10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                               to                              

Commission file number: 001-35886

HEMISPHERE MEDIA GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	80-0885255
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Hemisphere Media Group, Inc. 2000 Ponce de Leon Boulevard Suite 500 Coral Gables, FL	33134
(Address of principal executive offices)	(Zip Code)

(305) 421-6364

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 x  No o

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 x  No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o

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

Class of Stock	Shares Outstanding as of August 10, 2013
Class A common stock, par value $0.0001 per share	12,060,553 shares
Class B common stock, par value $0.0001 per share	33,000,000 shares

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

June 30, 2013

(Unaudited)

		PAGE NUMBER
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements:	5
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II -	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
SIGNATURES		34

2

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Form 10-Q, including the exhibits attached hereto, may contain certain statements about Hemisphere Media Group, Inc. (the “Company”) that are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements are necessarily estimates reflecting the best judgment and current expectations of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control that could cause actual results to differ materially from those those expressed or implied in such forward-looking statements.  Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “expect,” “positioned,” “strategy,” “future,” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements.  In addition, these statements are based on a number of assumptions that are subject to change.  Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements are discussed in “Item 1A — Risk Factors” in this report and under the heading “Risk Factors” and “Forward-Looking Statements” in our Registration Statement on Form S-4, as amended (File No. 333-186210) (the “Registration Statement”) and Post-Effective Amendment No. 1 to the Registration Statement, filed with the SEC, as they may be updated in any future reports filed with the Securities and Exchange Commission (“SEC”). If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. In addition to the risk factors described in “Item 1A — Risk Factors” in this report and our Registration Statement and Post-Effective Amendment No. 1, those factors include:

·the reaction by advertisers, programming providers, strategic partners, the Federal Communications Commission (the “FCC”) or other government regulators to the consummation of the mergers described in the Registration Statement (the “Transaction”);

·the potential for viewership of our cable networks and broadcast businesses programming to decline;

·the risk that we may fail to secure sufficient or additional advertising and/or subscription revenue;

·the benefits of the combination of WAPA Holdings, LLC (“WAPA”) and Cine Latino, Inc. (“Cinelatino”), including the prospects of the combined businesses;

·the ability to realize anticipated growth and growth strategies of the combined company since the completion of the Transaction;

·our ability to obtain additional financing in the future;

·our ability to successfully manage relationships with customers, distributors and other important relationships;

·the loss of key personnel and/or talent or expenditure of a greater amount of resources attracting, retaining and motivating key personnel than in the past;

·changes in technology;

·changes in pricing and availability of products and services;

·the ability to realize the anticipated benefits of the Transaction, which may be affected by, among other things, competition in the industry in which we operate;

·the deterioration of general economic conditions, either nationally or in the local markets in which we operate; and

·legislative or regulatory changes that may adversely affect our businesses.

The list of factors above is illustrative, but by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All subsequent written and oral forward-looking statements concerning the matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are qualified by these cautionary statements.

3

The forward-looking statements are based on current expectations about future events and are not guarantees of future performance, and are subject to certain risks, uncertainties and assumptions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations may not be achieved.  We may change our intentions, beliefs or expectations at any time and without notice, based upon any change in our assumptions or otherwise. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

4

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

	June 30,			December 31,
	2013			2012
Assets
Current Assets
Cash	$	81,020,220		$	10,084,434
Accounts receivable, net of allowance for doubtful accounts of $206,406 and $179,568, respectively	14,151,304			10,510,978
Due from related parties, net of allowance for doubtful accounts of $376,039 and $0, respectively	1,455,027			—
Programming rights	5,857,196			4,403,029
Deferred taxes	6,149,075			3,049,047
Prepaid expenses and other current assets	5,335,864			1,362,002
Total current assets	113,968,686			29,409,490
Programming Rights	7,823,078			2,664,100
Property and Equipment, net	25,604,327			26,861,359
Deferred Taxes	4,822,984			863,252
Broadcast License	41,355,700			41,355,700
Goodwill	124,803,456			10,982,586
Other Intangibles, net	24,416,071			1,677,500
Other Assets	2,712,432			2,043,703
Total Assets	$	345,506,734		$	115,857,690
Liabilities and Stockholder’s Equity
Current Liabilities
Accounts payable	$	3,881,108		$	912,007
Accrued expenses	8,961,866			12,042,165
Programming rights payable	4,751,730			3,207,719
Current portion of long-term debt	9,761,102			4,608,000
Total current liabilities	27,355,806			20,769,891
Programming Rights Payable	1,455,563			926,984
Long-Term Debt, net of current portion	75,548,368			52,404,000
Other Liabilities	2,178,406			2,098,886
Total Liabilities	106,538,143			76,199,761
Commitments and Contingencies
Stockholder’s Equity
Preferred Stock, $0.0001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2013 and December 31, 2012	—			—
Class A Common Stock, $0.0001 par value; 100,000,000 shares authorized; 11,241,000 and 0 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively	1,124			—
Class B Common Stock, $0.0001 par value; 33,000,000 shares authorized; 33,000,000 and 0 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively	3,300			—
Additional Paid In Capital	241,316,389			34,608,586
Fair Value of Contingent Consideration	(2,030,333		)	—
Treasury Stock, at cost; 65,549 shares	(938,016		)	—
Accumulated Earnings	1,392,603			5,837,331
Accumulated Comprehensive Loss	(776,476		)	(787,988		)
Total Stockholder’s Equity	238,968,591			39,657,929
Total Liabilities and Stockholder’s Equity	$	345,506,734		$	115,857,690

See Notes to Condensed Consolidated Financial Statements.

5

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net Revenues	$	22,929,281		$	17,227,640		$	36,424,175		$	30,733,059
Operating Expenses:
Cost of revenues	7,671,847			7,439,854			13,527,389			14,023,949
Selling, general and administrative	11,644,388			3,325,613			15,073,633			6,605,990
Depreciation and amortization	1,848,472			921,228			2,859,037			1,822,389
Other expenses	1,380,353			85,613			4,672,388			85,613
Loss (gain) on disposition of assets	43,042			(1,500		)	67,577			(50,000		)
Total operating expenses	22,588,102			11,770,808			36,200,024			22,487,941
Operating income	341,179			5,456,832			224,151			8,245,118
Other Expenses:
Interest expense, net	(1,154,775		)	(771,009		)	(1,913,338		)	(1,906,404		)
Other (expense) income, net	(12,500		)	(12,499		)	(25,000		)	8,060
	(1,167,275		)	(783,508		)	(1,938,338		)	(1,898,344		)
(Loss) income before income taxes	(826,096		)	4,673,324			(1,714,187		)	6,346,774
Income tax (expense) benefit	(357,011		)	(2,022,287		)	6,136			(2,822,544		)
Net (loss) income	$	(1,183,107	)	$	2,651,037		$	(1,708,051	)	$	3,524,230
(Loss) earnings per share:
Basic	$	(0.03	)	$	2,651,037		$	(0.08	)	$	3,524,230
Diluted	$	(0.03	)	$	2,651,037		$	(0.08	)	$	3,524,230
Weighted average shares outstanding:
Basic	40,710,542			1			20,467,732			1
Diluted	40,710,542			1			20,467,732			1

See Notes to Condensed Consolidated Financial Statements.

6

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Net (loss) income:	$	(1,183,107	)	$	2,651,037	$	(1,708,051	)	$	3,524,230
Other comprehensive income:
Net unrealized gain on interest rate swap agreement	38,434			—		38,434			—
Comprehensive (loss) income	$	(1,144,673	)	$	2,651,037	$	(1,669,617	)	$	3,524,230

See Notes to Condensed Consolidated Financial Statements.

7

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholder’s Equity

Six Months Ended June 30, 2013

(unaudited)

			Class A		Class B		Class A			Additional		Accumulated			Accumulated
	Preferred		Common		Common		Treasury			Paid In		Earnings			Comprehensive
	Stock		Stock		Stock		Stock			Capital		(Deficit)			(Loss) Income			Total
Balance as of December 31, 2012	$	—	$	—	$	—	—			$	34,608,586	$	5,837,331		$	(787,988	)	$	39,657,929
Consummation of the Transaction (April 4, 2013)	—		1,099		3,300		—			201,388,964		(2,736,677		)	(26,922		)	198,629,764
Net loss	—		—		—		—			—		(1,708,051		)	—			(1,708,051		)
Comprehensive income	—		—		—		—			—		—			38,434			38,434
Issuance of Restricted Stock	—		25		—		—			2,030,000		—			—			2,030,025
Excess of tax benefits related to the issuance of restricted stock	—		—		—		—			182,000								182,000
Stock-based compensation	—		—		—		—			1,076,506		—			—			1,076,506
Repurchases of Class A Common Stock	—		—		—		(938,016		)	—		—			—			(938,016		)
Balance as of June 30, 2013	$	—	$	1,124	$	3,300	$	(938,016	)	$	239,286,056	$	1,392,603		$	(776,476	)	$	238,968,591

See Notes to Condensed Consolidated Financial Statements.

8

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended June 30,
	2013			2012
Reconciliation of Net (Loss) Income to Net Cash Used In
Operating Activities:
Net (loss) income	$	(1,708,051	)	$	3,524,230
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	2,859,037			1,822,389
Program amortization	4,364,607			3,574,031
Amortization of deferred financing costs	437,523			438,109
Stock-based compensation	3,106,531			—
Provision for bad debts	61,497			60,000
Loss (gain) on disposition of assets	67,577			(50,000		)
Deferred tax (expense) benefit	(698,967		)	1,037,516
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable	350,768			454,495
Due from related parties	(913,403		)	—
Programming rights	(6,518,201		)	(6,738,826		)
Prepaid expenses and other current assets	(1,589,738		)	(3,063,669		)
Increase (decrease) in:
Accounts payable	2,877,064			509,552
Accrued expenses	(8,372,821		)	(3,232,976		)
Programming rights payable	1,575,162			2,345,041
Income tax payable	(2,055,332		)	102,000
Other liabilities	79,520			(41,435		)
Net cash (used in) provided by operating activities	(6,077,227		)	740,457
Cash Flows From Investing Activities
Transaction proceeds, net	82,437,465			—
Proceeds from sale of assets	—			50,000
Capital expenditures	(686,739		)	(2,269,799		)
Net cash provided by (used in) investing activities	81,750,726			(2,219,799		)
Cash Flows From Financing Activities
Repayments of long-term debt	(3,799,697		)	(4,038,000		)
Purchase of treasury stock	(938,016		)	—
Net cash used in financing activities	(4,737,713		)	(4,038,000		)
Net increasse (decrease) in cash	70,935,786			(5,517,342		)
Cash:
Beginning	10,084,434			10,182,539
Ending	$	81,020,220		$	4,665,197

(Continued)

9

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(unaudited)

	Six Months Ended June 30,
	2013		2012
Supplemental Dislcosures of Cash Flow Information
Cash payments for:
Interest	$	1,984,525	$	1,547,280
Income taxes	$	2,276,752	$	3,046,236

See Notes to Condensed Consolidated Financial Statements.

10

Notes to Condensed Consolidated Financial Statements

Note 1. Nature of Business

Nature of business:  The accompanying consolidated financial statements include the accounts of Hemisphere Media Group, Inc. (“Hemisphere” or the “Company”), the parent holding company of Cine Latino, Inc. (“Cinelatino”), WAPA Holdings, LLC (formerly known as InterMedia Español Holdings, LLC) (“WAPA”), and Azteca Acquisition Corporation (“Azteca”).  While Hemisphere was formed on January 16, 2013 for purposes of effecting the Transaction, the Transaction had been consummated on April 4, 2013.  In these notes, the terms “Company,” “we,” “us” or “our” mean Hemisphere and all subsidiaries included in our consolidated financial statements.

·Cine Latino, Inc. (“Cinelatino”)—this company was organized under the laws of the State of Delaware and is engaged in in the business of producing, offering and distributing a cable television network  designated “Cine Latino,” the content for which is Spanish-language motion pictures or other entertainment programming. The network is distributed throughout the United States, Mexico, Central America, South America, the Caribbean and Canada.

·WAPA Holdings, LLC (“WAPA”)—this company was organized under the laws of the State of Delaware and is a holding company that owns 100% interest of Español and WAPA America (see below). WAPA has no operations or assets other than the investments in Español and WAPA America.

·InterMedia Español, Inc. (“Español”)—this company was organized under the laws of the State of Delaware and is a holding company that owns 100% interest of WAPA PR (see below). Español has no operations or assets other than the investment in WAPA PR.

·Televicentro of Puerto Rico, LLC (“Televicentro” or “WAPA PR”)—this Company was organized under the laws of the State of Delaware and is engaged in the broadcast television business, as well as in the production of news and entertainment programming in Puerto Rico.

·WAPA America, Inc. (“WAPA America”)—this company was organized on September 2, 2004, under the laws of the state of Delaware, and is a cable television network distributed in the U.S. and programmed with Spanish language news and entertainment programs (produced and supplied, in its majority, by WAPA PR).

·Azteca Acquisition Corporation (“Azteca”)— Dormant subsidiary; Azteca was initially formed as a blank check company in the British Virgin Islands on April 15, 2011 and reincorporated in the State of Delaware on June 8, 2011 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock, reorganization or similar business combination with one or more businesses. Azteca, a special purpose acquisition vehicle, delivered the proceeds of a trust account raised in its 2011 initial public offering to Hemisphere in the merger. Following the consummation of the merger, Azteca has had no operations and does not currently engage in any business activities generating revenues.

Cinelatino has certain agreements with MVS Multivision Digital S. de R.L. de C.V. and its affiliates (collectively “MVS”), a Mexican media and television conglomerate, which have directors and stockholders in common with the Company, as discussed in Note 3.

Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements for Hemisphere and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.   Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Our financial condition as of, and operating results for the three month and six month periods ended, June 30, 2013 are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2013.  As further described in Note 2, WAPA is the accounting acquirer and predecessor, whose historical results are the historical results of Hemisphere.  The operating results presented for the three month period ended June 30, 2013 reflect the operating results of the businesses acquired in the Transaction.

Net (Loss) Earnings per Common Share:  Basic (loss) earnings per share (“EPS”) are computed by dividing income attributable to common stockholders by the number of weighted-average outstanding shares of common stock.  Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive.

The following table sets forth the computation of the common shares outstanding used in determining basic and diluted EPS:

11

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Numerator for (loss) earnings per common share calculation:
Net (loss) income:	$	(1,183,107	)	$	2,651,037	$	(1,708,051	)	$	3,524,230
Denominator for earnings per common share calculation:
Weighted-average common shares, basic	40,710,542			1		20,467,732			1
Effect of dilutive securities:
Stock options and restricted stock	—			—		—			—
Weighted-average common shares, diluted	40,710,542			1		20,467,732			1

The Company applies the treasury stock method to measure the dilutive effect of its outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted income per common share calculation. Potentially dilutive securities representing 0.3 million a shares of common stock for the three and six months ended June 30, 2013 and June 30, 2012, respectively, were excluded from the computation of diluted (loss) income per common share for this period because their effect would have been anti-dilutive. The net (loss) income per share amounts are the same for our Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

A summary of the Company’s significant accounting policies follows:

Stock based compensation:  The Company has given equity linked incentives to certain employees. The Company accounts for equity linked incentives in accordance with Accounting Standards Codification (“ASC”) 718 “Stock Compensation”. The Company measures compensation cost for equity settled awards at fair value on the date of grant and recognizes compensation cost in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. Compensation cost is determined by using option pricing models.

Recent accounting pronouncements:  In July 2012, the Financial Accounting Standards Board (“FASB”) issued guidance that is intended to reduce the cost and complexity of the annual impairment test for indefinite-lived intangible assets other than goodwill by providing entities an option to perform a qualitative assessment to determine whether a quantitative impairment test is necessary. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, but early adoption is permitted. The Company adopted this guidance effective January 1, 2013, and the adoption did not have a material effect on the Company’s consolidated financial position, results of operation and cash flows.

In February 2013, the FASB issued guidance related to reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. These amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional details about those amounts. For public entities, the amendments are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012.  The Company adopted this guidance effective January 1, 2013, and the adoption did not have a material effect on the Company’s consolidated financial position, results of operation and cash flows.

Use of estimates:  In preparing these financial statements, management had to make estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the balance sheets date, and the reported revenues and expenses for the years then ended. Such estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. However, actual results could differ from those estimates.

Note 2. Business Combination

On April 4, 2013, the merger by and among Cinelatino, WAPA and Azteca providing for the combination of Cinelatino, WAPA and Azteca as indirect, wholly-owned subsidiaries of Hemisphere (the “Transaction”) was consummated.

12

The Transaction was accounted for by applying the acquisition method, which requires the determination of the accounting acquirer, the acquisition date, the fair value of the purchase consideration to be transferred, the fair value of assets and liabilities of the acquiree and the measurement of goodwill. ASC Topic 805-10, “Business Combinations—Overall” (“ASC 805-10”) provides that in identifying the acquiring entity in a business combination effected primarily through an exchange of equity interests, the acquirer is usually the entity that issues equity interests but all pertinent facts and circumstances must be considered in determining the acquirer. Other pertinent facts and circumstances to consider include the relative voting rights of the shareholders of the constituent companies in the combined entity, the composition of the board of directors and senior management of the combined company, the relative size of each company and the terms of the exchange of equity interests in the Transaction, including payment of any premium. Although Hemisphere issued the equity interests in the Transaction, since it is a new entity formed solely to issue these equity interests to effect the Transaction it would not be considered the acquirer and one of the combining entities that existed before the transaction must be identified as the acquirer. Based on the following, WAPA is the accounting acquirer and predecessor, whose historical results are the results of Hemisphere:

i.	WAPA shareholders obtained approximately 46.4% of the post-Transaction common shares of stock and 59.9% of the voting rights in the combined entities;
ii.	WAPA, through its parent company, InterMedia Partners VII, L.P. (“InterMedia Partners”), has the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity, as they represent five of the nine directors on the combined entity board of directors, including the Chief Executive Officer; and
iii.	WAPA’s historical revenues represent approximately 69.0% of the total revenues of the combined entities.

As WAPA is the accounting acquirer (and legal acquiree), the Transaction is considered to be a reverse acquisition. Since WAPA issued no consideration in the Transaction, unless the fair value of accounting acquirees’ equity interests are more reliably measurable, the fair value of the consideration transferred by WAPA would be based on the number of shares WAPA would have had to issue to give owners of the other entities in the transaction the same percentage ownership in the combined entities that results from the Transaction. In this situation, since Azteca’s shares were publicly traded and they are one of the combining entities in this Transaction, the fair value of those shares are considered to be more reliably measurable than the fair value of WAPA’s shares and therefore were used to determine the fair value of the consideration transferred for the acquisition of Cinelatino, which is the other operating entity involved in this Transaction.

Total consideration transferred by WAPA (accounting acquirer) to Cinelatino (accounting acquiree) was $129,423,943 based on: (i) cash consideration of $3.8 million (funded from cash on hand), plus (ii) 12,567,538 shares with a value of $10.25 per share based on the Company’s opening share price on the date following the consummation of the Transaction for each share of the Company’s common stock to be received by Cinelatino stockholders in the Transaction, (iii) less $3.2 million, which represents the difference between the value of 1,142,504 shares of Hemisphere Class B common stock that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels and the estimated fair value of these shares using a Monte Carlo simulation model (571,252 shares with value of $1.2 million have vested and are no longer subject to forfeiture as of June 30, 2013). Significant assumptions utilized in the model include:

·Stock Price: $10.25

·Volatility: 32.5%

·Risk-Free Rate: 0.69%

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the acquisition of Cinelatino:

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Cash	$	12,865,242
Accounts receivable, net	4,052,590
Programming rights	4,459,550
Prepaid expenses and other current assets	939,945
Property and equipment, net	21,415
Other assets	7,566,867
Intangible asset - affiliate agreements	23,700,000
Current liabilities	(6,271,770		)
Long-term debt	(32,097,167		)
Fair value of identifiable net assets acquired	15,236,672
Goodwill	114,187,271
Total	$	129,423,943

The amount allocated to definite-lived intangible assets represents the estimated fair values of Cinelatino’s affiliate agreements of $23.7 million, which have been valued using a discounted cash flow based on management’s current estimates utilizing a 10% discount rate subject to finalization.  These intangible assets will amortized over the estimated remaining useful lives of approximately 7 years.

Goodwill of $114.2 million is the excess of the net consideration paid over the fair value of the identifiable net assets acquired, and primarily represents the benefits the Company expects to realize from the acquisition.  The goodwill associated with the transaction is not deductible for tax purposes.

The number of shares of stock of the Company issued and outstanding immediately following the consummation of the Transaction is summarized as follows:

	Number of Shares
Azteca public shares outstanding prior to the Transaction	10,000,000
Azteca founder shares (1)	2,500,000
Total Azteca shares outstanding prior to the Transaction	12,500,000
Less: shareholders of Azteca public shares redeemded	(1,258,900	)
Less: Azteca founder shares cancelled	(250,000	)
Shares issued to WAPA member (2)	20,432,462
Shares issued to Cinelatino stockholders (3)	12,567,538
Total shares outstanding at closing, April 4, 2013	43,991,100

(1)Includes 985,294 shares of Hemisphere Class A common stock which are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

(2)Includes 1,857,496 shares of Hemisphere Class B common stock, which were issued in the Transaction by Hemisphere that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

(3)Includes 1,142,504 shares of Hemisphere Class B common stock, which were issued in the Transaction by Hemisphere that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

The cash flows related to the Transaction are summarized as follows:

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	Amount
Cash in trust at Azteca	$	100,520,532
Cash on hand at Cinelatino	12,865,242
Less: redemption of Azteca public shares	(12,651,945		)
Less: cash consideration paid to Azteca warrantholders	(7,333,334		)
Less: cash consideration paid to WAPA member and Cinelatino stockholders	(5,000,000		)(1)
Less: payment of Azteca fees and expenses	(5,963,030		)
Net cash received by the Company	$	82,437,465

(1)Includes $3.8 million paid by WAPA to Cinelatino.

Pro Forma Information

The following table sets forth the unaudited pro forma results of operations assuming that the Transaction occurred on January 1, 2012:

	Pro Forma
	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012
Net Revenues	$	22,929,281	$	23,190,839		$	42,528,003	$	42,471,860
Operating Expenses:
Cost of revenues	7,671,847		8,843,978			14,580,733		16,813,923
Selling, general and administrative	7,844,388		7,686,653			15,856,756		15,329,602
Depreciation and amortization	1,848,472		1,769,156			3,707,205		3,518,246
Loss (gain) on disposition of assets	43,042		(1,500		)	67,577		(50,000		)
Total operating expenses	17,407,749		18,298,287			34,212,271		35,611,771
Operating income	$	5,521,532	$	4,892,552		$	8,315,732	$	6,860,089

The unaudited pro forma results of operations for all periods set forth above includes the operating results of Cinelatino, stock-based compensation, corporate overhead and public company costs and amortization of intangibles created as a result of the Transaction and excludes all transaction related fees and expenses  and non-recurring expenses. Selling, general and administrative expenses for the three and six months ended June 30, 2012 were reduced as a result of the termination of a certain agreement with MVS that was terminated in connection with the Transaction.

Note 3. Related Party Transactions

The Company has various agreements with MVS as follows:

·An agreement through August 1, 2017 pursuant to which MVS provides Cinelatino with satellite and support services including origination, uplinking and satellite delivery of two feeds of Cinelatino’s channel (for U.S. and Latin America), master control and monitoring, dubbing, subtitling and close captioning, and other support services (the “Satellite and Support Services Agreement”). The annual fee for the services was reduced during 2012, and provides for an annual fee going forward of $2,136,000. Total expenses incurred were $534,003 for the three and six months ended June 30, 2013, and are included in cost of revenues.

·A ten-year master license agreement through July 2017, which grants MVS the non-exclusive (except with respect to pre-existing distribution arrangements between MVS and third party distributors that are effective at the time of the consummation of the Transaction) to duplicate, distribute and exhibit Cinelatino’s service via cable, satellite or

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by any other means in Latin America and in Mexico to the extent that Mexico distribution is not owned by MVS. Pursuant to the agreement, Cinelatino receives revenue net of MVS’s distribution fees, which is presently equal to 13.5% of all license fees collected from distributors in Latin America and Mexico. Total revenues recognized were $903,414 for the three and six months ended June 30, 2013.

·A six-year affiliation agreement through August 1, 2017 for the distribution and exhibition of Cinelatino’s programming service through Dish Mexico (dba Commercializadora de Frecuencias Satelitales, S de R.L. de C.V.), an MVS affiliate that transmits television programming services throughout Mexico. Total revenues recognized were $446,202 for the three and six months ended June 30, 2013.

·A distribution agreement that gave MVS the exclusive right to negotiate the terms of the distribution, sub-distribution and exhibition of Cinelatino throughout the United States of America.  The agreement stipulated a distribution fee of 13.5% of the revenue received from all multiple system operators.  Upon consummation of the Transaction on April 4, 2013, the agreement was terminated effective January 1, 2013.  In consideration for such termination, the Company made a cash payment to MVS in an amount equal to $3,800,000, which is reflected in selling, general and administrative expenses.

Amounts due from MVS pursuant to the agreements noted above, net of an allowance for doubtful accounts, amounted to $2,265,292 and $0 as of June 30, 2013 and December 31, 2012, respectively, and are remitted monthly.  Amounts due to MVS pursuant to the agreements noted above amounted to $744,795 and $0 as of June 30, 2013 and December 31, 2012, respectively, and are remitted monthly.

The Company entered into a three-year consulting agreement effective April 9, 2013 with James M. McNamara, a member of the Company’s Board of Directors, to provide the development, production and maintenance of programming, affiliate relations, identification and negotiation of carriage opportunities, and the development, identification and negotiation of new business initiatives including sponsorship, new channels, direct-to-consumer programs and other interactive initiatives. Prior to that, Cinelatino entered into a consulting agreement with an entity owned by James M. McNamara. Total expenses incurred under these agreements are included in selling, general and administrative expenses and amounted to $26,667 for the three and six months ended June 30, 2013.  Amounts due to this related party were $25,417 as of June 30, 2013.

Cinelatino entered into programming agreements with an entity owned by James M. McNamara for the distribution of three specific movie titles. As of June 30, 2013 and December 31, 2012, $67,649 and $0, respectively, is included in other assets as prepaid programming related to these agreements. As of June 30, 2013 and December 31, 2012, approximately $137,571 and $0, respectively, is included in programming rights related to these agreements.

In March 2011, WAPA entered into an agreement with InterMedia Partners VII, L.P., to provide management services, including strategic planning, assistance with licensing of programming rights, and participation in distribution negotiations with cable and satellite operators (the “Management Services Fee”). The Management Services Fee is payable so long as no default shall have occurred or would result therefrom. Pursuant to the loan agreement, the payment of the Management Services Fee is expressly subordinate and junior in right of payment and exercise of remedies to the payment in full of the WAPA term loan. Total expenses for management services amounted to $0 and $156,250 for the three months ended June 30, 2013 and 2012, respectively, and $0 and $312,500 for the six months ended June 30, 2013 and 2012, respectively.  Upon consummation of the Transaction on April 4, 2013, this agreement was terminated retroactively to January 1, 2013.

The Company entered into a services agreement effective April 4, 2013 with InterMedia Advisors, LLC (“IMA”), which has officers, directors and stockholders in common with the Company, to provide  services including, without  limitation, office space, operational support and employees acting in a consulting capacity. Prior to that, the Company reimbursed IMA for payments made on the Company’s behalf for similar services. Amounts due to this related party amounted to $40,053 and $57,956 as of June 30, 2013 and December 31, 2012, respectively. Such expenses are included in selling, general and administrative expenses and amounted to $40,053 and $29,908 for the three months ended June 30, 2013 and 2012, respectively, and $40,053 and $69,405 for the six months ended June 30, 2013 and 2012, respectively.

Note 4. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following as June 30, 2013 and December 31, 2012:

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	June 30,		December 31,
	2013		2012
Broadcast licenses	$	41,355,700	$	41,355,700
Goodwill	124,803,456		10,982,586
Other intangibles	24,416,071		1,677,500
	$	190,575,227	$	54,015,786

A summary of changes in the Company’s goodwill and other indefinite lived intangible assets, on a net basis, for the six months ended June 30, 2013 and the year ended December 31, 2012 is as follows:

	Net Balance at						Net Balance at
	December 31, 2012		Additions		Impairment		June 30, 2013
Broadcast licenses	$	41,355,700	$	—	$	—	$	41,355,700
Goodwill	10,982,586		113,820,870		—		124,803,456
Other Intangibles	700,000		—		—		700,000
Total indefinite lived intangibles	$	53,038,286	$	113,820,870	$	—	$	166,859,156

	Net Balance at						Net Balance at
	December 31, 2011		Additions		Impairment		December 31, 2012
Broadcast licenses	$	41,355,700	$	—	$	—	$	41,355,700
Goodwill	10,982,586		—		—		10,982,586
Other Intangibles	700,000		—		—		700,000
Total indefinite lived intangibles	$	53,038,286	$	—	$	—	$	53,038,286

As of June 30, 2013 and December 31, 2012, the Company has the following net amounts related to other amortizable intangible assets:

	Amortization	June 30,		December 31,
	Term (Years)	2013		2012
Affiliate relationships	7 - 10	$	23,716,071	$	977,500

The aggregate amortization expense of the Company’s amortizable intangible assets were $903,929 and $57,500 for the three months ended June 30, 2013 and 2012, respectively, and $961,429 and $115,000 for the six months ended June 30, 2013 and 2012,  respectively. The weighted average remaining amortization period is 3.4 years as of June 30, 2013.

Future estimated amortization expense is as follows:

Year Ending
December 31,
Remainder of 2013	$	1,807,857
2014	3,615,714
2015	3,615,714
2016	3,615,714
2017	3,443,214
2018	3,385,714
2019	3,385,714
2020	846,429
	$	23,716,071

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Note 5. Income Taxes

For the three and six months ended June 30, 2013 and 2012, the Company’s income tax expense and effective tax rates were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income tax expense (benefit)	$	357,011		$	2,022,287		$	(6,136	)	$	2,822,544
Effective income tax rate	102.7		%	44.2		%	102.7		%	44.2		%

For the three and six months ended June 30, 2013, the Company’s statutory Federal income tax rate of 34.0% increased to the effective income tax rate of 102.7% as a result of an increase in the tax rate in Puerto Rico from 30% to 39% that will not generate offsetting U.S. income tax credits, the loss of a deferred tax asset as a result of the increase in the tax rate in Puerto Rico, permanent differences as a result of costs related the Transaction, and statutory taxes.  For the three and six months ended June 30, 2012, the Company’s statutory Federal income tax rate of 34.0% increased to the effective income tax rate of 44.2% as a result of increases in taxes in Puerto Rico that will not generate offsetting U.S. tax credits and permanent differences for meals and entertainment, respectively.

Note 6. Long-Term Debt

Long-term debt as of June 30, 2013 and December 31, 2012 consists of the following:

	June 30,			December 31,
	2013			2012
Senior Notes due March 2016	$	54,789,000		$	57,012,000
Senior Notes due June 2017	30,520,470			—
Less: current portion	(9,761,102		)	(4,608,000		)
	$	75,548,368		$	52,404,000

Senior Notes due March 2016: On March 31, 2011, InterMedia Español, Inc. and Televicentro of Puerto Rico, LLC, collectively known in this note as the “Borrowers”, entered into a loan agreement that included a $66,000,000 term loan and a $10,000,000 revolving credit line with a maturity of March 31, 2016. The loan is guaranteed by WAPA Holdings, LLC, the direct holding company of InterMedia Español, Inc. and Televicentro of Puerto Rico, LLC, and its wholly-owned subsidiaries other than the Borrowers and secured by a first-priority perfected lien on all capital stock of and equity interests in each of the Borrowers and all other property and assets (tangible and intangible) of the Borrowers, whenever acquired and wherever located, subject to certain exceptions. The proceeds from the term loan were used to pay off in full a pre-existing loan, to finance a distribution to the WAPA member, and to, pay fees and expenses associated with the financing.

The loan bears interest at LIBOR rate plus an applicable LIBOR rate margin, or at a base rate plus an applicable base rate margin both as amended from time to time based upon the consolidated leverage ratio for the last day of the most recent fiscal quarter, which as of June 30, 2013 was 3.69%. Amounts outstanding under the term loan due as of June 30, 2013 and December 31, 2012 were $54,789,000 and $57,012,000, respectively.

The term loan principal payments shall be payable on quarterly due dates commencing July 15, 2011 and a final installment on March 31, 2016.

In addition, pursuant to the terms of the loan, within 130 days after the end of each fiscal year, the Borrowers shall make a prepayment of the loan principal in an amount equal to 50% of the excess cash flow of the most recently completed fiscal year. Excess cash flow is generally defined as net income plus depreciation and amortization expense, less mandatory prepayments of the term loan, interest charges, income taxes and capital expenditures, and adjusted for the change in working capital. The percentage of the excess cash flow used to determine the amount of the prepayment of the loan declines from 50% to 25% at a lower leverage ratio for the Borrowers.

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There is an annual commitment fee of 0.75%, paid quarterly, on the revolving credit line for the unfunded amounts calculated daily as the amount by which the aggregate revolving credit line limit exceeds the aggregate outstanding unpaid principal amount. The commitment fees were approximately $18,493 and $18,904 for the three months ended June 30, 2013 and 2012, respectively, and $37,192 and $37,603 for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, there were no outstanding balances due under the revolving credit commitment.

The credit facilities require that the Borrowers maintain certain financial ratios and restrict certain expenditures. As of June 30, 2013, the Borrowers were in compliance with all the loan covenants.

On April 13, 2011, WAPA entered into a two-year interest rate swap agreement with an initial notional amount of $33,000,000 to receive interest at a variable rate equal to three (3) months LIBOR and to pay interest at a fixed rate of 1.143%. The interest rate swap agreement expired on April 15, 2013. As of June 30, 2013 and December 31, 2012, this interest rate swap agreement had a fair value of $0 and $122,032, respectively, and is recognized in other accrued expenses on the consolidated balance sheets. The Company recognized additional financing income of $61,230 and $43,140 for the three months ended June 30, 2013 and 2012, respectively, and $122,032 and $33,059 for the six months ended June 30, 2013 and 2012, respectively, related to the change in the fair value of the interest rate swap agreement, which is included in interest expense, net on the consolidated statements of operations.

Senior Notes due June 2017: During 2011, Cinelatino amended its credit facility with a financial institution and maximum borrowings were increased to $40,000,000. The loan is collateralized by the Cinelatino’s assets and common stock, which the stockholder has pledged, and is guaranteed by the Company’s subsidiary. Principal and interest payments are due quarterly with interest at LIBOR plus 4% (4.27% as of June 30, 2013) through June 2017, at which time a balloon payment of the remaining principal is due. Amounts outstanding under the term loan due as of June 30, 2013 and December 31, 2012 were $30,520,470 and $0, respectively.

Pursuant to the terms of the term loan agreement, within 95 days after the end of each fiscal year, the Company must make a prepayment of the loan principal. The prepayment is an amount equal to 50% of the excess cash flow of the most recently completed fiscal year, if the leverage ratio, as calculated as of the last day of such fiscal year, is 2.5 to 1.00 or greater, or 25% of such excess cash flow if the leverage ratio as of the last day of such fiscal year is less than 2.50 to 1.00. Excess cash flow is generally defined as net income plus depreciation and amortization expense, less mandatory prepayments of the term loan, interest charges, income taxes, and capital expenditures, and adjusted for the change in working capital.

The credit facilities require that the Cinelatino maintain certain financial ratios. As of June 30, 2013, Cinelatino was in compliance with all the loan covenants.

Following are maturities of long-term debt, as of June 30, 2013:

Year Ending
December 31,
Remainder of 2013	$	4,225,051
2014	12,128,102
2015	15,688,127
2016	38,388,152
2017	14,880,038
	$	85,309,470

Note 7. Stockholder’s Equity

Capitalization

On April 4, 2013, the merger by and among Cinelatino, WAPA and Azteca providing for the combination of Cinelatino, WAPA and Azteca as indirect, wholly-owned subsidiaries of Hemisphere (the “Transaction”) was consummated.

In connection with the Transaction (i) the holders of Cinelatino common stock and the holder of membership interests in WAPA (the “Cinelatino/WAPA Investors”) surrendered their respective interests and received an aggregate of 33,000,000 shares of Hemisphere Class B common stock, par value $0.0001 (“Class B common stock”), a cash payment equal to an aggregate of $5.0 million, and purchased 2,333,334 warrants from Azteca founders to purchase Hemisphere Class A common stock, par value $0.0001

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(such warrants, “Warrants” and such stock, “Class A common stock”); (ii) each share of Azteca common stock was automatically converted into one share of Class A common stock; (iii) each Amended Azteca Warrant, as defined below, was automatically converted into an equal number of Warrants; and (iv) immediately prior to the consummation of the Transaction,  Azteca Acquisition Holdings, LLC and certain existing shareholders of Azteca contributed 250,000 shares of Azteca common stock to Azteca for cancellation and agreed to subject an additional 250,000 shares of Class A common stock to certain forfeiture provisions (in addition to 735,294 shares of Class A common stock already subject to forfeiture under pre-existing agreements) if the market price of shares of Hemisphere Class A common stock does not reach certain levels.  Following the consummation of the Transaction, there were 10,991,100 shares of Class A stock outstanding and 33,000,000 shares of Hemisphere Class B stock outstanding.

From time to time the Company has issued Class A common stock to certain members of management and board of directors as equity compensation, subject to time and performance vesting conditions, as discussed below.

Voting

Class B common stock votes on a 10 to 1 basis with the Class A common stock, which means that each share of Class B common stock will have 10 votes and each share of Class A common stock will have 1 vote.

Equity Incentive Plans

An aggregate of 4,000,000 shares of our Class A common stock were authorized for issuance under the terms of the Hemisphere Media Group, Inc. 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”).  During the six months ended June 30, 2013, 1,135,002 shares of restricted Class A common stock and 1,575,000 options to purchase shares of Class A common stock were awarded under the Plan.  As of June 30, 2013, 1,355,547 shares remained available for issuance of stock options or other stock-based awards under our Equity Incentive Plan (including shares of restricted Class A common stock surrendered to the Company in payment of taxes required to be withheld in respect of vested shares of restricted Class A common stock and available for issuance).  The expiration date of the 2013 Equity Incentive Plan, on and after which date no awards may be granted, is April 4, 2023.  The Company’s board of directors (“Board”) administers the 2013 Equity Incentive Plan, and has the sole and plenary authority to, among other things:  (i) designate participants; (ii) determine the type, size, and terms and conditions of awards to be granted; (iii) determine the method by which an award may be settled, exercised, canceled, forfeited, or suspended.

The Company’s time-based restricted stock awards and option awards generally vest in three equal annual installments beginning on the first anniversary of the grant date, subject to the grantee’s continued employment or service with the Company. The Company’s event-based restricted stock awards and option awards generally vest either upon the Company’s Class A common stock attaining a $12.50 or $15.00 closing price per share, as quoted on the NASDAQ Global Market, on at least 10 trading days, subject to the grantee’s continued employment or service with the Company.  Other event-based restricted stock awards granted to certain members of our Board vest on the day preceding the Company’s 2014 annual shareholder meeting.

Stock-Based Compensation

Stock-based compensation expense related to stock options and restricted stock amounted was $3,106,531 for the three and six months ended June 30, 2013.  As of June 30, 2013, there was $5.5 million and $8.0 million of total unrecognized compensation cost related to non-vested stock options and restricted stock, respectively, which is expected to be recognized over weighted-average periods of 2.0 years and 1.3 years, respectively.

Stock Options

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes pricing model for time-based options and the Monte Carlo simulation model for event-based options.  The expected term of options granted is derived using the simplified method under ASC 718-10-S99-1/SEC Topic 14.D for “plain vanilla” options and the Monte Carlo simulation for event-based options.  Expected volatility is based on the historical volatility of the Company’s competitors given its lack of trading history. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has estimated forfeitures of 1.5% and has assumed no dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future.

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	Six Months
	Ended June 30,
Black-Scholes Option Valuation Assumptions	2013	2012
Risk-free interest rates	0.93% - 1.02%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	6	—

	Six Months
	Ended June 30,
Monte Carlo Option Valuation Assumptions	2013	2012
Risk-free interest rate	1.78%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	5.3 - 6	—

The weighted average granted date fair value of options granted for the six months ended June 30, 2013 was $3.83 per option. The time-vesting option grants vest over a period of three years. The following table summarizes stock option activity for the six months ended June 30, 2013:

				Weighted-
		Weighted-		average	Aggregate
	Number	average		contractual	intrinsic
	of shares	exercise price		term	value
Outstanding at January 1, 2013:	—	$	—	—	$	—
Granted	1,575,000	11.19		10.0	4,375,000
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Outstanding at June 30, 2013:	1,575,000	$	11.19	10.0	$	4,375,000
Vested at June 30, 2013	275,000	$	10.20	10.0	$	962,500
Exercisable at June 30, 2013	275,000	$	10.20	10.0	$	962,500

Upon the exercise of stock options, the Company will issue new shares of its Class A common stock.  As of June 30, 2013, 300,000 options issued are unvested, event-based options.

Restricted Stock

Certain employees and directors have been awarded restricted stock under the 2013 Equity Incentive Plan. The time-based restricted stock grants vest primarily over a period of three years.  The fair value and expected term of event-based restricted stock grants is estimated at the grant date using the Monte Carlo simulation.

	Six Months
	Ended June 30,
Monte Carlo Restricted Stock Valuation Assumptions	2013	2012
Risk-free interest rate	1.78%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	0.8 - 1.4	—

The following table summarizes restricted share activity for the six months ended June 30, 2013:

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			Weighted-
			average		Aggregate
	Number		grant date		intrinsic
	of shares		fair value		value
Outstanding at January 1, 2013:	—		$	—	$	—
Granted	1,135,002		9.53		4,814,250
Vested	(250,000	)	8.12		(1,395,000		)
Forfeited	—		—		—
Outstanding at June 30, 2013:	885,002		$	9.92	$	3,419,250

As of June 30, 2013, 150,000 shares of restricted stock issued are unvested, event-based shares.

Note 8. Contingencies

The Company is involved in various legal actions, generally related to its operations. Management believes, based on advice from legal counsel, that the outcome of such legal actions will not adversely affect the financial condition of the Company.

Note 9. Commitments

The Company has entered into certain rental property contracts with third parties, which are accounted for as operating leases. Rental expense was $51,547 and $42,503 for the three months ended June 30, 2013 and 2012, respectively, and $102,972 and $72,774 for the six months ended June 30, 2013 and 2012, respectively.

The Company has certain commitments including various operating leases.

Future minimum payments for these commitments and other commitments are as follows:

Year Ending	Operating		Other
December 31,	Leases		Commitments		Total
Remainder of 2013	$	141,699	$	3,639,006	$	3,780,705
2014	92,850		3,022,163		3,115,013
2015	64,941		578,507		643,448
2016	7,274		78,578		85,852
Total	$	306,764	$	7,318,254	$	7,625,018

Note 10. Multiemployer Pension

The unionized employees at WAPA PR are covered by the Newspaper Guild International Pension Plan (the “Plan” or “TNGIPP”), a multiemployer pension plan with a plan year end of December 31, that provides defined benefits to certain employees covered by two collective bargaining agreements (each, a “CBA”), which expire on July 23, 2015 and June 27, 2016, respectively.  The cost of this pension plan is determined in accordance with the provisions of the CBA.

The Company has received Annual Funding Notices, Report of Summary Plan Information, Critical Status Notices (“Notices”) and a Rehabilitation Plan, as defined by the Pension Protection Act of 2006 (“PPA”), from the Plan.  The Notices indicate that the Plan actuary has certified that the Plan is in critical status, the “Red Zone”, as defined by the PPA, and that a plan of rehabilitation (“Rehabilitation Plan”) was adopted by the Trustees of the Plan (“Trustees”) on May 1, 2010.  On May 29, 2010, the Trustees sent the Company a Notice of Reduction and Adjustment of Benefits Due to Critical Status explaining all changes adopted under the Rehabilitation Plan, including the reduction or elimination of benefits referred to as “adjustable benefits.”  In connection with the adoption of the Rehabilitation Plan, most of the Plan participating unions and contributing employers (including the Newspaper Guild International and the Company), agreed to one of the “schedules” of changes as set forth under the Rehabilitation Plan.  The Company elected the “preferred schedule” and executed a Memorandum of Agreement, effective May 27, 2010 (the “MOA”) and agreed to the following contribution rate increases: 3.0% beginning on January 1, 2013; an additional 3.0% beginning on January 1, 2014; and an additional 3.0% beginning on January 1, 2015.

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The surcharges and effect of the Rehabilitation Plan as described above are not anticipated to have a material effect on the Company’s results of operations.  However, in the event other contributing employers are unable to, or fail to, meet their ongoing funding obligations, the financial impact on the Company to contribute to any plan underfunding may be material.  In addition, if a United States multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund.

The Company could also be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) due to the unfunded vested benefits of the Plan, in the event the Company withdrew from the plan during the five-year period beginning on the effective date of the MOA.  The withdrawal liability (which could be material) in the event of the foregoing, would equal the total lump sum of contributions that the Company would have been obligated to pay the Plan through the date of withdrawal, under the “default schedule” of the Rehabilitation Plan (5% surcharge in the initial year and 10% for each successive year thereafter the plan is in critical status), less any contributions actually paid by the WAPA PR to the Plan under the “preferred schedule”.  Under current law regarding multiemployer defined benefit plans, a plan’s termination, WAPA PR’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require us to make payments to the plan for the Company’s proportionate share of the multiemployer plan’s unfunded vested liabilities.  WAPA PR’s contributions to the Plan for the year ended December 31, 2011 were less than 5% of total contributions made to the Plan.

Further information about the Plan is presented in the table below:

				WAPA PR’s Contributions					Expiration Date of
Pension		Pension Protection Act Zone Status	Funding Improvement Plan/Rehabilitation Plan	Three months ended June 30,		Six months ended June		Surcharge	Collective Bargaining
Fund	EIN	2012	Status	2013		30, 2013		Imposed	Agreements
TNGIPP (Plan No. 001)	52-1082662	Red	Implemented	$	32,611	$	62,843	Yes	July 23, 2015 June 27, 2016

Note 11. Subsequent Events

On July 2, 2013, WAPA PR entered into a new CBA with the Newspaper Guild International, covering the news department assistant producers only.

On July 30, 2013 certain of the Company’s subsidiaries entered into a credit agreement providing for a $175 million senior secured term loan B facility (the “Term Loan Facility”) which matures on July 30, 2020. The Term Loan Facility also provides an uncommitted accordion option (the “Incremental Facility”) allowing for additional borrowings under the Term Loan Facility up to an aggregate principal amount equal to (i) $20 million plus (ii) an additional amount up to 4.0x 1st lien net leverage. Pricing on the Term Loan Facility was set at LIBOR plus 500 basis points (with a LIBOR floor of 1.25%) and 1.0% of original issue discount. After repayment of all outstanding debt obligations at the Company’s subsidiaries and payment of fees and expenses, net cash proceeds are expected to be approximately $85 million. The Company is currently evaluating the impact of the transaction related fees in accordance with ASC 470-50 “Debt — Modifications and Extinguishments”. The Company will use these proceeds for general corporate purposes, including potential acquisitions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis summarizes Hemisphere Media Group Inc’s (“Hemisphere” or the “Company”) financial condition and operating performance and should be read in conjunction with its historical consolidated financial statements and notes thereto included above.

OVERVIEW

Hemisphere Media Group is the parent holding company of WAPA Holdings, LLC (formerly known as InterMedia Español Holdings, LLC) (“WAPA”), Cine Latino, Inc. (“Cinelatino”), and Azteca Acquisition Corporation (“Azteca”).  While Hemisphere was formed on January 16, 2013 for purposes of effecting the Transaction, the Transaction was consummated on April 4, 2013.

WAPA consists of the leading broadcast television network (“WAPA PR”) and content producer in Puerto Rico, and a unique Spanish-language cable television network programmed with news and entertainment programs (produced and supplied, in its majority, by WAPA PR)  (“WAPA America”) serving Hispanics in the United States. WAPA also operates a sports television network (“WAPA 2 Deportes”) and a news and entertainment website (“WAPA.TV”) in Puerto Rico.

The two predominant sources of revenue for WAPA are advertising revenues and retransmission/subscription fees. WAPA PR primarily derives its revenue from advertising. WAPA America primarily derives its revenue from subscription fees. Advertising revenue is generated from the sale of advertising time on WAPA PR, WAPA 2 Deportes, WAPA America and on WAPA.TV. WAPA’s advertising revenue tends to reflect seasonal patterns of its advertisers’ demand, which is generally greatest during the 4th quarter of each year, driven by the holiday buying season. Puerto Rico’s political election cycle is every four years and so WAPA benefits from increased advertising sales every four years, including 2012.

WAPA PR has been the #1-rated broadcast television network in Puerto Rico for the last four years, and has maintained its leadership position as the #1-rated network thus far in 2013. WAPA PR is Puerto Rico’s news leader and the largest local producer of entertainment programming, producing over 65 hours in the aggregate each week in its state-of-the art production facility in Puerto Rico. WAPA PR continuously reviews the quality of its programming and develops new programming to ensure it can generate the highest ratings as estimated by Nielsen. The continued growth of WAPA PR’s advertising revenue will, to a certain extent, be dependent on the growth of WAPA PR’s audience, as well as the general health of the advertising marketplace.

WAPA America occupies a valuable and unique position as one of only a few Hispanic cable networks to have achieved broad distribution in the U.S. As a result, management believes WAPA America is well-positioned to capture a share of the growing national advertising spend targeted at the highly sought- after U.S. Hispanic cable television audience. Hispanics represent 17% of the total U.S. population and approximately 9% of the total U.S. discretionary consumption, but only 5% of the aggregate media spend targets U.S. Hispanics. As a result of the under-indexing of the media spend targeting U.S. Hispanics, advertisers have been and are expected to continue to increase the portion of their marketing dollars targeted towards U.S. Hispanics. U.S. Hispanic cable network advertising revenue grew at a 17% CAGR from 2006 to 2012, significantly outpacing overall U.S. cable advertising, which grew at 6%. Going forward, advertising on U.S. Hispanic cable networks is expected to grow to $398 million in 2014, representing a CAGR of 13%, presenting a significant and growing opportunity for WAPA America.

WAPA also benefits from retransmission and subscriber revenue earned by WAPA PR and WAPA America, respectively, which are fees received from cable, satellite and telecommunications operators, for the right to distribute WAPA PR and WAPA America, pursuant to multi-year agreements.

WAPA PR is distributed by all pay-TV distributors in Puerto Rico and has been successfully growing retransmission fees at a very robust rate. As the #1-rated broadcast television network in Puerto Rico and having grown its ratings and audience share each of the last three years, management believes WAPA PR is highly valued by its viewers and distributors. In fact, WAPA PR’s ratings are so strong that its primetime household rating is nearly equal to the aggregate ratings of the four major national broadcast networks in the U.S. (ABC, CBS, NBC and Fox). The four major U.S. networks have experienced significant growth in retransmission fees received by U.S. distributors. Accordingly, management believes WAPA PR is well positioned for future growth in retransmission fees.

WAPA America is distributed by all major pay-TV distributors in the U.S. and has been successfully growing subscriber fees at a robust rate. Management expects WAPA America to benefit from significant growth in subscribers, as the U.S. Hispanic population continues to grow rapidly. As of the 2012 U.S. Census, 53 million Hispanics resided in the United States, which represents an increase of 18 million people, or 50%, between 2000 and 2012, and is expected to grow to 64 million by 2020. Similarly, Hispanic

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television households are projected to grow from 14.1 million in 2012 to 15.4 million in 2014, an increase of 9% or 1.3 million new Hispanic television households. In an effort to capitalize on the strong growth of the U.S. Hispanic population and Hispanic television households, pay-TV distributors have been more aggressively marketing Hispanic programming packages. Accordingly, management believes WAPA America, which is carried on Hispanic programming packages, is well positioned to benefit from growth in subscribers.

Cinelatino is the leading Spanish-language cable television movie network, distributed in the U.S., Latin America and Canada. Cinelatino is programmed with a lineup featuring contemporary films and original television series from Mexico, Latin America, the U.S. and Spain. Cinelatino is the #2 Nielsen-rated Spanish-language pay-TV channel in the U.S., driven by the strength of its programming. Cinelatino’s programming is distributed to the U.S. and Latin America via two distinct feeds, which allow it to tailor its programming strategy specifically to each audience.

Cinelatino is currently commercial-free and generates all of its revenue through subscriber fees received from cable, satellite and telecommunications operators distributing the network pursuant to multi-year distribution agreements that provide for monthly subscriber fees. With over 80% of Cinelatino’s 2012 revenues derived from U.S. distributors, management has strategically acquired earlier television exhibition windows for many of its titles for the U.S., thereby enhancing the value of the network and the programming it offers to its rapidly growing target audience.

Management expects Cinelatino to benefit from significant growth in subscribers, as the U.S. Hispanic population continues to grow rapidly. As of the 2012 U.S. Census, 53 million Hispanics resided in the United States, which represents an increase of 18 million people, or 50%, between 2000 and 2012, and is expected to grow to 64 million by 2020. Similarly, Hispanic television households are projected to grow from 14.1 million in 2012 to 15.4 million in 2014, and increase of 9% or 1.3 million new Hispanic television households. In an effort to capitalize on the strong growth of the U.S. Hispanic population and Hispanic television households, pay-TV distributors have been more aggressively marketing Hispanic programming packages. Accordingly, management believes Cinelatino is well positioned to benefit from growth in subscribers.

Similarly, management expects Cinelatino to benefit from significant growth in Latin America. Fueled by a sizeable and growing population, a strong macroeconomic backdrop and rising disposable incomes, as well as investments in network infrastructure resulting in improved service and performance, pay-TV subscribers in Latin America (excluding Brazil) are projected to grow from 39 million in 2012 to 50 million in 2016, representing a 6% compounded annual growth rate. Furthermore, with approximately 8 million subscribers in Latin America, Cinelatino is presently distributed to only 21% of total pay-TV subscribers throughout Latin America. Accordingly, growth through new system launches represents a significant growth opportunity. Cinelatino is a top-rated network and management believes the network’s content has widespread appeal throughout Latin America, and therefore will be able expand distribution throughout the region.

Cinelatino continuously reviews the quality of its programming to ensure that it is maximizing its viewership and giving its subscribers a premium, high-value experience. The continued growth in Cinelatino’s subscriber fees will, to a certain extent, be dependent on the growth in subscribers of the cable, satellite and telecommunications operators distributing its network, and new system launches, particularly in Latin America.

MVS provides operational and technical services to Cinelatino pursuant to several agreements. Upon consummation of the Transaction, certain of the agreements were amended or terminated to what management believes to be to the benefit of Cinelatino.  As consideration for the terminated agreement, the Company made a one-time payment of $3.8 million to MVS. An agreement which had granted MVS the exclusive right to distribute the service in the U.S was terminated upon consummation of the Transaction. Management believes Hemisphere can assume responsibility for those activities previously provided by MVS, given the resources of WAPA that will be available to it, thus having no impact on Cinelatino’s operations. A similar agreement which had granted MVS the exclusive right to distribute the service throughout Latin America was amended upon consummation of the Transaction so that MVS’s rights will be on a non-exclusive basis, except for distribution agreements currently in effect. Management believes that the amendment to this agreement will not impact Cinelatino’s current distribution, and should enhance Cinelatino’s ability to drive new distribution in Latin America. Also upon consummation of the Transaction, Cinelatino’s affiliation agreement with Dish Mexico (an affiliate of MVS), pursuant to which Dish Mexico distributes the network and Cinelatino receives revenue, was extended through August 1, 2017.

Cinelatino is seeking to introduce advertising on its U.S. feed in an effort to further monetize its strong ratings and attractive audience, and to capitalize on the growing Hispanic cable advertising market. Cinelatino’s strong ratings performance offers advertisers an unmatched opportunity to target a rapidly growing demographic with high media consumption patterns.

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Azteca, a subsidiary of the Company, was initially formed as a blank check company in the British Virgin Islands on April 15, 2011 and reincorporated in the State of Delaware on June 8, 2011 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock, reorganization or similar business combination with one or more businesses. Azteca, a special purpose acquisition vehicle, delivered approximately $70 million from a trust account raised in its 2011 initial public offering to Hemisphere in the merger. Following the consummation of the merger, Azteca has had no operations and does not currently engage in any business activities generating revenues.

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Comparison of Consolidated Operating Results for the Three and Six Months Ended June 30, 2013 and June 30, 2012

	Three Months Ended						$ Change			% Change	Six Months Ended						$ Change			% Change
	June 30,						Favorable/			Favorable/	June 30,						Favorable/			Favorable/
(dollars in thousands)	2013			2012			(Unfavorable)			(Unfavorable)	2013			2012			(Unfavorable)			(Unfavorable)
Revenues	$	22,929		$	17,228		$	5,702		33%	$	36,424		$	30,733		$	5,691		19%
Operating Expenses:
Cost of revenues	7,672			7,440			(232		)	(3)%	13,527			14,024			497			4%
Selling, general and administrative	11,644			3,326			(8,319		)	NM	15,074			6,606			(8,468		)	NM
Depreciation and amortization	1,848			921			(927		)	NM	2,859			1,822			(1,037		)	(57)%
Other expenses	1,380			86			(1,295		)	NM	4,672			86			(4,587		)	NM
Loss (gain) on disposition of assets	43			(2		)	(45		)	NM	68			(50		)	(118		)	NM
Total operating expenses	22,588			11,771			(10,817		)	(92)%	36,200			22,488			(13,712		)	(61)%
Operating Income	341			5,457			(5,116		)	(94)%	224			8,245			(8,021		)	(97)%
Other Expenses:
Interest expense, net	(1,155		)	(771		)	(384		)	(50)%	(1,913		)	(1,906		)	(7		)	(0)%
Other (expense) income, net	(13		)	(12		)	(0		)	(0)%	(25		)	8			(33		)	NM
	(1,167		)	(784		)	(384		)	(49)%	(1,938		)	(1,898		)	(40		)	(2)%
(Loss) income before income taxes	$	(826	)	$	4,673		$	(5,499	)	(118)%	$	(1,714	)	$	6,347		$	(8,061	)	(127)%
Income tax (expense) benefit	(357		)	(2,022		)	1,665			82%	6			(2,823		)	2,829			NM
Net (loss) income	$	(1,183	)	$	2,651		$	(3,834	)	(145)%	$	(1,708	)	$	3,524		$	(5,232	)	(148)%

NM = not meaningful

Net Revenues

Net revenues increased $5.7 million, or 33%, for the three months ended June 30, 2013, and increased $5.7 million, or 19%, for the six months ended June 30, 2013.  The increases are primarily a result of the inclusion in the current quarter of the net revenues of Cinelatino since the consummation of the Transaction offset in part by the decline in political advertising revenue and the cancellation of one of WAPA’s television programs, SuperXclusivo.  Excluding the acquisition in the 2013 periods and political advertising revenue in the 2012 periods, for the three and six months ended June 30, 2013, net revenues decreased by $0.4 million, or 3%, and $0.2 million, or 1%, primarily due the cancellation of one of WAPA’s television programs, SuperXclusivo, offset in part by growth in retransmission and subscriber fees.

Operating Expenses

Cost of Revenues: Cost of revenues consists primarily of programming and production costs, programming amortization and distribution costs. For the three and six month period ended June 30, 2013, cost of revenues increased $0.2 million, or 3%, and decreased $0.5 million or 4%, respectively.  The increase during the current quarter was due to the inclusion in the current quarter of Cinelatino in the operating results since the consummation of the Transaction, offset in part by lower programming costs at WAPA due primarily to the cancellation of SuperXclusivo.  The decrease during the six month period was due to lower programming costs at WAPA due primarily to the cancellation of SuperXclusivo, offset in part by the inclusion of Cinelatino in the operating results for part of the period.

Selling, General and Administrative: Selling, general and administrative expenses consist principally of promotion, marketing and research, stock-based compensation, corporate employee costs, occupancy costs and other general administrative costs. Selling, general and administrative expenses increased $8.3 million and $8.5 million for the three and six months ended June 30, 2013, respectively.  The increase is due primarily to the inclusion in the current quarter of Cinelatino in the operating results since the consummation of the Transaction, and the incurrence of stock based compensation and corporate overhead, along with one-time fees and expenses related to the Transaction, including a one-time charge of $3.8 million in connection with the termination of an agreement with MVS.

Depreciation and Amortization: Depreciation and amortization expense consists of depreciation of fixed assets and amortization of intangibles. Depreciation and amortization expense increased $0.9 million and $1.0 million for the three and six months ended June 30, 2013, respectively.  The increases are due primarily to amortization of intangibles identified as a result of the Transaction.

Other Expenses: Other expenses, which include costs related to the Transaction increased $1.3 million and $4.6 million for the three and six months ended June 30, 2013, respectively.  The increases were due primarily to transaction related costs.

Loss on Disposition of Assets: Loss on disposition of assets increased $0.05 million and $0.1 million for the three and six months ended June 30, 2013, respectively.  The increase was due to higher losses on disposals of equipment no longer used in WAPA’s operations.

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Other Expenses

For the three and six months ended June 30, 2013, other expenses increased by $0.4 million and $0.04 million, respectively, due to lower term loan balances, offset by higher interest expense as a result of an interest rate swap that became effective in June 2012.

Income Tax Expense

Income tax expense decreased $1.7 million, or 82%, for the three months ended June 30, 2013, and decreased $2.8 million, or 100%, for the six months ended June 30, 2013, due to a 118% and 127% decrease in income before income taxes, respectively.

Net (Loss) Income

Net income decreased $3.8 million, or 145%, for the three months ended June 30, 2013, and decreased $5.2 million, or 148%, for the six months ended June 30, 2013.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

The Company’s principal sources of cash are cash on hand, cash flows from operating activities and its borrowing capacity available under its revolving credit facility. As of June 30, 2013, the Company had $81.0 million of cash on hand and $10.0 million available to borrow under WAPA’s revolving credit facility.

The Company’s primary uses of cash include the production and acquisition of programming, operational costs, personnel costs, equipment purchases, interest payments on its outstanding debt and income tax payments.

Management believes cash on hand, cash flow from operations and availability under the credit facility will be sufficient to meet its current contractual financial obligations and to fund anticipated working capital and capital expenditure requirements for existing operations. The Company’s current financial obligations include maturities of debt, operating lease obligations and other commitments from ordinary course of business that require cash payments to vendors and suppliers.

Cash Flows

	Six Months Ended June 30,
(dollars in thousands)	2013			2012
Cash (used in) provided by:
Operating Activities	$	(6,077	)	$	740
Investing Activities	81,751			(2,220		)
Financing Activities	(4,738		)	(4,038		)
Net increase (decrease) in Cash	$	70,936		$	(5,517	)

Comparison for the Six Months Ended June 30, 2013 and June 30, 2012

Operating Activities

Cash used in operating activities is primarily driven by the Company’s net (loss) income, adjusted for non-cash items and changes in working capital. Non-cash items consist primarily of depreciation of property and equipment, amortization of intangibles, programming amortization, amortization of deferred financing costs, stock-based compensation expenses, deferred taxes and provision for bad debts.

Net cash used by operating activities for the six months ended June 30, 2013 was $6.1 million as compared to a source of cash of $0.7 million in the same period in 2012, due to a $5.2 million decrease in net income and a $4.9 million increase in net working capital,

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offset in part by a $3.3 million increase in non-cash items. Non-cash items increased primarily as a result of a $3.1 million increase in stock-based compensation, a $1.0 million increase in depreciation and amortization, a $0.8 million increase in programming amortization and a $0.1 million increase in loss on disposition of assets, offset by a $1.7 million decrease in deferred income taxes.

Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2013, was $81.8 million as compared to net cash use of cash of $2.2 million in the same period in 2012.  The increase is primarily due to net proceeds from the Transaction and due to lower capital expenditures during the period, which were higher in 2012 as a result of the upgrade of WAPA’s television production facilities to high definition.

Financing Activities

For the six months ended June 30, 2013, cash used in financing activities was $4.7 million as compared to $4.0 million in the same period in 2012.  The increase is due to higher excess cash flow payments made by both WAPA and Cinelatino in 2013 as compared to 2012, as a result of higher excess cash flow generation (as defined in the credit agreements of the respective companies) during calendar year 2012 as compared to calendar year 2011 (the excess cash flow payment is due and payable in the subsequent calendar year).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We finance our capital needs through two term loans at our indirect wholly-owned subsidiaries, WAPA and Cinelatino.

The variable-rate of interest on the WAPA Term Loan exposes us to market risk for changes in interest rates.  Loans thereunder bear interest at rates that vary with changes in prevailing market rates.  With respect to the WAPA Term Loan, we do not speculate on the future direction of interest rates.  As of June 30, 2013, our exposure to changing market rates with respect to the WAPA Term Loan was as follows:

Dollars in millions	June 30, 2013
Variable rate debt	$	54.789
Average interest rate	3.69		%

As of June 30, 2013 total outstanding balance on the WAPA Term Loan was approximately $54.8 million and the revolving credit facility of $10 million was fully undrawn. In the event of an increase in the interest rate of 100 basis points, assuming a principal of $54.8 million, we would incur an increase in interest expense of approximately $0.5 million per year.  Such potential increases or decreases are based on certain simplifying assumptions, including a constant level of debt, no interest rate swap or hedge in place, and an immediate, across-the-board increase or decrease in the level of interest rates with no other subsequent changes for one year. Historically, WAPA’s risk management policy is to use derivative financial instruments, as appropriate, to manage the interest expense related to the debt with variable interest rates.

Cinelatino is exposed to the impact of changes in interest rates primarily through the unhedged portion of the Cinelatino Term Loan, which is variable-rate debt.  As of June 30, 2013, our exposure to changing market rates with respect to the Cinelatino Term Loan was as follows:

Dollars in millions	June 30, 2013
Unhedged Variable rate debt	$	12.520
Average interest rate	4.27		%

As of June 30, 2013 total outstanding balance on the Cinelatino Term Loan was approximately $30.5 million.  In the event of an increase in the interest rate of 100 basis points, assuming a principal of $30.5 million, we would incur an increase in interest expense of approximately $0.3 million per year.  Such potential increases or decreases are based on certain simplifying assumptions, including a constant level of debt, no interest rate swap or hedge in place, and an immediate, across-the-board increase or decrease in the level of interest rates with no other subsequent changes for one year.

We maintain an interest rate risk management strategy with respect to the Cinelatino Term Loan that uses interest rate swap derivative instruments, to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility related to its

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LIBOR-based borrowing on the Cinelatino Term Loan.  Cinelatino entered into an interest rate swap agreement which as of June 30, 2013 had outstanding notional amount of $18.0 million.  The interest rate swap agreement converts the variable interest rate of LIBOR on $18.0 million of the Cinelatino Term Loan to a fixed rate of 1.195%. The interest rate swap became effective on June 30, 2012, and matures on July 8, 2013.  The effective portion of the change in fair value of the swap is reported as a component of other comprehensive income and is reclassified into interest expense in the same period or periods during which the hedged transaction affects earnings.  This derivative instruments is being utilized to manage interest rate exposure over the period of the derivative instrument and is designated as highly effective cash flow hedges

We are exposed to credit related losses if the counterparties to our derivative instrument fail to perform their obligations.

ITEM 4. CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures, as of June 30, 2013. Our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2013, our disclosure controls and procedures were effective to ensure that all information required to be disclosed is recorded, processed, summarized and reported within the time periods specified, and that information required to be filed in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There is no material litigation, arbitration or governmental proceeding currently pending against the Company or any members of our management team in their capacity as such.  From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

ITEM 1A. RISK FACTORS

You should carefully consider the risk factors included in the section titled “Risk Factors” in the prospectus contained in our registration statement on Form S-1, as amended (File No. 333-186210) (the “Registration Statement”) and our post-effective amendment No. 1 on Form S-1 to the Registration Statement, filed with the SEC on May 3, 2013 (the “Post-Effective Amendment No. 1”) , in addition to other information included in this Quarterly Report on Form 10-Q, including under the section entitled, “Statement Regarding Forward-Looking Statements,” and in other documents we file with the SEC, in evaluating the Company and its business. If any of the risks occur, our business, financial condition, liquidity and results of operations could be materially adversely affected. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment and new risks emerge from time to time. Management cannot predict such new risk factors, nor can we assess the impact, if any, of such new risk factors on our business or the extent to which any factor or combination of factors may impact our business.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Except as set forth below in this Item 1A, there have been no material changes in our risk factors disclosed in the section titled “Risk Factors” in the prospectus contained in our Registration Statement and our Post-Effective Amendment No. 1.

The success of the Company’s broadcast business and cable business is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.

The value to us of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our intellectual property may decrease, or the cost of obtaining and maintaining rights may increase.  There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content piracy or signal theft. Content piracy and signal theft present a threat to the Company’s revenues.

The unauthorized use of our intellectual property rights may increase the cost of protecting these rights or reduce our revenues. New technologies such as the convergence of computing, communication, and entertainment devices, the falling prices of devices incorporating such technologies, and increased broadband internet speed and penetration have made the unauthorized digital copying and distribution of our programming content easier and faster and enforcement of intellectual property rights more challenging. The unauthorized use of intellectual property in the entertainment industry generally continues to be a significant challenge for intellectual property rights holders. Inadequate laws or weak enforcement mechanisms to protect intellectual property in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its intellectual property rights. These developments may require us to devote substantial resources to protecting our intellectual property against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content.

With respect to intellectual property developed by the Company and is subsidiaries and rights acquired by the Company and its subsidiaries from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. Successful challenges to our rights in intellectual property may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from the intellectual property that is the subject of challenged rights. The Company is not aware of any challenges to its intellectual property rights that it currently foresees having a material effect on its operations.

The Company, through a subsidiary, could become obligated to pay additional contributions due to the unfunded vested benefits of a multiemployer pension plan.  A future incurrence of withdrawal liability could have a material effect on our results of operations.

The unionized employees at WAPA PR are covered by the Newspaper Guild International Pension Plan (the “Plan”), a multiemployer pension plan (with a plan year end of December 31, that provides defined benefits to certain employees covered by two

31

collective bargaining agreements (each a “CBA”), which expire on July 23, 2015 and June 27, 2016, respectively.  The cost of this pension plan is determined in accordance with the provisions of the CBA.

The Company has received Annual Funding Notices, Report of Summary Plan Information, Critical Status Notices (“Notices”) and a Rehabilitation Plan, as defined by the Pension Protection Act of 2006 (“PPA”), from the Plan.  The Notices indicate that the Plan actuary has certified that the Plan is in critical status, the “Red Zone”, as defined by the PPA, and that a plan of rehabilitation (“Rehabilitation Plan”) was adopted by the Trustees of the Plan (“Trustees”) on May 1, 2010.  On May 29, 2010, the Trustees sent the Company a Notice of Reduction and Adjustment of Benefits Due to Critical Status explaining all changes adopted under the Rehabilitation Plan, including the reduction or elimination of benefits referred to as “adjustable benefits.”  In connection with the adoption of the Rehabilitation Plan, most of the Plan participating unions and contributing employers (including the Newspaper Guild International and the Company), agreed to one of the “schedules” of changes as set forth under the Rehabilitation Plan.  The Company elected the “Preferred Schedule” and executed a Memorandum of Agreement, effective May 27, 2010 (the “MOA”) and agreed to the following contribution rate increases: 3.0% beginning on January 1, 2013; an additional 3.0% beginning on January 1, 2014; and an additional 3% beginning on January 1, 2015.

The future cost of the Plan depends on a number of factors, including the funding status of the Plan and the ability of other participating companies to meet ongoing funding obligations. Participating employers in the Plan are jointly responsible for any plan underfunding.  Assets contributed to the Plan are not segregated or otherwise restricted to provide benefits only to the employees of WAPA PR.  While WAPA PR’s pension cost for the Plan is established by the CBA, the Plan may impose increased contribution rates and surcharges based on the funded status of the plan and in accordance with the provisions of the PPA.  Factors that could impact the funded status of the Plan include investment performance, changes in the participant demographics, financial stability of contributing employers and changes in actuarial assumptions.

The surcharges and effect of the Rehabilitation Plan as described above are not anticipated to have a material effect on the Company’s results of operations.  However, in the event other contributing employers are unable to, or fail to, meet their ongoing funding obligations, the financial impact on the Company to contribute to any plan underfunding may be material.  In addition, if a United States multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund.

The Company could also be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) due to the unfunded vested benefits of the Plan, in the event the Company withdrew from the plan during the five-year period beginning on the effective date of the MOA.  The withdrawal liability (which could be material) in the event of the foregoing, would equal the total lump sum of contributions that the Company would have been obligated to pay the Plan through the date of withdrawal, under the “default schedule” of the Rehabilitation Plan (5% surcharge in the initial year and 10% for each successive year thereafter the plan is in critical status).  Under current law regarding multiemployer defined benefit plans, a plan’s termination, WAPA PR’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require us to make payments to the plan for our proportionate share of the multiemployer plan’s unfunded vested liabilities.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference (as stated therein) as part of this Quarterly Report.

32

Exhibit Index

Exhibit No.	Description of Exhibit
3.1	Amended and Restated Certificate of Incorporation of Hemisphere Media Group, Inc. (incorporated by reference from Exhibit 3.3 to Amendment No. 2 to the Company’s Registration Statement on Form S-4 filed on January 25, 2013)
3.2	Amended and Restated Bylaws of Hemisphere Media Group, Inc. (incorporated by reference to Exhibit 3.4 to Amendment No. 2 to the Company’s Registration Statement on Form S-4 filed on January 25, 2013)
4.1	Hemisphere Media Group, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed on April 10, 2013)
10.1	Form of Nonqualified Stock Option Award Agreement
10.2	Form of Restricted Stock Award Agreement
10.3	Employment Agreement, dated April 9, 2013, by and between the Company and Alan J. Sokol (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 15, 2013)
10.4	Employment Agreement, dated April 9, 2013, by and between the Company and Craig D. Fischer (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on April 15, 2013)
10.5	Consulting Agreement, dated June 20, 2013, by and between the Company and James M. McNamara
10.6	Credit Agreement, dated as of July 30, 2013, by and among Hemisphere Media Holdings, LLC, a Delaware limited liability company, InterMedia Español, Inc., a Delaware corporation, the lenders party thereto from time to time, Deutsche Bank Securities Inc. as joint lead arranger and lead bookrunner, GE Capital Markets, Inc., as joint lead arranger, Deutsche Bank AG New York Branch, as administrative agent and collateral agent, General Electric Capital Corporation, as syndication agent, and the other parties named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 31, 2013)
10.7	Guaranty Agreement, dated as of July 30, 2013, by and among HMTV, LLC, a Delaware limited liability company, Hemisphere Media Holdings, LLC, a Delaware limited liability company, InterMedia Español, Inc., a Delaware corporation, the subsidiary guarantors from time to time party thereto and Deutsche Bank AG New York Branch as administrative agent ((incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 31, 2013)
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase
101.LAB**	XBRL Taxonomy Extension Label Linkbase
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase
101.DEF**	XBRL Taxonomy Extension Definition Document

*

A signed original of the written statement required by Section 906 has been provided to the Company and will be retained by the Company and forwarded to the SEC or its staff upon request.

**

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing, are deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise are not subject to liability under those sections.

33

SIGNATURES

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.

		HEMISPHERE MEDIA GROUP, INC.
DATE:	August 14, 2013	By:	/s/ Alan J. Sokol
			Alan J. Sokol
			Chief Executive Officer and President
			(Principal Executive Officer)
DATE:	August 14, 2013	By:	/s/ Craig D. Fischer
			Craig D. Fischer
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

34

Exhibit Index

Exhibit No.	Description of Exhibit
3.1	Amended and Restated Certificate of Incorporation of Hemisphere Media Group, Inc. (incorporated by reference from Exhibit 3.3 to Amendment No. 2 to the Company’s Registration Statement on Form S-4 filed on January 25, 2013)
3.2	Amended and Restated Bylaws of Hemisphere Media Group, Inc. (incorporated by reference to Exhibit 3.4 to Amendment No. 2 to the Company’s Registration Statement on Form S-4 filed on January 25, 2013)
4.1	Hemisphere Media Group, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed on April 10, 2013)
10.1	Form of Nonqualified Stock Option Award Agreement
10.2	Form of Restricted Stock Award Agreement
10.3	Employment Agreement, dated April 9, 2013, by and between the Company and Alan J. Sokol (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 15, 2013)
10.4	Employment Agreement, dated April 9, 2013, by and between the Company and Craig D. Fischer (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on April 15, 2013)
10.5	Consulting Agreement, dated June 20, 2013, by and between the Company and James M. McNamara
10.6	Credit Agreement, dated as of July 30, 2013, by and among Hemisphere Media Holdings, LLC, a Delaware limited liability company, InterMedia Español, Inc., a Delaware corporation, the lenders party thereto from time to time, Deutsche Bank Securities Inc. as joint lead arranger and lead bookrunner, GE Capital Markets, Inc., as joint lead arranger, Deutsche Bank AG New York Branch, as administrative agent and collateral agent, General Electric Capital Corporation, as syndication agent, and the other parties named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 31, 2013)
10.7	Guaranty Agreement, dated as of July 30, 2013, by and among HMTV, LLC, a Delaware limited liability company, Hemisphere Media Holdings, LLC, a Delaware limited liability company, InterMedia Español, Inc., a Delaware corporation, the subsidiary guarantors from time to time party thereto and Deutsche Bank AG New York Branch as administrative agent ((incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 31, 2013)
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase
101.LAB**	XBRL Taxonomy Extension Label Linkbase
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase
101.DEF**	XBRL Taxonomy Extension Definition Document

*

A signed original of the written statement required by Section 906 has been provided to the Company and will be retained by the Company and forwarded to the SEC or its staff upon request.

**

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing, are deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise are not subject to liability under those sections.

35

EX-10.1

Exhibit 10.1

FORM OF STOCK OPTION AWARD

HEMISPHERE MEDIA GROUP, INC.

2013 EQUITY INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

THIS NONQUALIFIED STOCK OPTION AWARD AGREEMENT (the “Agreement”), is made, effective as of                    (hereinafter the “Date of Grant”), between Hemisphere Media Group, Inc. (the “Company”), and                        (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Hemisphere Media Group, Inc. 2013 Equity Incentive Plan (the “Plan”), pursuant to which awards of Options may be granted; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that it is in the best interests of the Company and its stockholders to grant to the Participant an award of Options as provided herein and subject to the terms set forth herein.

NOW THEREFORE, for and in consideration of the premises and the covenants of the parties contained in this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, for themselves, their successors and assigns, hereby agree as follows:

1.Grant of Option.

(a)Grant. The Company hereby grants to the Participant an Option (the “Option”) to purchase                  shares of Common Stock (such shares, the “Option Shares”), on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. The Option is not intended to qualify as an Incentive Stock Option.  The Exercise Price, being the price at which the Participant shall be entitled to purchase the Option Shares upon the exercise of all or any portion of the Option, shall be $             per Option Share.

(b)Incorporation by Reference, Etc. The provisions of the Plan are hereby incorporated herein by reference.  Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan.  In the event of a conflict between the Plan and this Agreement, the terms and conditions of this Agreement shall govern.  The Committee shall have final authority to interpret and construe the Plan and this Agreement and to make any and all determinations under them, and its decision shall be binding and conclusive upon the Participant and his legal representative in respect of any questions arising under the Plan or this Agreement.

(c)Vesting.  Except as may otherwise be provided herein, subject to the Participant’s continued employment with the Company or an Affiliate, the Option shall become vested and exercisable in equal installments on each of the first                anniversaries of the Date of Grant.

2.Transferability. The Option may not be assigned, alienated, pledged, attached, sold, gifted, loaned or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution, pursuant to a qualified domestic relations order or as otherwise permitted under the Plan.  In the event of the Participant’s death, the Option shall thereafter be exercisable (to the extent otherwise exercisable hereunder) only by the Participant’s executors or administrators.  In addition, the Participant agrees to comply with any written holding requirement policy adopted by the Company for employees.

3.Termination of Employment.  Except as otherwise provided herein (or as otherwise provided in an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates), if the Participant’s employment or service with the Company or any Affiliate, as applicable, terminates for any reason, then the unvested portion of the Option shall be cancelled immediately and the Participant shall immediately forfeit any rights to the Option Shares subject to such unvested portion.

4.Expiration.

(a)In no event shall all or any portion of the Option be exercisable after the tenth anniversary of the Date of Grant (the “Option Period”).

(b)Except as otherwise provided herein (or as otherwise provided in an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates), if the Participant’s employment or service with the Company and all Affiliates is terminated (i) by the Company or its Affiliates without Cause, by the Participant for Good Reason or upon the Expiration Date, the Option shall expire on the earlier of (A) the last day of the Option Period or (B) the date that is one year after the date of such termination or (ii) by the Participant for any reason other than at a time when grounds to terminate the Participant’s employment for Cause exist, the Option shall expire on the earlier of the last day of the Option Period or the date that is one year after the date of such termination.  In the event of a termination described in this subsection (b), the Option shall remain exercisable by the Participant until its expiration only to the extent the Option was exercisable at the time of such termination.

(c)Except as otherwise provided herein (or as otherwise provided in an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates), if the Participant dies or is terminated on account of Disability prior to the end of the Option Period and while still in the employ or service of the Company or an Affiliate, the Option shall remain exercisable by the Participant or his or her beneficiary, as applicable, until the earlier of the last day of the Option Period or the date that is one year after the date of death or termination on account of Disability of the Participant, as applicable.  In the event of a termination described in this subsection (c), the Option shall remain exercisable by the

2

Participant until its expiration only to the extent the Option was exercisable at the time of such termination.

(d)Except as otherwise provided in an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates, if the Participant ceases employment or service of the Company or any of its Affiliates due to a termination for Cause or a termination by the Participant for any reason at a time when grounds to terminate the Participant’s employment for Cause exist, the Option (including any vested portion of the Option) shall expire immediately upon such cessation of employment or service.

5.Method of Exercise.

(a)Options which have become exercisable may be exercised by delivery of a duly executed written notice of exercise to the Company at its principal business office using such form(s) as may be required from time to time by the Company.  The Participant may obtain such form(s) by contacting the Legal Department at the address set forth in Section 8(a) below.

(b)No Option Shares shall be delivered pursuant to any exercise of the Option until payment in full of the Exercise Price therefor is received by the Company in accordance with Section 7(d) of the Plan and the Participant has paid to the Company an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld.

(c)Subject to applicable law, the Exercise Price and applicable tax withholding shall be payable by (i) cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (ii) tendering previously acquired Common Stock (either actually or by attestation) valued at their then Fair Market Value and (iii) such other method which is approved by the Committee.  Any fractional shares of Common Stock shall be settled in cash.

6.Rights as a Shareholder. The Participant shall not be deemed for any purpose to be the owner of any Option Shares unless, until and to the extent that (i) this Option shall have been exercised pursuant to its terms, (ii) the Company shall have issued and delivered to the Participant the Option Shares, and (iii) the Participant’s name shall have been entered as a shareholder of record with respect to such Option Shares on the books of the Company.

7.Tax Withholding. The exercise of the Option (or any portion thereof) shall be subject to the Participant satisfying any applicable federal, state, local and foreign tax withholding obligations. The Company shall have the power and the right to deduct or withhold from all amounts payable to the Participant in connection with the Option or otherwise, or require the Participant to remit to the Company, an amount sufficient to satisfy any applicable taxes required by law. In addition, unless required pursuant to the terms of an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates, the Committee may permit the Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest and which would not result in adverse accounting to the Company) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having

3

the Company withhold from the number of Option Shares otherwise issuable or deliverable pursuant to the exercise of the Option Shares  a number of shares with a Fair Market Value equal to such withholding liability (but no more than the minimum required statutory withholding liability).  The obligations of the Company under this Agreement will be conditional on such payment or arrangements, and the Company will, to the extent permitted by law, have the right to deduct any such withholding taxes from any payment of any kind otherwise due to the Participant.

8.Miscellaneous.

(a)Notices.  All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery:

if to the Company:	Hemisphere Media Group, Inc.
	405 Lexington Avenue, 48th Floor
	New York, NY, 10174
	Attention: Legal Department
if to the Participant:	at the Participant’s last known address on file with the Company.

All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.

(b)Clawback/Forfeiture.  If the Participant receives any amount in excess of what the Participant should have received with respect to the Option Shares by reason of a financial restatement, mistake in calculations or other administrative error, in each case, as determined by the Company’s auditors, then the Participant shall be required to repay any such excess amount to the Company upon 30 days prior written demand by the Committee.  To the extent required by applicable law (including without limitation Section 304 of the Sarbanes Oxley Act and Section 954 of the Dodd Frank Act), the Option Shares shall be subject to any required clawback, forfeiture or similar requirement.

(c)Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(d)No Rights to Service.  Nothing contained in this Agreement shall be construed as giving the Participant any right to be retained, in any position as an employee, consultant or director of the Company or its Affiliates or shall interfere with or restrict in any way the rights of

4

the Company or its Affiliates, which are hereby expressly reserved, to remove, terminate or discharge the Participant at any time for any reason whatsoever.

(e)Bound by Plan.  By signing this Agreement, the Participant acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.

(f)Beneficiary.  The Participant may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation.  If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s estate shall be deemed to be the Participant’s beneficiary.

(g)Successors.  The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant and the beneficiaries, executors, administrators, heirs and successors of the Participant.

(h)Section 409A.  The Option is intended to be exempt from or comply with Section 409A of the Code and this Agreement shall be interpreted consistent therewith. This Agreement is subject to Section 14(t) of the Plan.

(i)Electronic Delivery. By executing this Agreement, the Participant hereby consents to the electronic delivery of prospectuses, annual reports and other information required to be delivered by Securities and Exchange Commission rules. This consent may be revoked in writing by the Participant at any time upon three business days’ notice to the Company, in which case subsequent prospectuses, annual reports and other information will be delivered in hard copy to the Participant.

(j)Securities Laws. The Participant agrees that the obligation of the Company to issue Option Shares shall also be subject, as conditions precedent, to compliance with applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, state securities or corporation laws, rules and regulations under any of the foregoing and applicable requirements of any securities exchange upon which the Company’s securities shall be listed.

(k)Entire Agreement.  This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto.  No change, modification or waiver of any provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto.

(l)Governing Law.  This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware without regard to principles of conflicts of law thereof, or principles of conflicts of laws of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.

5

(m)Headings.  The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

(n)Signature in Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 [Remainder of page intentionally blank]

6

IN WITNESS WHEREOF, this Agreement has been executed by the Company and the Participant as of the day first written above.

HEMISPHERE MEDIA GROUP, INC.
By:
	Name:
	Title:
[PARTICIPANT]

7

EX-10.2

Exhibit 10.2

FORM OF RESTRICTED STOCK AWARD

HEMISPHERE MEDIA GROUP, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”), is made, effective as of                    (hereinafter the “Date of Grant”), between Hemisphere Media Group, Inc. (the “Company”), and                  (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Hemisphere Media Group, Inc. 2013 Equity Incentive Plan (the “Plan”), pursuant to which awards of Restricted Stock may be granted; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that it is in the best interests of the Company and its stockholders to grant to the Participant an award of Restricted Stock as provided herein and subject to the terms set forth herein.

NOW THEREFORE, for and in consideration of the premises and the covenants of the parties contained in this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, for themselves, their successors and assigns, hereby agree as follows:

1.Grant of Restricted Stock.  The Company hereby grants on the Date of Grant to the Participant a total of                shares of Restricted Stock (the “Restricted Shares”), on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan.  The Restricted Shares shall vest in accordance with Section 3.

2.Incorporation by Reference, Etc.  The provisions of the Plan are hereby incorporated herein by reference.  Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan.  In the event of a conflict between the Plan and this Agreement, the terms and conditions of this Agreement shall govern.  The Committee shall have final authority to interpret and construe the Plan and this Agreement and to make any and all determinations under them, and its decision shall be binding and conclusive upon the Participant and his legal representative in respect of any questions arising under the Plan or this Agreement.

3.Terms and Conditions.

(a)Vesting and Forfeiture.  The Restricted Shares subject hereto shall be one hundred percent (100%) unvested as of the Date of Grant.  Except as otherwise provided

in the Plan and this Agreement, subject to the Participant’s continued employment with the Company, the Restricted Shares shall vest and become non-forfeitable in equal installments on each of the first              anniversaries of the Date of Grant.

(b)Transfer Restrictions; Holding Requirement.  Prior to the Restricted Shares vesting in accordance with Section 3(a) hereof, unvested Restricted Shares granted hereunder may not be sold, pledged, loaned, gifted or otherwise transferred (other than by will or the laws of descent and distribution) and may not be subject to lien, garnishment, attachment or other legal process.  In addition, the Participant agrees to comply with any written holding requirement policy adopted by the Company for employees.

(c)Issuance.  The Restricted Shares shall be issued by the Company and shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof in book-entry form, subject to the Company’s directions at all times prior to the date the Restricted Shares vest.  As a condition to the receipt of the Restricted Shares, the Participant shall at the request of the Company deliver to the Company one or more stock powers, duly endorsed in blank, relating to the Restricted Shares.  The Committee may cause a legend or legends to be put on any stock certificate relating to the Restricted Shares to make appropriate reference to such restrictions as the Committee may deem advisable under the Plan or as may be required by the rules, regulations, and other requirements of the Securities and Exchange Commission, any exchange that lists the Restricted Shares, and any applicable federal or state laws.

(d)Effect of Termination of Employment.  Except as otherwise provided herein (or in an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates), if the Participant’s employment with the Company terminates for any reason prior to the Restricted Shares vesting in accordance with Section 3(a) hereof, any unvested Restricted Shares shall be forfeited without consideration to the Participant on the date of termination of employment.

(e)Rights as a Stockholder; Dividends.  The Participant shall be the record owner of the Restricted Shares unless and until such shares are forfeited pursuant to Section 3(d) hereof or sold or otherwise disposed of, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights, if any, with respect to the Restricted Shares; provided, that any cash or in-kind dividends paid with respect to unvested Restricted Shares shall be withheld by the Company and shall be paid to the Participant, without interest, only when, and if, such Restricted Shares shall become vested.

(f)Taxes and Withholding.  The Participant shall be responsible for all income taxes payable in respect of the Restricted Shares.  Upon the vesting of the Restricted Shares, the Participant shall be required to pay to the Company, and the Company shall have the right and is hereby authorized to withhold any cash, shares of Common Stock, other securities or other property deliverable under the Restricted Shares or from any compensation or other amounts owing to the Participant, the amount (in cash, Restricted Shares, other securities or other property) of any required withholding taxes in respect of the Restricted Shares, and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations

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for the payment of such withholding taxes, if applicable.  In addition, unless required pursuant to the terms of an employment, consulting or other written agreement between the Participant and the Company or any of its Affiliates, the Committee may permit the Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest and which would not result in adverse accounting to the Company) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of Restricted Shares otherwise issuable or deliverable pursuant to the vesting of the Restricted Shares  a number of shares with a Fair Market Value equal to such withholding liability (but no more than the minimum required statutory withholding liability).  The obligations of the Company under this Agreement will be conditional on such payment or arrangements, and the Company will, to the extent permitted by law, have the right to deduct any such withholding taxes from any payment of any kind otherwise due to Participant.

4.Miscellaneous.

(a)Notices.  All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery:

if to the Company:	Hemisphere Media Group, Inc.
	405 Lexington Avenue, 48th Floor
	New York, NY, 10174
	Attention: Legal Department
if to the Participant:	at the Participant’s last known address on file with the Company.

All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.

(b)Clawback/Forfeiture.  If the Participant receives any amount in excess of what the Participant should have received with respect to the Restricted Shares by reason of a financial restatement, mistake in calculations or other administrative error, in each case, as determined by the Company’s auditors, then the Participant shall be required to repay any such excess amount to the Company upon 30 days prior written demand by the Committee.  To the extent required by applicable law (including without limitation Section 304 of the Sarbanes Oxley Act and Section 954 of the Dodd Frank Act), the Restricted Shares shall be subject to any required clawback, forfeiture or similar requirement.

(c)Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

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(d)No Rights to Service.  Nothing contained in this Agreement shall be construed as giving the Participant any right to be retained, in any position as an employee, consultant or director of the Company or its Affiliates or shall interfere with or restrict in any way the rights of the Company or its Affiliates, which are hereby expressly reserved, to remove, terminate or discharge the Participant at any time for any reason whatsoever.

(e)Bound by Plan.  By signing this Agreement, the Participant acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.

(f)Beneficiary.  The Participant may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation.  If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s estate shall be deemed to be the Participant’s beneficiary.

(g)Successors.  The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant and the beneficiaries, executors, administrators, heirs and successors of the Participant.

(h)Section 409A.  It is intended that the Restricted Shares be exempt from or comply with Section 409A of the Code and this Agreement shall be interpreted consistent therewith.  This Agreement is subject to Section 14(t) of the Plan.

(i)Electronic Delivery.  By executing this Agreement, the Participant hereby consents to the electronic delivery of prospectuses, annual reports and other information required to be delivered by Securities and Exchange Commission rules.  This consent may be revoked in writing by the Participant at any time upon three business days’ notice to the Company, in which case subsequent prospectuses, annual reports and other information will be delivered in hard copy to the Participant.

(j)Securities Laws.  The Participant agrees that the obligation of the Company to issue Restricted Shares shall also be subject, as conditions precedent, to compliance with applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, state securities or corporation laws, rules and regulations under any of the foregoing and applicable requirements of any securities exchange upon which the Company’s securities shall be listed.

(k)Entire Agreement.  This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto.  No change, modification or waiver of any provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto.

(l)Governing Law.  This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware without regard to principles of

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conflicts of law thereof, or principles of conflicts of laws of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.

(m)Headings.  The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

(n)Signature in Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Remainder of page intentionally blank]

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IN WITNESS WHEREOF, this Agreement has been executed by the Company and the Participant as of the day first written above.

HEMISPHERE MEDIA GROUP, INC.
By:
	Name:
	Title:
[PARTICIPANT]

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EX-10.5

Exhibit 10.5

EXECUTION COPY

CONSULTING AGREEMENT (the “Agreement”) dated as of June 20, 2013, and effective as of April 9, 2013 (the “Effective Date”), between Hemisphere Media Group, Inc., a Delaware corporation (the “Company”), and James M. McNamara (“Consultant”).

WHEREAS, the Company desires Consultant to provide consulting services to the Company, and Consultant is willing to serve the Company in a consulting capacity, for the period and upon such other terms and conditions of this Agreement; and

WHEREAS Consultant’s agreement to enter into this Agreement and be bound by the terms hereof, including the restrictive covenants herein, is a material inducement to the Company’s willingness to grant stock options to Consultant and the Company would not otherwise grant such stock options to Consultant if Consultant did not agree to enter into this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as set forth below:

1.Term.  (a)  Subject to earlier termination pursuant to Section 4, the term of this Agreement shall be effective as of the Effective Date, and shall continue until the three (3) year anniversary of the Effective Date.  The period of time from the Effective Date through the termination of this Agreement is hereinafter referred to as the “Term”.

(b)For purposes of this Agreement, the following terms, as used herein, shall have the definitions set forth below.

“Affiliate” means, with respect to any specified Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person, provided that, in any event, any business in which the Company has any direct or indirect ownership interest shall be treated as an Affiliate of the Company.

“Control” (including, with correlative meanings, the terms “Controlled by” and “under common Control with”), as used with respect to any Person, means the direct or indirect possession of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Governmental Entity” means any national, state, county, local, municipal or other government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality.

“Person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, association, Governmental Entity, unincorporated entity or other entity.

“Plan” means the Hemisphere Media Group, Inc. 2013 Equity Incentive Plan.

2.Services; Place of Engagement; Independent Contractor Status.  (a) During the Term, Consultant agrees to provide the Company with the services set forth and described on Exhibit A to this Agreement (the “Services”).  Consultant hereby agrees to perform the Services upon the terms and conditions of this Agreement.  During the Term, Consultant shall use Consultant’s good faith efforts to faithfully and diligently perform the Services and shall not act in any capacity that is in conflict with Consultant’s Services hereunder.  During the Term, Consultant shall report directly to the Board of

Directors of the Company (the “Board”) and the Chief Executive Officer of the Company.  Consultant agrees that he will comply with the Company’s established policies, protocols and security requirements of which Consultant is aware.

(b)Consistent with and subject to Consultant’s duties and obligations under this Agreement, Consultant may perform services for, or accept engagements by, additional persons or entities as Consultant sees fit; provided that Consultant’s provision of the Services hereunder shall be his first priority vis-à-vis such other persons or entities; provided, further, that during the Term, Consultant will not, directly or indirectly, be employed by or otherwise render services to any person or entity that competes with the Company or any of its subsidiaries as provided in Section 5 hereof, or that materially interferes with the provision of the Services by Consultant.

(c)Consultant acknowledges that Consultant’s duties and responsibilities shall require Consultant to travel on business to the extent necessary to fully perform Consultant’s duties and responsibilities hereunder, and in connection therewith, Consultant shall visit any reasonable location, to provide the Services hereunder.

(d)Consultant acknowledges that (i) Consultant is an independent contractor of the Company and not an employee of the Company or any of its Affiliates, and nothing contained in this Agreement shall be construed to imply a joint venture, partnership or principal-agent or employment relationship between the Company or any of its Affiliates, on the one hand, and Consultant, on the other hand, (ii) other than in his capacity as a member of the Board, Consultant shall not have any right to act for, represent or otherwise bind the Company or any of its Affiliates in any manner and (iii) except as otherwise provided herein, neither Consultant nor any of his employees or service providers shall be entitled to participate in any employee benefit plans or programs of the Company or any of its Affiliates.

3.Consulting Fees; Other Compensation.  During the Term, for all Services rendered under this Agreement, Consultant shall receive the Consulting Fees and other remuneration as set forth on Exhibit B to this Agreement, in accordance with the documentation and payment terms set forth on Exhibit B.

4.Termination of Services.

(a)Consultant’s Services may be terminated by either party at any time and for any reason or no reason upon at least 30 days advance written notice to the other party hereto; provided, however, that the Company may terminate this Agreement immediately for Cause.  Notwithstanding the foregoing, Consultant’s services shall automatically terminate upon Consultant’s death.

(b)Except as otherwise provided herein, upon termination of Consultant’s services hereunder, the Company shall have no further obligation to provide compensation to Consultant hereunder except for payment of any accrued but unpaid pro rata Consulting Fees and reimbursement for any reasonable out of pocket expenses properly incurred in connection with the Services through the date Consultant’s Services are terminated.

(c)(i)  In the event that the Consultant’s Services are terminated by the Company for any reason other than death, Disability or Cause, or in the event that Consultant terminates the Services with Good Reason, Consultant shall be entitled to receive (i) a lump sum payment equal to 50% of his annual Consulting Fees (the “Severance Amount”); provided that the Severance Amount shall in no event be greater than (x) 1/12 of Consultant’s annual Consulting Fees, multiplied by (y) the number

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of months from the date of such termination to the end of the Term, and (ii) continue to receive the Health Benefit Coverage through the end of the Term.  The Option (as defined below) shall be treated in accordance with its terms.

(ii)Any payments or benefits under Section 4(c)(i) shall be (A) conditioned upon Consultant having provided an irrevocable waiver and general release of claims in favor of the Company, its respective Affiliates, their respective predecessors and successors, and all of the respective current or former directors, officers, employees, shareholders, partners, members, agents or representatives of any of the foregoing (collectively, the “Released Parties”) substantially in a form attached hereto as Exhibit C (the “Release”) that has become effective in accordance with its terms, (B) subject to Executive’s continued compliance with the applicable terms of this Agreement and (C) subject to Section 26.

(iii)Notwithstanding anything herein to the contrary, the amount of any payment or benefit provided for in this Section 4 shall not be reduced, offset or subject to recovery by the Company or any of its subsidiaries or affiliates by reason of any compensation earned by Consultant as the result of employment by another employer after the Term terminates for any reason. In addition, Consultant shall be under no obligation to seek other employment or to take any other actions to mitigate the amounts payable under this Section 4.

(iv)For purposes of this Agreement, “Cause” shall mean that Consultant has (A) engaged in or committed willful misconduct; (B) engaged in or committed theft, fraud or other felonious, tortious or grossly negligent conduct; (C) refused or demonstrated an unwillingness to substantially perform the Services after written demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes Consultant has not substantially performed the Services; (D) refused or demonstrated an unwillingness to reasonably cooperate in good faith with any Company or government investigation or provide testimony therein (other than such failure resulting from Consultant’s disability); (E) engaged in or committed any willful act that is likely to and which does in fact have the effect of injuring the reputation or business of the Company; (F) willfully violated his fiduciary duty or his duty of loyalty to the Company in any material respect; (G) used alcohol or drugs (other than drugs prescribed to Consultant by a physician and used by Consultant for their intended purpose for which they had been prescribed) in a manner which materially and repeatedly interferes with the performance of his duties hereunder or which has the effect of materially injuring the reputation or business of the Company; or (H) engaged in or committed a breach of any other term of this Agreement, and not cured such breach within ten (10) days following the delivery by the Company to Consultant of notice of such breach (provided that no cure period shall be required for a breach which by its nature cannot be cured). For purposes of the above clauses (A), (E) and (F) of this Section 4(c)(iv) no act, or failure to act, on Consultant’s part shall be considered willful unless done or omitted to be done, by him not in good faith or without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Services shall not be deemed to have been terminated for Cause without delivery to Consultant of a resolution duly adopted by the Board (excluding Consultant) stating that, in the good faith opinion of such Board, Cause exists and specifying the particulars thereof.

(v)For purposes of this Agreement, “Good Reason” means the occurrence of any of the following, without the written consent of Consultant, unless such event is rescinded within thirty (30) days after Consultant notifies the Company that Consultant objects thereto: (A) any reduction in Consultant’s payments or benefits set forth on Exhibit B; or (B) any other material default by the Company of its obligations to Consultant hereunder.

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(vi)For purposes of this Agreement, “Disability” means, as a result of Consultant’s incapacity due to physical or mental illness, Consultant shall have been unable to perform the Services, even with reasonable accommodation that does not impose an undue hardship on the Company, on a fifteen hours per week basis for the entire period of three (3) consecutive months, and within thirty (30) days after the later of such three (3) consecutive months without Consultant’s Services and written notice of termination is given (which may occur before or after the end of such three month period), shall not have returned to the performance of his duties hereunder on a fifteen hours per week basis.

(vii)Upon termination of Consultant’s Services for any reason, upon the Company’s request Consultant agrees to resign, as of the date of such termination of Services or such other date requested, from the Board and any committees thereof (and, if applicable, from the board of directors (and any committees thereof) of any Affiliate of the Company) to the extent Consultant is then serving thereon.

5.Noncompetition and Nonsolicitation.  For purposes of Sections 5, 6, 7, 8, 9, 10 and 11 of this Agreement, references to the Company shall include its subsidiaries.

(a)Consultant agrees that Consultant shall not, during the Term and during six-month period following termination of service (such collective duration, the “Non-Compete Period”), directly or indirectly, without the prior written consent of the Company:  (A) engage in activities or businesses (including without limitation by owning any interest in, managing, controlling, participating in, consulting with, advising, rendering services for, or in any manner engaging in the business of owning, operating or managing any business) anywhere in the world that are principally or primarily in the business of producing Spanish language media content, or owning or operating Hispanic television networks (“Competitive Activities”); provided, that, Competitive Activities shall not include film-making, or (B) assisting any Person in any way to do, or attempt to do, anything prohibited by this Section 5(a)(A) above.

(b)Consultant agrees that Consultant shall not, during the Term and during the one-year period following termination of service (such collective duration, the “Non-Solicit Period,” and together with the Non-Compete Period, the “Restriction Period”), directly or indirectly, without the prior written consent of the Company perform any action, activity or course of conduct which is substantially detrimental to the businesses or business reputations of the Company, including (A) soliciting, recruiting or hiring (or attempting to solicit, recruit or hire) any employees of the Company or Persons who have worked for the Company during the 12-month period immediately preceding such solicitation, recruitment or hiring or attempt thereof; (B) soliciting or encouraging (or attempting to solicit or encourage) any employee of the Company to leave the employment of the Company; (C) intentionally interfering with the relationship of the Company with any Person who or which is employed by or otherwise engaged to perform services for, or any customer, client, supplier, licensee, licensor or other business relation of, the Company; or (D) assisting any Person in any way to do, or attempt to do, anything prohibited by Section 5(b) (A), (B) or (C) above.

The Restriction Period shall be tolled during (and shall be deemed automatically extended by) any period in which Consultant is in violation of the provisions of this Section 5(a).

(c)The provisions of Section 5(a) shall not be deemed breached as a result of Consultant’s passive ownership of less than an aggregate of 5% of any class of securities of a Person

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engaged, directly or indirectly, in Competitive Activities, so long as Consultant does not actively participate in the business of such Person.

(d)Without limiting the generality of Section 11, notwithstanding the fact that any provision of this Section 5 is determined not to be specifically enforceable, the Company may nevertheless be entitled to recover monetary damages as a result of Consultant’s material breach of such provision.

(e)Consultant acknowledges that the Company has a legitimate business interest and right in protecting its Confidential Information (as defined below), business strategies, employee and customer relationships and goodwill, and that the Company would be seriously damaged by the disclosure of Confidential Information and the loss or deterioration of its business strategies, employee and customer relationships and goodwill.  Consultant acknowledges that Consultant is being provided with significant additional consideration (to which Consultant is not otherwise entitled), including stock options, to induce Consultant to enter into this Agreement.  Consultant expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.  Consultant further acknowledges that although Consultant’s compliance with the covenants contained in Sections 5, 6, 7, 8 and 9 may prevent Consultant from earning a livelihood in a business similar to the business of the Company, Consultant’s experience and capabilities are such that Consultant has other opportunities to earn a livelihood and adequate means of support for Consultant and Consultant’s dependents.

6.Nondisclosure of Confidential Information.  (a)   Consultant acknowledges that Consultant is and shall become familiar with the Company’s Confidential Information, including trade secrets, and that Consultant’s services are of special, unique and extraordinary value to the Company.  Consultant acknowledges that the Confidential Information obtained by Consultant while providing services to the Company is the property of the Company.  Therefore, Consultant agrees that Consultant shall not disclose to any unauthorized Person or use for Consultant’s own purposes any Confidential Information without the prior written consent of the Company, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Consultant’s acts or omissions in violation of this Agreement; provided, however, that if Consultant receives a request to disclose Confidential Information pursuant to a deposition, interrogatory, request for information or documents in legal proceedings, subpoena, civil investigative demand, governmental or regulatory process or similar process, (i) Consultant shall promptly notify in writing the Company, and consult with and assist the Company in seeking a protective order or request for other appropriate remedy, (ii) in the event that such protective order or remedy is not obtained, or if the Company waives compliance with the terms hereof, Consultant shall disclose only that portion of the Confidential Information which, in the written advice of Consultant’s legal counsel, is legally required to be disclosed and shall exercise reasonable efforts to provide that the receiving Person shall agree to treat such Confidential Information as confidential to the extent possible (and permitted under applicable law) in respect of the applicable proceeding or process and (iii) the Company shall be given an opportunity to review the Confidential Information prior to disclosure thereof.

(b)For purposes of this Agreement, “Confidential Information” means information, observations and data concerning the business or affairs of the Company, including, without limitation, all business information (whether or not in written form) which relates to the Company, or its customers, suppliers or contractors or any other third parties in respect of which the Company has a business relationship or owes a duty of confidentiality, or their respective businesses or products, and which is not known to the public generally other than as a result of Consultant’s breach of this Agreement, including but not limited to: technical information or reports; formulas; trade secrets;

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unwritten knowledge and “know-how”; operating instructions; training manuals; customer lists; customer buying records and habits; product sales records and documents, and product development, marketing and sales strategies; market surveys; marketing plans; profitability analyses; product cost; long-range plans; information relating to pricing, competitive strategies and new product development; information relating to any forms of compensation or other personnel-related information; contracts; and supplier lists. Confidential Information will not include such information known to Consultant prior to Consultant’s involvement with the Company or information rightfully obtained from a third party (other than pursuant to a breach by Consultant of this Agreement).  Without limiting the foregoing, Consultant agrees to keep confidential the existence of, and any information concerning, any dispute between Consultant and the Company, except that Consultant may disclose information concerning such dispute to his immediate family, to the court that is considering such dispute or to Consultant’s legal counsel and other professional advisors (provided that such counsel and other advisors agree not to disclose any such information other than as necessary to the prosecution or defense of such dispute).

(c)Except as expressly set forth otherwise in this Agreement, Consultant agrees that Consultant shall not disclose the terms of this Agreement, except to Consultant’s immediate family and Consultant’s financial and legal advisors, or as may be required by law or ordered by a court.  Consultant further agrees that any disclosure to Consultant’s financial or legal advisors shall only be made after such advisors acknowledge and agree to maintain the confidentiality of this Agreement and its terms.

(d)Consultant further agrees that Consultant will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other Person to whom Consultant has an obligation of confidentiality, and will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other Person to whom Consultant has an obligation of confidentiality unless consented to in writing by the former employer or other Person.

7.Return of Property.  Consultant acknowledges that all notes, memoranda, specifications, devices, formulas, records, files, lists, drawings, documents, models, equipment, property, computer, software or intellectual property relating to the businesses of the Company, in whatever form (including electronic), and all copies thereof, that are received or created by Consultant while a consultant of the Company or its subsidiaries or Affiliates (including but not limited to Confidential Information and Inventions (as defined below)) are and shall remain the property of the Company, and Consultant shall immediately return such property to the Company upon the termination of Consultant’s services and, in any event, at the Company’s request.  Consultant further agrees that any property situated on the premises of, and owned by, the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company’s personnel at any time with or without notice.

8.Intellectual Property Rights.  (i)  Consultant agrees that the results and proceeds of Consultant’s services for the Company (including, but not limited to, any trade secrets, products, services, processes, know-how, designs, developments, innovations, analyses, drawings, reports, techniques, formulas, methods, developmental or experimental work, improvements, discoveries, inventions, ideas, source and object codes, programs, matters of a literary, musical, dramatic or otherwise creative nature, writings and other works of authorship) resulting from services performed while a consultant of the Company and any works in progress, whether or not patentable or registrable under copyright or similar statutes, that were made, developed, conceived or reduced to practice or learned by Consultant, either alone or jointly with others in the performance of Consultant’s Services for the Company (collectively, “Inventions”), shall be works-made-for-hire and the Company shall be deemed the sole owner throughout the universe of any and all trade secret, patent, copyright and other intellectual

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property rights (collectively, “Proprietary Rights”) of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner the Company determines in its sole discretion, without any further payment to Consultant whatsoever.  If, for any reason, any of such results and proceeds shall not legally be a work-made-for-hire and/or there are any Proprietary Rights which do not accrue to the Company under the immediately preceding sentence, then Consultant hereby irrevocably assigns and agrees to assign any and all of Consultant’s right, title and interest thereto, including any and all Proprietary Rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, to the Company, and the Company shall have the right to use the same in perpetuity throughout the universe in any manner determined by the Company without any further payment to Consultant whatsoever.  As to any Invention that Consultant is required to assign, Consultant shall promptly and fully disclose to the Company all information known to Consultant concerning such Invention.

(b)Consultant agrees that, from time to time, as may be requested by the Company and at the Company’s sole cost and expense, Consultant shall do any and all things that the Company may reasonably deem useful or desirable to establish or document the Company’s exclusive ownership throughout the United States of America or any other country of any and all Proprietary Rights in any such Inventions, including the execution of appropriate copyright and/or patent applications or assignments.  To the extent Consultant has any Proprietary Rights in the Inventions that cannot be assigned in the manner described above, Consultant unconditionally and irrevocably waives the enforcement of such Proprietary Rights.  This Section 8(b) is subject to and shall not be deemed to limit, restrict or constitute any waiver by the Company of any Proprietary Rights of ownership to which the Company may be entitled by operation of law by virtue of the Company’s engagement of the Consultant.  Consultant further agrees that, from time to time, as may be requested by the Company and at the Company’s sole cost and expense, Consultant shall assist the Company in every proper and lawful way to obtain and from time to time enforce Proprietary Rights relating to Inventions in any and all countries.  Consultant shall execute, verify and deliver such documents and perform such other acts consistent herewith (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining, and enforcing such Proprietary Rights and the assignment thereof.  In addition, Consultant shall execute, verify and deliver assignments of such Proprietary Rights to the Company or its designees.  Consultant’s obligations under this Section 8 shall continue beyond the termination of Consultant’s services with the Company.

(c)Consultant hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that Consultant now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

9.Nondisparagement.  Consultant shall not, whether in writing or orally, malign, denigrate or disparage the Company or its predecessors and successors, or any of the current or former directors, officers, employees, shareholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light; provided that nothing herein shall or shall be deemed to prevent or impair Consultant from otherwise testifying truthfully in any legal or administrative proceeding where such testimony is compelled, or requested or from otherwise complying with legal requirements.  The Company shall not, and shall instruct its senior executives not to, whether in writing or orally, malign, denigrate or disparage Consultant, or otherwise publish (whether in writing or orally) statements that tend to portray Consultant in an unfavorable light; provided that nothing herein shall or shall be deemed to prevent or impair the

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Company or any such executives from testifying truthfully in any legal or administrative proceeding where such testimony is compelled, or requested or from otherwise complying with legal requirements.

10.Notification of Subsequent Employer.  Consultant hereby agrees that prior to accepting employment with, or agreeing to provide services to, any other Person engaged in Competitive Activities during any period during which Consultant remains subject to any of the covenants set forth in Section 5, Consultant shall provide such prospective employer with written notice of such provisions of this Agreement, with a copy of such notice delivered simultaneously to the Company (and the Company agrees to keep such notice confidential to the extent not prohibited by law).

11.Remedies and Injunctive Relief.  Consultant acknowledges that a violation by Consultant of any of the covenants contained in Section 5, 6, 7, 8 or 9 would cause irreparable damage to the Company in an amount that would be material but not readily ascertainable, and that any remedy at law (including the payment of damages) would be inadequate.  Accordingly, Consultant agrees that, notwithstanding any provision of this Agreement to the contrary, the Company shall be entitled (without the necessity of showing economic loss or other actual damage) to seek injunctive relief (including temporary restraining orders, preliminary injunctions and/or permanent injunctions) in any court of competent jurisdiction for any actual or threatened breach of any of the covenants set forth in Section 5, 6, 7, 8 or 9 in addition to any other legal or equitable remedies it may have.  The preceding sentence shall not be construed as a waiver of the rights that the Company may have for damages under this Agreement or otherwise, and all of the Company’s rights shall be unrestricted.

12.Indemnification and Insurance.  (a)  The Company shall indemnify and hold Consultant harmless for acts and omissions in Consultant’s capacity as a consultant of the Company and/or member of the Board to the maximum extent permitted under applicable law; provided, however, that neither the Company, nor any of its subsidiaries or affiliates shall indemnify Consultant for any losses incurred by Consultant as a result of any acts that would constitute Cause hereunder.

(b)During the Term and for a period of three (3) years following the termination of the Term, a directors’ and officers’ liability insurance policy (or policies), an errors and omissions liability insurance policy (or policies) and a general liability insurance policy (or policies) (together, the “Insurance Policies”) shall be kept in place providing coverage to Consultant that is no less favorable to him in any respect (including with respect to scope, exclusions, amounts, and deductibles) than the coverage then being provided to any other present or former senior executive or director of the Company.  Following the Company’s receipt of written request from Consultant (provided that Consultant shall be limited to one written request per calendar year), the Company shall provide Consultant with copies of certificates or other documentation evidencing coverage of Consultant under the Insurance Policies consistent with its obligations under this Section 12(b).

13.Representations of Consultant; Advice of Counsel.  (a)  Consultant represents, warrants and covenants that as of the date hereof:  (i) Consultant has the full right, authority and capacity to enter into this Agreement and perform Consultant’s obligations hereunder, (ii) Consultant is not bound by any agreement that conflicts with or prevents or restricts the full performance of Consultant’s duties and obligations to the Company hereunder during or after the Term and (iii) the execution and delivery of this Agreement shall not result in any breach or violation of, or a default under, any existing obligation, commitment or agreement to which Consultant is subject.

(b)Consultant represents that, prior to execution of this Agreement, Consultant has been advised by an attorney of Consultant’s own selection regarding this Agreement.  Consultant acknowledges that Consultant has entered into this Agreement knowingly and voluntarily and

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with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel.  Consultant further represents that in entering into this Agreement, Consultant is not relying on any statements or representations made by any of the Company’s directors, officers, employees or agents which are not expressly set forth herein, and that Consultant is relying only upon Consultant’s own judgment and any advice provided by Consultant’s attorney.

14.Cooperation.  Consultant agrees that, upon reasonable notice and without the necessity of the Company obtaining a subpoena or court order, Consultant shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation and/or defense of any claims asserted against any of Consultant and the Company, its respective Affiliates, their respective predecessors and successors, and all of the respective current or former directors, officers, employees, shareholders, partners, members, agents or representatives of any of the foregoing, which relates to events occurring during Consultant’s provision of services to the Company and its Affiliates as to which Consultant may have relevant information (including but not limited to furnishing relevant information and materials to the Company or its designee and/or providing testimony at depositions and at trial), provided that with respect to such cooperation occurring following termination of services, the Company shall reimburse Consultant for expenses reasonably incurred in connection therewith, and further provided that any such cooperation occurring after the termination of Consultant’s services shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with Consultant’s business or personal affairs.

15.Taxes; Offsets.  The Consultant shall be responsible for the payment of its portion of any and all required federal, state, local and foreign taxes (including self-employment taxes) incurred, or to be incurred, in connection with any amounts payable to the Consultant under this Agreement, and Consultant hereby agrees to indemnify and hold harmless the Company and its affiliates in relation to the payment of any and all withholding taxes, employee social security, employee national insurance, disability, unemployment taxes and such other federal, state, local and foreign taxes due in any country, tax withholding and tax deductions, and any interest and penalties applied thereon, on any earnings, payments or other compensation made with respect to this Agreement and the Services provided hereunder.  The Company may offset any amounts due and payable by Consultant to the Company or its affiliates against any amounts the Company owes Consultant hereunder and shall provide Consultant with an accounting thereof concurrently with any such offset.

16.Assignment.  (a)  This Agreement is personal to Consultant and without the prior written consent of the Company shall not be assignable by Consultant, except for the assignment by will or the laws of descent and distribution of any accrued pecuniary interest of Consultant, and any assignment in violation of this Agreement shall be void.  The Company may assign this Agreement, and its rights and obligations hereunder, to any of its Affiliates.

(b)This Agreement shall be binding on, and shall inure to the benefit of, the parties to it and their respective heirs, legal representatives, successors and permitted assigns (including, without limitation, successors by merger, consolidation, sale or similar transaction, and, in the event of Consultant’s death, Consultant’s estate and heirs in the case of any payments due to Consultant hereunder).

(c)Consultant acknowledges and agrees that all of Consultant’s covenants and obligations to the Company, as well as the rights of the Company hereunder, shall run in favor of and shall be enforceable by the Company and its successors and assigns.

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17.Governing Law; No Construction Against Drafter.  This Agreement shall be deemed to be made in the State of Delaware, and the validity, interpretation, construction, and performance of this Agreement in all respects shall be governed by the laws of the State of Delaware without regard to its principles of conflicts of law.  No provision of this Agreement or any related document will be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or drafted such provision.

18.Consent to Jurisdiction; Waiver of Jury Trial.  (a)  Except as otherwise specifically provided herein, Consultant and the Company each hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Delaware (or, if subject matter jurisdiction in that court is not available, in any state court located within the State of Delaware) over any dispute arising out of or relating to this Agreement.  Except as otherwise specifically provided in this Agreement, the parties undertake not to commence any suit, action or proceeding arising out of or relating to this Agreement in a forum other than a forum described in this Section 18(a); provided, however, that nothing herein shall preclude the Company or the Consultant from bringing any suit, action or proceeding in any other court for the purposes of enforcing the provisions of this Section 18 or enforcing any judgment obtained by the Company or the Consultant.

(b)The agreement of the parties to the forum described in Section 18(a) is independent of the law that may be applied in any suit, action, or proceeding and the parties agree to such forum even if such forum may under applicable law choose to apply non-forum law.  The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in an applicable court described in Section 18(a), and the parties agrees that they shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court.  The parties agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any suit, action or proceeding brought in any applicable court described in Section 18(a) shall be conclusive and binding upon the parties and may be enforced in any other jurisdiction.

(c)The parties hereto irrevocably consent to the service of any and all process in any suit, action or proceeding arising out of or relating to this Agreement by the mailing of copies of such process to such party at such party’s address specified in Section 23.

(d)Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of or relating to this Agreement.  Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such party would not, in the event of any action, suit or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party hereto has been induced to enter into this Agreement by, among other things, the mutual waiver and certifications in this Section 18(d).

(e)Each party shall bear its own costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with any dispute arising out of or relating to this Agreement.

19.Amendment; No Waiver.  No provisions of this Agreement may be amended, modified, waived or discharged except by a written document signed by Consultant and a duly authorized officer of the Company (other than Consultant).  The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or

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deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.  No failure or delay by either party in exercising any right or power hereunder will operate as a waiver thereof, nor will any single or partial exercise of any such right or power, or any abandonment of any steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.

20.Severability.  If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party; provided, however, that if any term or provision of Section 5, 6, 7, 8 or 9 is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect to the fullest extent permitted by law; provided further, that in the event that any court of competent jurisdiction shall finally hold in a non-appealable judicial determination that any provision of Section 5, 6, 7, 8 or 9 (whether in whole or in part) is void or constitutes an unreasonable restriction against Consultant, such provision shall not be rendered void but shall be deemed to be modified to the minimum extent necessary to make such provision enforceable for the longest duration and the greatest scope as such court may determine constitutes a reasonable restriction under the circumstances.  Subject to the foregoing, upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

21.Entire Agreement.  This Agreement, including the Exhibits hereto, constitutes the entire agreement and understanding between the Company and Consultant with respect to the subject matter hereof and supersedes all prior agreements and understandings (whether written or oral), between Consultant and the Company and the Company’s subsidiaries, relating to such subject matter, including, without limitation, that certain Consulting Agreement, by and between Consultant and Cine Latino, Inc. dated as of May 1, 2008 and any agreements or understandings with respect to the issuance of any equity securities in the Company or any of the Company’s subsidiaries (it being understood that nothing in this Agreement shall affect the securities of the Company previously received by Consultant in respect of the conversion of his shares of Cine Latino, Inc. in connection with the merger agreement and related transactions pursuant to which Cine Latino, Inc. became an indirect wholly-owned subsidiary of the Company).  None of the parties shall be liable or bound to any other party in any manner by any representations and warranties or covenants relating to such subject matter except as specifically set forth herein.

22.Survival.  The rights and obligations of the parties under the provisions of this Agreement shall survive, and remain binding and enforceable, notwithstanding the expiration of the Term, the termination of this Agreement, the termination of Consultant’s services hereunder or any settlement of the financial rights and obligations arising from Consultant’s services hereunder, to the extent necessary to preserve the intended benefits of such provisions.

23.Notices.  All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile or electronic image scan (pdf) or sent, postage prepaid, by registered, certified or express mail or overnight courier service and shall be deemed given when so delivered by hand, facsimile or pdf or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service) to the parties at the following

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addresses or facsimiles or email addresses (or at such other address for a party as shall be specified by like notice):

If to the Company:	Hemisphere Media Group, Inc.
	405 Lexington Avenue, 48th Floor
	New York, NY 10174
	Attention: Alan J. Sokol
	Fax: (305) 668-6109
	Email: asokol@hemispheretv.com
With a copy (which shall not constitute notice hereunder) to:
	Paul, Weiss, Rifkind, Wharton & Garrison LLP
	1285 Avenue of the Americas
	New York, NY 10019-6064
	Fax: (212) 757-3990
	Attention: Jeffrey D. Marell, Esq.
	Email: jmarell@paulweiss.com
If to Consultant:	James M. McNamara
	At the most recent address and fax or email in Company personnel records
With a copy (which shall not constitute notice) to:
	Del, Shaw, Moonves, Tanaka, Finkelstein & Lezcano
	2120 Colorado Avenue, Suite 200
	Santa Monica, CA 90404
	Attention: Jeffrey S. Finkelstein, Esq. and Ernest Del, Esq.
	Fax: (310) 979-7999
	Email: jfinkelstein@DSMTFL.com and edel@DSMTFL.com

Notices delivered by facsimile or pdf shall have the same legal effect as if such notice had been delivered in person.

24.Headings and References.  The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement.  When a reference in this Agreement is made to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated.

25.Counterparts.  This Agreement may be executed in one or more counterparts (including via facsimile and electronic image scan (pdf)), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

26.Section 409A.

(a)For purposes of this Agreement, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder (and such other Treasury or Internal Revenue Service guidance) as in effect from time to time. 

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The parties intend that any amounts payable hereunder that could constitute “deferred compensation” within the meaning of Section 409A will be compliant with Section 409A or exempt from Section 409A.  Notwithstanding the foregoing, the Company shall not be liable to, and the Consultant shall be solely liable and responsible for, any taxes or penalties that may be imposed on such Consultant under Section 409A of the Code with respect to Consultant’s receipt of payments hereunder.

(b)Notwithstanding anything in this Agreement to the contrary, the following special rule shall apply, if and to the extent required by Section 409A, in the event that (i) Consultant is deemed to be a “specified employee” within the meaning of Section 409A(a)(2)(B)(i), (ii) amounts or benefits under this Agreement or any other program, plan or arrangement of the Company or a controlled group affiliate thereof are due or payable on account of “separation from service” within the meaning of Treasury Regulations Section 1.409A-1(h) and (iii) Consultant is employed by a public company or a controlled group affiliate thereof:  no payments hereunder that are “deferred compensation” subject to Section 409A shall be made to Consultant prior to the date that is six (6) months after the date of Consultant’s separation from service or, if earlier, Consultant’s date of death; following any applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest permissible payment date.

(c)Any payment or benefit due upon a termination of Consultant’s employment that represents a “deferral of compensation” within the meaning of Section 409A shall commence to be paid or provided to Consultant 61 days following a “separation from service” as defined in Treas. Reg. § 1.409A-1(h); provided that Consultant executes if required by Section 4(c)(ii), the release described therein, within 60 days following his “separation from service.”  Each payment made under this Agreement (including each separate installment payment in the case of a series of installment payments) shall be deemed to be a separate payment for purposes of Section 409A.  Amounts payable under this Agreement shall be deemed not to be a “deferral of compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9) (“separation pay plans,” including the exception under subparagraph (iii)) and other applicable provisions of Section 409A.  For purposes of this Agreement, with respect to payments of any amounts that are considered to be “deferred compensation” subject to Section 409A, references to “termination of employment”, “termination”, or words and phrases of similar import, shall be deemed to refer to Consultant’s “separation from service” as defined in Section 409A, and shall be interpreted and applied in a manner that is consistent with the requirements of Section 409A.

(d)Notwithstanding anything to the contrary in this Agreement, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided to Consultant only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which Consultant’s “separation from service” occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which Consultant’s “separation from service” occurs.  To the extent any indemnification payment, expense reimbursement, or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise), the amount of any such indemnification payment or expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the indemnification payment or provision of in-kind benefits or expenses eligible for reimbursement in any other calendar year (except for any life-time or other aggregate limitation applicable to medical expenses), and in no event shall any indemnification payment or expenses be reimbursed after the last day of the calendar year following the calendar year in which Consultant

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incurred such indemnification payment or expenses, and in no event shall any right to indemnification payment or reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.

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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as of the date first written above.

HEMISPHERE MEDIA GROUP, INC.
By:	/s/ Alan J. Sokol
	Name: Alan J. Sokol
	Title:   President and Chief Executive Officer
JAMES M. MCNAMARA
/s/ James M. McNamara

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EXHIBIT A

SERVICES

·Consultant shall dedicate an average of fifteen hours a week to providing to the Company the following services: (A) the development, production and maintenance of programming; affiliate relations; identification and negotiation of carriage opportunities; and the development, identification and negotiation of new business initiatives, including sponsorship, new channels, direct-to-consumer products (e.g., DVDs and downloads) and other interactive initiatives, and (B) Consultant shall be available to consult as to InterMedia Español Holdings, LLC, as reasonably requested by the Board.

·In addition to the average of fifteen hours per week for the duties set forth above, (a) Consultant shall serve as Vice Chairman of the Board, and (b) unless otherwise instructed by the Company, Consultant shall make no fewer than one trip every fiscal quarter of Cine Latino, Inc. to Mexico City to visit MVS Cine Latino, S.A. de C.V. (“MVS”) and to observe the provision of services by MVS under the Support Agreement between MVS and Cine Latino, Inc. dated as of August 2, 2007, and the Satellites Services Agreement between MVS and Cine Latino, Inc., dated as of August 2, 2007.

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EXHIBIT B

CONSULTING FEES AND PAYMENT TERMS

1.Base Fees.  For all Services to be performed hereunder (including Consultant’s service on the Board), Consultant shall receive an annual consulting fee equal to $152,500 payable in equal monthly installments in arrears in accordance with the Company’s payroll policies.

2.Bonus.  Consultant shall be eligible to receive a discretionary bonus equal to $50,000 annually.  For the avoidance of doubt, Consultant agrees that for 2013, unless the Company meets all of its budget performance goals, no bonus shall be payable, and Consultant acknowledges that he has no expectation that a bonus would be payable in such event.

3.Health Insurance.  During the Term, the Company shall pay on behalf of Consultant the premiums for the cost of health benefits for the Consultant, Consultant’s spouse and dependents under the Company’s group health plan subject to availability of coverage under the Company’s group health plan; provided, that, if such coverage is not available under the Company’s group health plan then the Company shall reimburse Consultant for the premiums paid by Consultant for comparable health insurance (the “Health Benefit Coverage”).

4.Equity.  As promptly as practicable following the Effective Date, the Company shall grant Consultant, pursuant to, and subject to, the terms of the Plan and an option grant certificate substantially in the form attached hereto as Exhibit D, an option (the “Option”) to purchase 250,000 shares of Company common stock (the “Stock”).  Each share of Stock subject to the Option shall have an exercise price equal to the fair market value of a share of Stock on the date of grant.

5.Office Space; Parking.  During the Term, the Company shall make available to Consultant appropriately furnished and equipped office space and related office services at the Company’s executive offices on a rent-free basis, and shall reimburse Consultant and his executive assistant for parking expenses in connection with the performance of Services at the Company’s executive offices in accordance with the Company’s then-prevailing policies and procedures for expense reimbursement (which shall include appropriate itemization and substantiation of expenses incurred).

6.Business Expense Reimbursements.  During the Term, the Company shall promptly reimburse Consultant for Consultant’s reasonable and necessary business expenses (including, e.g., business travel incidentals, such as meals) incurred in connection with the Services provided hereunder in accordance with its then-prevailing policies and procedures for expense reimbursement (which shall include appropriate itemization and substantiation of expenses incurred).  Notwithstanding the foregoing, the following policies shall apply with respect to travel and related expenses in connection with the Services provided hereunder: Consultant shall be entitled, at the Company’s expense, to (A) “Business” class travel unless traveling with an employee or director of the Company traveling “first” class at the Company’s expense, in which case, first” class travel, (B) private “first” class hotel accommodations, and (C) use, and shall use, the Company’s recommended vendors for any transportation between airports, hotels and other locations in which the Services will be performed.

For purposes of this Agreement, the Base Fees are referred to as “Consulting Fees”.

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EXHIBIT C

WAIVER AND RELEASE OF CLAIMS

In connection with the termination of services of James M. McNamara (the “Consultant”) by Hemisphere Media Group, Inc. (the “Company”) pursuant to the consulting agreement between the Consultant and the Company, dated as of June 20, 2013 (the “Consulting Agreement”), the Consultant agrees as follows:

1.Waiver and Release

As used in this Waiver and Release of Claims (this “Agreement”), the term “claims” shall include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses and liabilities, of whatsoever kind or nature, both known and unknown, in law, equity or otherwise.

For and in consideration of the payments described in Section 4(c)(i) of the Consulting Agreement, the Consultant, for and on behalf of the Consultant and the Consultant’s heirs, administrators, executors, and assigns (the “Related Parties”), effective as of the Effective Date (as defined below), does fully and forever waive and release, remise and discharge the Company, its direct and indirect parents (including InterMedia Partners VII, L.P.), subsidiaries and affiliates, their predecessors and successors and assigns, together with the respective officers, directors, partners, shareholders, employees, members, and agents of the foregoing (collectively, the “Group”) from any and all claims which the Consultant or any Related Party had, may have had, or now has against the Company, the Group, collectively or any member of the Group individually, for or by reason of any matter, cause or thing whatsoever, including but not limited to any claim arising out of or attributable to the Consultant’s engagement or the termination of the Consultant’s engagement with the Company, and also including but not limited to claims of breach of contract, wrongful termination, unjust dismissal, defamation, libel or slander, or under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual preference.  This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act of 1967 (the “ADEA”), Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, and all other federal, state and local labor and anti-discrimination laws, the common law and any other purported restriction on an employer’s right to terminate the employment or engagement of employees or consultants.

The Consultant specifically releases all claims against the Group and each member thereof under ADEA relating to the Consultant’s engagement and its termination.

The Consultant represents that the Consultant has not filed or authorized to be filed against the Group, any member of the Group individually or the Group collectively, any lawsuit, complaint, charge, proceeding or the like, before any local, state or federal agency, court or other body (each, a “Proceeding”), and the Consultant covenants and agrees that the Consultant will not

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do so at any time hereafter with respect to the subject matter of this Agreement and claims released pursuant to this Agreement (including, without limitation, any claims relating to the termination of the Consultant’s engagement), except as may be necessary to enforce this Agreement, to obtain benefits described in or granted under this Agreement, or to seek a determination of the validity of the waiver of the Consultant’s rights under the ADEA, or initiate or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission.  Except as otherwise provided in the preceding sentence, (i) the Consultant will not initiate or cause to be initiated on the Consultant’s behalf any Proceeding, and will not participate (except as required by law) in any Proceeding of any nature or description against any member of the Group individually or the Group collectively that in any way involves the allegations and facts that the Consultant could have raised against any member of the Group individually or the Group collectively as of the date hereof and (ii) the Consultant waives any right the Consultant may have to benefit in any manner from any relief (monetary or otherwise) arising out of any Proceeding.

Notwithstanding the foregoing, nothing in this Agreement shall release Consultant’s claim for (i)  any right or claim that arises against the Company after the date of this Agreement, or (ii)  any right the Consultant may have to obtain contribution as permitted by law in the event of entry of judgment against the Consultant and the Company as a result of any act or failure to act for which the Consultant and the Company are jointly liable.

2.Acknowledgment of Consideration.

The Consultant is specifically agreeing to the terms of this release because the Company has agreed to pay the Consultant money and other benefits to which the Consultant was not otherwise entitled under the Company’s policies or under the Consulting Agreement (in the absence of providing this release).  The Company has agreed to provide this money and other benefits because of the Consultant’s agreement to accept it in full settlement of all possible claims the Consultant might have or ever had, and because of the Consultant’s execution of this Agreement.

3.Acknowledgments Relating to Waiver and Release; Revocation Period

The Consultant acknowledges that the Consultant has read this Agreement in its entirety, fully understands its meaning and is executing this Agreement voluntarily and of the Consultant’s own free will with full knowledge of its significance.  The Consultant acknowledges and warrants that the Consultant has been advised by the Company to consult with an attorney prior to executing this Agreement.  The offer to accept the terms of the Agreement is open for at least [21/45] days following termination of Consultant’s services.  The Consultant shall have the right to revoke this Agreement for a period of seven days following the Consultant’s execution of this Agreement, by giving written notice of such revocation to the Company.  This Agreement shall not become effective until the eighth day following the Consultant’s execution of it (the “Effective Date”).

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4.Remedies

Moreover, the Consultant understands and agrees that if the Consultant breaches any provisions of this Agreement, in addition to any other legal or equitable remedy the Company may have, the Company shall be entitled to cease making any payments or providing any benefits to the Consultant under Section 4(c)(i) of the Consulting Agreement, and the Consultant shall reimburse the Company for all its reasonable outside attorneys’ fees and costs incurred by it arising out of any such breach.  The remedies set forth in this paragraph shall not apply to any challenge to the validity of the waiver and release of the Consultant’s rights under the ADEA.  In the event the Consultant challenges the validity of the waiver and release of the Consultant’s rights under the ADEA, then the Company’s right to attorneys’ fees and costs shall be governed by the provisions of the ADEA, so that the Company may recover such fees and costs if the lawsuit is brought by the Consultant in bad faith.  Any such action permitted to the Company by this paragraph, however, shall not affect or impair any of the Consultant’s obligations under this Agreement, including without limitation, the release of claims in paragraph 1 hereof.  The Consultant further agrees that nothing herein shall preclude the Company from recovering attorneys’ fees, costs or any other remedies specifically authorized under applicable law.

5.No Admission

Nothing herein shall be deemed to constitute an admission of wrongdoing by the Company or any member of the Group.  Neither this Agreement nor any of its terms shall be used as an admission or introduced as evidence as to any issue of law or fact in any proceeding, suit or action, other than an action to enforce this Agreement.

6.Governing Law

THE TERMS OF THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO, INCLUDING ITS ENFORCEMENT, SHALL BE INTERPRETED AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS OF THE STATE OF DELAWARE OR THOSE OF ANY OTHER JURISDICTION WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.

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IN WITNESS WHEREOF, Consultant has hereunto set Consultant’s hand as of the day and year set forth opposite the Consultant’s signature below.

DATE	James M. McNamara
(not to be signed prior to termination of services)

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EXHIBIT D

STOCK OPTION GRANT CERTIFICATE

[See Attached]

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EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Alan J. Sokol, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Hemisphere Media Group, Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2013	By:	/s/ Alan J. Sokol
		Alan J. Sokol
		Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Craig D. Fischer, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Hemisphere Media Group, Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2013	By:	/s/ Craig D. Fischer
		Craig D. Fischer
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hemisphere Media Group, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alan J. Sokol, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of the Company that, to my knowledge:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Alan J. Sokol

Alan J. Sokol

Chief Executive Officer and President

Date: August 14, 2013

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to Hemisphere Media Group, Inc. and will be retained by Hemisphere Media Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hemisphere Media Group, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig D. Fischer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of the Company that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Craig D. Fischer

Craig D. Fischer

Chief Financial Officer

Date: August 14, 2013

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to Hemisphere Media Group, Inc. and will be retained by Hemisphere Media Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Multiemployer Pension

6 Months Ended

Jun. 30, 2013

Multiemployer Pension

Multiemployer Pension

Note 10. Multiemployer Pension

The unionized employees at WAPA PR are covered by the Newspaper Guild International Pension Plan (the “Plan” or “TNGIPP”), a multiemployer pension plan with a plan year end of December 31, that provides defined benefits to certain employees covered by two collective bargaining agreements (each, a “CBA”), which expire on July 23, 2015 and June 27, 2016, respectively.  The cost of this pension plan is determined in accordance with the provisions of the CBA.

The Company has received Annual Funding Notices, Report of Summary Plan Information, Critical Status Notices (“Notices”) and a Rehabilitation Plan, as defined by the Pension Protection Act of 2006 (“PPA”), from the Plan.  The Notices indicate that the Plan actuary has certified that the Plan is in critical status, the “Red Zone”, as defined by the PPA, and that a plan of rehabilitation (“Rehabilitation Plan”) was adopted by the Trustees of the Plan (“Trustees”) on May 1, 2010.  On May 29, 2010, the Trustees sent the Company a Notice of Reduction and Adjustment of Benefits Due to Critical Status explaining all changes adopted under the Rehabilitation Plan, including the reduction or elimination of benefits referred to as “adjustable benefits.”  In connection with the adoption of the Rehabilitation Plan, most of the Plan participating unions and contributing employers (including the Newspaper Guild International and the Company), agreed to one of the “schedules” of changes as set forth under the Rehabilitation Plan.  The Company elected the “preferred schedule” and executed a Memorandum of Agreement, effective May 27, 2010 (the “MOA”) and agreed to the following contribution rate increases: 3.0% beginning on January 1, 2013; an additional 3.0% beginning on January 1, 2014; and an additional 3.0% beginning on January 1, 2015.

The surcharges and effect of the Rehabilitation Plan as described above are not anticipated to have a material effect on the Company’s results of operations.  However, in the event other contributing employers are unable to, or fail to, meet their ongoing funding obligations, the financial impact on the Company to contribute to any plan underfunding may be material.  In addition, if a United States multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund.

The Company could also be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) due to the unfunded vested benefits of the Plan, in the event the Company withdrew from the plan during the five-year period beginning on the effective date of the MOA.  The withdrawal liability (which could be material) in the event of the foregoing, would equal the total lump sum of contributions that the Company would have been obligated to pay the Plan through the date of withdrawal, under the “default schedule” of the Rehabilitation Plan (5% surcharge in the initial year and 10% for each successive year thereafter the plan is in critical status), less any contributions actually paid by the WAPA PR to the Plan under the “preferred schedule”.  Under current law regarding multiemployer defined benefit plans, a plan’s termination, WAPA PR’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require us to make payments to the plan for the Company’s proportionate share of the multiemployer plan’s unfunded vested liabilities.  WAPA PR’s contributions to the Plan for the year ended December 31, 2011 were less than 5% of total contributions made to the Plan.

Further information about the Plan is presented in the table below:

				WAPA PR’s Contributions					Expiration Date of
Pension		Pension Protection Act Zone Status	Funding Improvement Plan/Rehabilitation Plan	Three months ended June 30,		Six months ended June		Surcharge	Collective Bargaining
Fund	EIN	2012	Status	2013		30, 2013		Imposed	Agreements
TNGIPP (Plan No. 001)	52-1082662	Red	Implemented	$	32,611	$	62,843	Yes	July 23, 2015 June 27, 2016

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Condensed Consolidated Statements of Operations
Net Revenues	$ 22,929,281	$ 17,227,640	$ 36,424,175	$ 30,733,059
Operating Expenses:
Cost of revenues	7,671,847	7,439,854	13,527,389	14,023,949
Selling, general and administrative	11,644,388	3,325,613	15,073,633	6,605,990
Depreciation and amortization	1,848,472	921,228	2,859,037	1,822,389
Other expenses	1,380,353	85,613	4,672,388	85,613
Loss (gain) on disposition of assets	43,042	(1,500)	67,577	(50,000)
Total operating expenses	22,588,102	11,770,808	36,200,024	22,487,941
Operating income	341,179	5,456,832	224,151	8,245,118
Other Expenses:
Interest expense, net	(1,154,775)	(771,009)	(1,913,338)	(1,906,404)
Other (expense) income, net	(12,500)	(12,499)	(25,000)	8,060
Total other expenses	(1,167,275)	(783,508)	(1,938,338)	(1,898,344)
(Loss) income before income taxes	(826,096)	4,673,324	(1,714,187)	6,346,774
Income tax (expense) benefit	(357,011)	(2,022,287)	6,136	(2,822,544)
Net (loss) income	$ (1,183,107)	$ 2,651,037	$ (1,708,051)	$ 3,524,230
(Loss) earnings per share:
Basic (in dollars per share)	$ (0.03)	$ 2,651,037.00	$ (0.08)	$ 3,524,230.00
Diluted (in dollars per share)	$ (0.03)	$ 2,651,037.00	$ (0.08)	$ 3,524,230.00
Weighted average shares outstanding:
Basic (in shares)	40,710,542	1	20,467,732	1
Diluted (in shares)	40,710,542	1	20,467,732	1

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Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions

Related Party Transactions

Note 3. Related Party Transactions

The Company has various agreements with MVS as follows:

· An agreement through August 1, 2017 pursuant to which MVS provides Cinelatino with satellite and support services including origination, uplinking and satellite delivery of two feeds of Cinelatino’s channel (for U.S. and Latin America), master control and monitoring, dubbing, subtitling and close captioning, and other support services (the “Satellite and Support Services Agreement”). The annual fee for the services was reduced during 2012, and provides for an annual fee going forward of $2,136,000. Total expenses incurred were $534,003 for the three and six months ended June 30, 2013, and are included in cost of revenues.

· A ten-year master license agreement through July 2017, which grants MVS the non-exclusive (except with respect to pre-existing distribution arrangements between MVS and third party distributors that are effective at the time of the consummation of the Transaction) to duplicate, distribute and exhibit Cinelatino’s service via cable, satellite or by any other means in Latin America and in Mexico to the extent that Mexico distribution is not owned by MVS. Pursuant to the agreement, Cinelatino receives revenue net of MVS’s distribution fees, which is presently equal to 13.5% of all license fees collected from distributors in Latin America and Mexico. Total revenues recognized were $903,414 for the three and six months ended June 30, 2013.

· A six-year affiliation agreement through August 1, 2017 for the distribution and exhibition of Cinelatino’s programming service through Dish Mexico (dba Commercializadora de Frecuencias Satelitales, S de R.L. de C.V.), an MVS affiliate that transmits television programming services throughout Mexico. Total revenues recognized were $446,202 for the three and six months ended June 30, 2013.

· A distribution agreement that gave MVS the exclusive right to negotiate the terms of the distribution, sub-distribution and exhibition of Cinelatino throughout the United States of America.  The agreement stipulated a distribution fee of 13.5% of the revenue received from all multiple system operators.  Upon consummation of the Transaction on April 4, 2013, the agreement was terminated effective January 1, 2013.  In consideration for such termination, the Company made a cash payment to MVS in an amount equal to $3,800,000, which is reflected in selling, general and administrative expenses.

Amounts due from MVS pursuant to the agreements noted above, net of an allowance for doubtful accounts, amounted to $2,265,292 and $0 as of June 30, 2013 and December 31, 2012, respectively, and are remitted monthly.  Amounts due to MVS pursuant to the agreements noted above amounted to $744,795 and $0 as of June 30, 2013 and December 31, 2012, respectively, and are remitted monthly.

The Company entered into a three-year consulting agreement effective April 9, 2013 with James M. McNamara, a member of the Company’s Board of Directors, to provide the development, production and maintenance of programming, affiliate relations, identification and negotiation of carriage opportunities, and the development, identification and negotiation of new business initiatives including sponsorship, new channels, direct-to-consumer programs and other interactive initiatives. Prior to that, Cinelatino entered into a consulting agreement with an entity owned by James M. McNamara. Total expenses incurred under these agreements are included in selling, general and administrative expenses and amounted to $26,667 for the three and six months ended June 30, 2013.  Amounts due to this related party were $25,417 as of June 30, 2013.

Cinelatino entered into programming agreements with an entity owned by James M. McNamara for the distribution of three specific movie titles. As of June 30, 2013 and December 31, 2012, $67,649 and $0, respectively, is included in other assets as prepaid programming related to these agreements. As of June 30, 2013 and December 31, 2012, approximately $137,571 and $0, respectively, is included in programming rights related to these agreements.

In March 2011, WAPA entered into an agreement with InterMedia Partners VII, L.P., to provide management services, including strategic planning, assistance with licensing of programming rights, and participation in distribution negotiations with cable and satellite operators (the “Management Services Fee”). The Management Services Fee is payable so long as no default shall have occurred or would result therefrom. Pursuant to the loan agreement, the payment of the Management Services Fee is expressly subordinate and junior in right of payment and exercise of remedies to the payment in full of the WAPA term loan. Total expenses for management services amounted to $0 and $156,250 for the three months ended June 30, 2013 and 2012, respectively, and $0 and $312,500 for the six months ended June 30, 2013 and 2012, respectively.  Upon consummation of the Transaction on April 4, 2013, this agreement was terminated retroactively to January 1, 2013.

The Company entered into a services agreement effective April 4, 2013 with InterMedia Advisors, LLC (“IMA”), which has officers, directors and stockholders in common with the Company, to provide  services including, without  limitation, office space, operational support and employees acting in a consulting capacity. Prior to that, the Company reimbursed IMA for payments made on the Company’s behalf for similar services. Amounts due to this related party amounted to $40,053 and $57,956 as of June 30, 2013 and December 31, 2012, respectively. Such expenses are included in selling, general and administrative expenses and amounted to $40,053 and $29,908 for the three months ended June 30, 2013 and 2012, respectively, and $40,053 and $69,405 for the six months ended June 30, 2013 and 2012, respectively.

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2013

Long-Term Debt

Schedule of long-term debt

	June 30,			December 31,
	2013			2012
Senior Notes due March 2016`	$	54,789,000		$	57,012,000
Senior Notes due June 2017	30,520,470			—
Less: current portion	(9,761,102		)	(4,608,000		)
	$	75,548,368		$	52,404,000

Schedule of maturities of long-term debt

Year Ending
December 31,
Remainder of 2013	$	4,225,051
2014	12,128,102
2015	15,688,127
2016	38,388,152
2017	14,880,038
	$	85,309,470

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Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events

Subsequent Events

Note 11. Subsequent Events

On July 2, 2013, WAPA PR entered into a new CBA with the Newspaper Guild International, covering the news department assistant producers only.

On July 30, 2013 certain of the Company’s subsidiaries entered into a credit agreement providing for a $175 million senior secured term loan B facility (the “Term Loan Facility”) which matures on July 30, 2020. The Term Loan Facility also provides an uncommitted accordion option (the “Incremental Facility”) allowing for additional borrowings under the Term Loan Facility up to an aggregate principal amount equal to (i) $20 million plus (ii) an additional amount up to 4.0x 1st lien net leverage. Pricing on the Term Loan Facility was set at LIBOR plus 500 basis points (with a LIBOR floor of 1.25%) and 1.0% of original issue discount. After repayment of all outstanding debt obligations at the Company’s subsidiaries and payment of fees and expenses, net cash proceeds are expected to be approximately $85 million. The Company is currently evaluating the impact of the transaction related fees in accordance with ASC 470-50 “Debt — Modifications and Extinguishments”. The Company will use these proceeds for general corporate purposes, including potential acquisitions.

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Stockholder's Equity (Details 2) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Equity Incentive Plans
Shares available for issuance	1,355,547	1,355,547
Stock-Based Compensation
Stock-based compensation expense (in dollars)	$ 3,106,531	$ 3,106,531
Class A Common Stock
Equity Incentive Plans
Shares authorized for issuance	4,000,000	4,000,000
Stock Options
Equity Incentive Plans
Granted (in shares)		1,575,000
Stock-Based Compensation
Unrecognized compensation cost related to non-vested stock options (in dollars)	5,500,000	5,500,000
Weighted-average periods over which unrecognized compensation cost recognized		2 years
Estimated forfeitures (as a percent)	1.50%	1.50%
Valuation assumptions
Dividend yield (as a percent)		0.00%
Weighted average grant date fair value of options granted (in dollars per share)		$ 3.83
Number of shares
Granted (in shares)		1,575,000
Outstanding at the end of the period (in shares)	1,575,000	1,575,000
Vested at the end of the period (in shares)	275,000	275,000
Exercisable at the end of the period (in shares)	275,000	275,000
Weighted-average exercise price
Granted (in dollars per share)		$ 11.19
Outstanding at the end of the period (in dollars per share)	$ 11.19	$ 11.19
Vested at the end of the period (in dollars per share)	$ 10.20	$ 10.20
Exercisable at the end of the period (in dollars per share)	$ 10.20	$ 10.20
Weighted-average contractual term
Outstanding at the beginning of the period		10 years
Granted		10 years
Outstanding at the end of the period		10 years
Vested at the end of the period		10 years
Exercisable at the end of the period		10 years
Aggregate intrinsic value
Granted (in dollars)	4,375,000	4,375,000
Outstanding at the end of the period (in dollars)	4,375,000	4,375,000
Vested at the end of the period (in dollars)	962,500	962,500
Exercisable at the end of the period (in dollars)	962,500	962,500
Stock Options | Class A Common Stock
Equity Incentive Plans
Granted (in shares)		1,575,000
Number of shares
Granted (in shares)		1,575,000
Restricted Stock
Equity Incentive Plans
Granted (in shares)		1,135,002
Stock-Based Compensation
Unrecognized compensation cost related to non-vested restricted stock (in dollars)	8,000,000	8,000,000
Weighted-average periods over which unrecognized compensation cost recognized		1 year 3 months 18 days
Number of shares
Granted (in shares)		1,135,002
Vested (in shares)		(250,000)
Outstanding at the end of the period (in shares)	885,002	885,002
Weighted-average grant date fair value
Granted (in dollars per share)		$ 9.53
Vested (in dollars per share)		$ 8.12
Outstanding at the end of the period (in dollars per share)	$ 9.92	$ 9.92
Aggregate intrinsic value
Granted (in dollars)		4,814,250
Vested (in dollars)		(1,395,000)
Outstanding at the end of the period (in dollars)	$ 3,419,250	$ 3,419,250
Restricted Stock | Class A Common Stock
Equity Incentive Plans
Granted (in shares)		1,135,002
Number of shares
Granted (in shares)		1,135,002
Time-based restricted stock awards and option awards
Equity Incentive Plans
Number of equal annual installments for vesting of awards	3	3
Time-based option
Aggregate intrinsic value
Vesting period		3 years
Time-based option | Black-Scholes pricing model
Valuation assumptions
Volatility (as a percent)		32.50%
Weighted-average expected term		6 years
Time-based option | Black-Scholes pricing model | Maximum
Valuation assumptions
Risk-free interest rates (as a percent)		1.02%
Time-based option | Black-Scholes pricing model | Minimum
Valuation assumptions
Risk-free interest rates (as a percent)		0.93%
Time-based option | Monte Carlo simulation model
Valuation assumptions
Risk-free interest rates (as a percent)		1.78%
Volatility (as a percent)		32.50%
Time-based option | Monte Carlo simulation model | Maximum
Valuation assumptions
Weighted-average expected term		6 years
Time-based option | Monte Carlo simulation model | Minimum
Valuation assumptions
Weighted-average expected term		5 years 3 months 18 days
Time-based restricted stock
Aggregate intrinsic value
Vesting period		3 years
Event-based restricted stock awards and option awards | Class A Common Stock | Maximum
Equity Incentive Plans
Closing price per share to be attained for vesting of awards to begin (in dollars per share)		$ 15.00
Event-based restricted stock awards and option awards | Class A Common Stock | Minimum
Equity Incentive Plans
Closing price per share to be attained for vesting of awards to begin (in dollars per share)		$ 12.50
Number of trading days on which the closing price per share should attain the specified price per share for vesting of awards to begin	10	10
Event-based option
Aggregate intrinsic value
Unvested options	300,000	300,000
Event-based restricted stock
Aggregate intrinsic value
Unvested options	150,000	150,000
Event-based restricted stock | Monte Carlo simulation model
Valuation assumptions
Risk-free interest rates (as a percent)		1.78%
Volatility (as a percent)		32.50%
Event-based restricted stock | Monte Carlo simulation model | Maximum
Valuation assumptions
Weighted-average expected term		1 year 4 months 24 days
Event-based restricted stock | Monte Carlo simulation model | Minimum
Valuation assumptions
Weighted-average expected term		9 months 18 days

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Multiemployer Pension (Tables)

6 Months Ended

Jun. 30, 2013

Multiemployer Pension

Schedule of further information about the Plan

				WAPA PR’s Contributions					Expiration Date of
Pension		Pension Protection Act Zone Status	Funding Improvement Plan/Rehabilitation Plan	Three months ended June 30,		Six months ended June		Surcharge	Collective Bargaining
Fund	EIN	2012	Status	2013		30, 2013		Imposed	Agreements
TNGIPP (Plan No. 001)	52-1082662	Red	Implemented	$	32,611	$	62,843	Yes	July 23, 2015 June 27, 2016

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Commitments (Tables)

6 Months Ended

Jun. 30, 2013

Commitments

Schedule of future minimum payments for operating leases and other commitments

Year Ending	Operating		Other
December 31,	Leases		Commitments		Total
Remainder of 2013	$	141,699	$	3,639,006	$	3,780,705
2014	92,850		3,022,163		3,115,013
2015	64,941		578,507		643,448
2016	7,274		78,578		85,852
Total	$	306,764	$	7,318,254	$	7,625,018

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Goodwill and Intangible Assets (Details 3) (USD $)	3 Months Ended		6 Months Ended				6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Affiliate relationships	Dec. 31, 2012 Affiliate relationships	Jun. 30, 2013 Affiliate relationships Maximum	Jun. 30, 2013 Affiliate relationships Minimum	Jun. 30, 2013 Affiliate relationships Weighted average
Amortizable intangible assets
Amortization period							10 years	7 years
Remaining amortization period									3 years 4 months 24 days
Net amounts related to other amortizable intangible assets	$ 23,716,071		$ 23,716,071		$ 23,716,071	$ 977,500
Aggregate amortization expense of amortizable intangible assets	903,929	57,500	961,429	115,000
Future estimated amortization expense
Remainder of 2013	1,807,857		1,807,857
2014	3,615,714		3,615,714
2015	3,615,714		3,615,714
2016	3,615,714		3,615,714
2017	3,443,214		3,443,214
2018	3,385,714		3,385,714
2019	3,385,714		3,385,714
2020	846,429		846,429
Total	$ 23,716,071		$ 23,716,071		$ 23,716,071	$ 977,500

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Multiemployer Pension (Details) (Multiemployer pension, WAPA PR, USD $)	3 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 item	Dec. 31, 2011 Maximum	Jun. 30, 2013 Beginning on January 1, 2013	Jun. 30, 2013 Beginning on January 1, 2014	Jun. 30, 2013 Beginning on January 1, 2015
Multiemployer pension
Number of collective bargaining agreements		2
Increase in the contribution rate agreed by the company under the "preferred schedule" of the Rehabilitation Plan (as a percent)				3.00%	3.00%	3.00%
Period beginning on the effective date of the MOA during which withdrawal from the plan would result in additional contribution due to the unfunded vested benefits		5 years
Surcharge in the initial year (as a percent)		5.00%
Surcharge for each successive year, thereafter, the plan is in critical status (as a percent)		10.00%
Total contributions made to the Plan			5.00%
Contributions	$ 32,611	$ 62,843

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Related Party Transactions (Details) (USD $)			3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	0 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended	0 Months Ended			6 Months Ended	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2013 MVS	Dec. 31, 2012 MVS	Jun. 30, 2013 MVS Satellite and Support Services Agreement Cinelatino	Jun. 30, 2013 MVS Satellite and Support Services Agreement Cinelatino item	Jun. 30, 2013 MVS Master license agreement Cinelatino	Jun. 30, 2013 MVS Master license agreement Cinelatino	Jun. 30, 2013 MVS Affiliation agreement Cinelatino	Jun. 30, 2013 MVS Affiliation agreement Cinelatino	Apr. 04, 2013 MVS Distribution agreement	Dec. 31, 2012 MVS Distribution agreement Cinelatino	Jun. 30, 2013 James M. McNamara and entity owned by James M. McNamara Consulting agreements with director and entity owned director	Jun. 30, 2013 James M. McNamara and entity owned by James M. McNamara Consulting agreements with director and entity owned director	Apr. 09, 2013 James M. McNamara Consulting agreement with director	Jun. 30, 2013 Entity owned by James M. McNamara Programming agreements	Dec. 31, 2012 Entity owned by James M. McNamara Programming agreements	Jun. 30, 2013 Entity owned by James M. McNamara Programming agreements Cinelatino item	Jun. 30, 2013 IMA Services agreement	Jun. 30, 2012 IMA Services agreement	Jun. 30, 2013 IMA Services agreement	Jun. 30, 2012 IMA Services agreement	Dec. 31, 2012 IMA Services agreement	Jun. 30, 2013 InterMedia Partners VII, L.P Management services agreement WAPA	Jun. 30, 2012 InterMedia Partners VII, L.P Management services agreement WAPA	Jun. 30, 2013 InterMedia Partners VII, L.P Management services agreement WAPA	Jun. 30, 2012 InterMedia Partners VII, L.P Management services agreement WAPA
Related Party Transactions
Number of channel feeds delivered through satellite				2
Annual fee for services			$ 2,136,000	$ 2,136,000
Total expense			534,003	534,003							26,667	26,667					40,053	29,908	40,053	69,405		0	156,250	0	312,500
Term of agreement						10 years		6 years					3 years
Revenue as a percentage of license fees collected from distributors in Latin America and Mexico					13.50%	13.50%
Revenue recognized from related party					903,414	903,414	446,202	446,202
Distribution fee as a percentage of revenue received from multiple system operators										13.50%
Cash payment on termination of agreement									3,800,000
Due from related parties, net of allowance for doubtful accounts	2,265,292	0
Due to related parties	744,795	0									25,417	25,417					40,053		40,053		57,956
Number of specific movie titles to be distributed																3
Amount of prepaid programming included in other assets														67,649	0
Programming rights														$ 137,571	$ 0

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Stockholder's Equity (Tables)

6 Months Ended

Jun. 30, 2013

Equity Incentive Plans

Summary of stock option activity

				Weighted-
		Weighted-		average	Aggregate
	Number	average		contractual	intrinsic
	of shares	exercise price		term	value
Outstanding at January 1, 2013:	—	$	—	—	$	—
Granted	1,575,000	11.19		10.0	4,375,000
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Outstanding at June 30, 2013:	1,575,000	$	11.19	10.0	$	4,375,000
Vested at June 30, 2013	275,000	$	10.20	10.0	$	962,500
Exercisable at June 30, 2013	275,000	$	10.20	10.0	$	962,500

Summary of restricted share activity

			Weighted-
			average		Aggregate
	Number		grant date		intrinsic
	of shares		fair value		value
Outstanding at January 1, 2013:	—		$	—	$	—
Granted	1,135,002		9.53		4,814,250
Vested	(250,000	)	8.12		(1,395,000		)
Forfeited	—		—		—
Outstanding at June 30, 2013:	885,002		$	9.92	$	3,419,250

Time-based option | Black-Scholes pricing model

Equity Incentive Plans

Schedule of valuation assumptions

	Six Months
	Ended June 30,
Black-Scholes Option Valuation Assumptions	2013	2012
Risk-free interest rates	0.93% - 1.02%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	6	—

Event-based option | Monte Carlo simulation model

Equity Incentive Plans

Schedule of valuation assumptions

	Six Months
	Ended June 30,
Monte Carlo Option Valuation Assumptions	2013	2012
Risk-free interest rate	1.78%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	5.3 - 6	—

Event-based restricted stock | Monte Carlo simulation model

Equity Incentive Plans

Schedule of valuation assumptions

	Six Months
	Ended June 30,
Monte Carlo Restricted Stock Valuation Assumptions	2013	2012
Risk-free interest rate	1.78%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	0.8 - 1.4	—

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Condensed Consolidated Statements of Changes in Stockholder's Equity (USD $)	Total	Preferred Stock	Common Stock Class A Common Stock	Common Stock Class B Common Stock	Treasury Stock Class A Common Stock	Additional Paid In Capital	Accumulated Earnings (Deficit)	Accumulated Comprehensive (Loss) Income
Balance at the beginning of the period at Dec. 31, 2012	$ 39,657,929					$ 34,608,586	$ 5,837,331	$ (787,988)
Changes in Member's Capital
Consummation of the Transaction (April 4, 2013)	198,629,764		1,099	3,300		201,388,964	(2,736,677)	(26,922)
Net loss	(1,708,051)						(1,708,051)
Comprehensive income	38,434							38,434
Issuance of Restricted Stock	2,030,025		25			2,030,000
Excess of tax benefits related to the issuance of restricted stock	182,000					182,000
Stock-based compensation	1,076,506					1,076,506
Repurchases of Class A Common Stock	(938,016)				(938,016)
Balance at the end of the period at Jun. 30, 2013	$ 238,968,591	$ 0	$ 1,124	$ 3,300	$ (938,016)	$ 239,286,056	$ 1,392,603	$ (776,476)

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Nature of Business

6 Months Ended

Jun. 30, 2013

Nature of Business

Nature of Business

Note 1. Nature of Business

Nature of business:  The accompanying consolidated financial statements include the accounts of Hemisphere Media Group, Inc. (“Hemisphere” or the “Company”), the parent holding company of Cine Latino, Inc. (“Cinelatino”), WAPA Holdings, LLC (formerly known as InterMedia Español Holdings, LLC) (“WAPA”), and Azteca Acquisition Corporation (“Azteca”).  While Hemisphere was formed on January 16, 2013 for purposes of effecting the Transaction, the Transaction had been consummated on April 4, 2013.  In these notes, the terms “Company,” “we,” “us” or “our” mean Hemisphere and all subsidiaries included in our consolidated financial statements.

· Cine Latino, Inc. (“Cinelatino”)—this company was organized under the laws of the State of Delaware and is engaged in in the business of producing, offering and distributing a cable television network  designated “Cine Latino,” the content for which is Spanish-language motion pictures or other entertainment programming. The network is distributed throughout the United States, Mexico, Central America, South America, the Caribbean and Canada.

· WAPA Holdings, LLC (“WAPA”)—this company was organized under the laws of the State of Delaware and is a holding company that owns 100% interest of Español and WAPA America (see below). WAPA has no operations or assets other than the investments in Español and WAPA America.

· InterMedia Español, Inc. (“Español”)—this company was organized under the laws of the State of Delaware and is a holding company that owns 100% interest of WAPA PR (see below). Español has no operations or assets other than the investment in WAPA PR.

· Televicentro of Puerto Rico, LLC (“Televicentro” or “WAPA PR”)—this Company was organized under the laws of the State of Delaware and is engaged in the broadcast television business, as well as in the production of news and entertainment programming in Puerto Rico.

· WAPA America, Inc. (“WAPA America”)—this company was organized on September 2, 2004, under the laws of the state of Delaware, and is a cable television network distributed in the U.S. and programmed with Spanish language news and entertainment programs (produced and supplied, in its majority, by WAPA PR).

· Azteca Acquisition Corporation (“Azteca”)— Dormant subsidiary; Azteca was initially formed as a blank check company in the British Virgin Islands on April 15, 2011 and reincorporated in the State of Delaware on June 8, 2011 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock, reorganization or similar business combination with one or more businesses. Azteca, a special purpose acquisition vehicle, delivered the proceeds of a trust account raised in its 2011 initial public offering to Hemisphere in the merger. Following the consummation of the merger, Azteca has had no operations and does not currently engage in any business activities generating revenues.

Cinelatino has certain agreements with MVS Multivision Digital S. de R.L. de C.V. and its affiliates (collectively “MVS”), a Mexican media and television conglomerate, which have directors and stockholders in common with the Company, as discussed in Note 3.

Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements for Hemisphere and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.   Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Our financial condition as of, and operating results for the three month and six month periods ended, June 30, 2013 are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2013.  As further described in Note 2, WAPA is the accounting acquirer and predecessor, whose historical results are the historical results of Hemisphere.  The operating results presented for the three month period ended June 30, 2013 reflect the operating results of the businesses acquired in the Transaction.

Net (Loss) Earnings per Common Share:  Basic (loss) earnings per share (“EPS”) are computed by dividing income attributable to common stockholders by the number of weighted-average outstanding shares of common stock.  Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive.

The following table sets forth the computation of the common shares outstanding used in determining basic and diluted EPS:

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Numerator for (loss) earnings per common share calculation:
Net (loss) income:	$	(1,183,107	)	$	2,651,037	$	(1,708,051	)	$	3,524,230
Denominator for earnings per common share calculation:
Weighted-average common shares, basic	40,710,542			1		20,467,732			1
Effect of dilutive securities:
Stock options and restricted stock	—			—		—			—
Weighted-average common shares, diluted	40,710,542			1		20,467,732			1

The Company applies the treasury stock method to measure the dilutive effect of its outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted income per common share calculation. Potentially dilutive securities representing 0.3 million a shares of common stock for the three and six months ended June 30, 2013 and June 30, 2012, respectively, were excluded from the computation of diluted (loss) income per common share for this period because their effect would have been anti-dilutive. The net (loss) income per share amounts are the same for our Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

A summary of the Company’s significant accounting policies follows:

Stock based compensation:  The Company has given equity linked incentives to certain employees. The Company accounts for equity linked incentives in accordance with Accounting Standards Codification (“ASC”) 718 “Stock Compensation”. The Company measures compensation cost for equity settled awards at fair value on the date of grant and recognizes compensation cost in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. Compensation cost is determined by using option pricing models.

Recent accounting pronouncements:  In July 2012, the Financial Accounting Standards Board (“FASB”) issued guidance that is intended to reduce the cost and complexity of the annual impairment test for indefinite-lived intangible assets other than goodwill by providing entities an option to perform a qualitative assessment to determine whether a quantitative impairment test is necessary. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, but early adoption is permitted. The Company adopted this guidance effective January 1, 2013, and the adoption did not have a material effect on the Company’s consolidated financial position, results of operation and cash flows.

In February 2013, the FASB issued guidance related to reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. These amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional details about those amounts. For public entities, the amendments are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012.  The Company adopted this guidance effective January 1, 2013, and the adoption did not have a material effect on the Company’s consolidated financial position, results of operation and cash flows.

Use of estimates:  In preparing these financial statements, management had to make estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the balance sheets date, and the reported revenues and expenses for the years then ended. Such estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. However, actual results could differ from those estimates.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 4. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following as June 30, 2013 and December 31, 2012:

	June 30,		December 31,
	2013		2012
Broadcast licenses	$	41,355,700	$	41,355,700
Goodwill	124,803,456		10,982,586
Other intangibles	24,416,071		1,677,500
	$	190,575,227	$	54,015,786

A summary of changes in the Company’s goodwill and other indefinite lived intangible assets, on a net basis, for the six months ended June 30, 2013 and the year ended December 31, 2012 is as follows:

	Net Balance at						Net Balance at
	December 31, 2012		Additions		Impairment		June 30, 2013
Broadcast licenses	$	41,355,700	$	—	$	—	$	41,355,700
Goodwill	10,982,586		113,820,870		—		124,803,456
Other Intangibles	700,000		—		—		700,000
Total indefinite lived intangibles	$	53,038,286	$	113,820,870	$	—	$	166,859,156

	Net Balance at						Net Balance at
	December 31, 2011		Additions		Impairment		December 31, 2012
Broadcast licenses	$	41,355,700	$	—	$	—	$	41,355,700
Goodwill	10,982,586		—		—		10,982,586
Other Intangibles	700,000		—		—		700,000
Total indefinite lived intangibles	$	53,038,286	$	—	$	—	$	53,038,286

As of June 30, 2013 and December 31, 2012, the Company has the following net amounts related to other amortizable intangible assets:

	Amortization	June 30,		December 31,
	Term (Years)	2013		2012
Affiliate relationships	7 - 10	$	23,716,071	$	977,500

The aggregate amortization expense of the Company’s amortizable intangible assets were $903,929 and $57,500 for the three months ended June 30, 2013 and 2012, respectively, and $961,429 and $115,000 for the six months ended June 30, 2013 and 2012,  respectively. The weighted average remaining amortization period is 3.4 years as of June 30, 2013.

Future estimated amortization expense is as follows:

Year Ending
December 31,
Remainder of 2013	$	1,807,857
2014	3,615,714
2015	3,615,714
2016	3,615,714
2017	3,443,214
2018	3,385,714
2019	3,385,714
2020	846,429
	$	23,716,071

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Business Combination

6 Months Ended

Jun. 30, 2013

Business Combination

Business Combination

Note 2. Business Combination

On April 4, 2013, the merger by and among Cinelatino, WAPA and Azteca providing for the combination of Cinelatino, WAPA and Azteca as indirect, wholly-owned subsidiaries of Hemisphere (the “Transaction”) was consummated.

The Transaction was accounted for by applying the acquisition method, which requires the determination of the accounting acquirer, the acquisition date, the fair value of the purchase consideration to be transferred, the fair value of assets and liabilities of the acquiree and the measurement of goodwill. ASC Topic 805-10, “Business Combinations—Overall” (“ASC 805-10”) provides that in identifying the acquiring entity in a business combination effected primarily through an exchange of equity interests, the acquirer is usually the entity that issues equity interests but all pertinent facts and circumstances must be considered in determining the acquirer. Other pertinent facts and circumstances to consider include the relative voting rights of the shareholders of the constituent companies in the combined entity, the composition of the board of directors and senior management of the combined company, the relative size of each company and the terms of the exchange of equity interests in the Transaction, including payment of any premium. Although Hemisphere issued the equity interests in the Transaction, since it is a new entity formed solely to issue these equity interests to effect the Transaction it would not be considered the acquirer and one of the combining entities that existed before the transaction must be identified as the acquirer. Based on the following, WAPA is the accounting acquirer and predecessor, whose historical results are the results of Hemisphere:

i.	WAPA shareholders obtained approximately 46.4% of the post-Transaction common shares of stock and 59.9% of the voting rights in the combined entities;
ii.	WAPA, through its parent company, InterMedia Partners VII, L.P. (“InterMedia Partners”), has the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity, as they represent five of the nine directors on the combined entity board of directors, including the Chief Executive Officer; and
iii.	WAPA’s historical revenues represent approximately 69.0% of the total revenues of the combined entities.

As WAPA is the accounting acquirer (and legal acquiree), the Transaction is considered to be a reverse acquisition. Since WAPA issued no consideration in the Transaction, unless the fair value of accounting acquirees’ equity interests are more reliably measurable, the fair value of the consideration transferred by WAPA would be based on the number of shares WAPA would have had to issue to give owners of the other entities in the transaction the same percentage ownership in the combined entities that results from the Transaction. In this situation, since Azteca’s shares were publicly traded and they are one of the combining entities in this Transaction, the fair value of those shares are considered to be more reliably measurable than the fair value of WAPA’s shares and therefore were used to determine the fair value of the consideration transferred for the acquisition of Cinelatino, which is the other operating entity involved in this Transaction.

Total consideration transferred by WAPA (accounting acquirer) to Cinelatino (accounting acquiree) was $129,423,943 based on: (i) cash consideration of $3.8 million (funded from cash on hand), plus (ii) 12,567,538 shares with a value of $10.25 per share based on the Company’s opening share price on the date following the consummation of the Transaction for each share of the Company’s common stock to be received by Cinelatino stockholders in the Transaction, (iii) less $3.2 million, which represents the difference between the value of 1,142,504 shares of Hemisphere Class B common stock that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels and the estimated fair value of these shares using a Monte Carlo simulation model (571,252 shares with value of $1.2 million have vested and are no longer subject to forfeiture as of June 30, 2013). Significant assumptions utilized in the model include:

· Stock Price: $10.25

· Volatility: 32.5%

· Risk-Free Rate: 0.69%

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the acquisition of Cinelatino:

Cash	$	12,865,242
Accounts receivable, net	4,052,590
Programming rights	4,459,550
Prepaid expenses and other current assets	939,945
Property and equipment, net	21,415
Other assets	7,566,867
Intangible asset - affiliate agreements	23,700,000
Current liabilities	(6,271,770		)
Long-term debt	(32,097,167		)
Fair value of identifiable net assets acquired	15,236,672
Goodwill	114,187,271
Total	$	129,423,943

The amount allocated to definite-lived intangible assets represents the estimated fair values of Cinelatino’s affiliate agreements of $23.7 million, which have been valued using a discounted cash flow based on management’s current estimates utilizing a 10% discount rate subject to finalization.  These intangible assets will amortized over the estimated remaining useful lives of approximately 7 years.

Goodwill of $114.2 million is the excess of the net consideration paid over the fair value of the identifiable net assets acquired, and primarily represents the benefits the Company expects to realize from the acquisition.  The goodwill associated with the transaction is not deductible for tax purposes.

The number of shares of stock of the Company issued and outstanding immediately following the consummation of the Transaction is summarized as follows:

	Number of Shares
Azteca public shares outstanding prior to the Transaction	10,000,000
Azteca founder shares (1)	2,500,000
Total Azteca shares outstanding prior to the Transaction	12,500,000
Less: shareholders of Azteca public shares redeemded	(1,258,900	)
Less: Azteca founder shares cancelled	(250,000	)
Shares issued to WAPA member (2)	20,432,462
Shares issued to Cinelatino stockholders (3)	12,567,538
Total shares outstanding at closing, April 4, 2013	43,991,100

(1) Includes 985,294 shares of Hemisphere Class A common stock which are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

(2) Includes 1,857,496 shares of Hemisphere Class B common stock, which were issued in the Transaction by Hemisphere that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

(3) Includes 1,142,504 shares of Hemisphere Class B common stock, which were issued in the Transaction by Hemisphere that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

The cash flows related to the Transaction are summarized as follows:

	Amount
Cash in trust at Azteca	$	100,520,532
Cash on hand at Cinelatino	12,865,242
Less: redemption of Azteca public shares	(12,651,945		)
Less: cash consideration paid to Azteca warrantholders	(7,333,334		)
Less: cash consideration paid to WAPA member and Cinelatino stockholders	(5,000,000		)(1)
Less: payment of Azteca fees and expenses	(5,963,030		)
Net cash received by the Company	$	82,437,465

(1) Includes $3.8 million paid by WAPA to Cinelatino.

Pro Forma Information

The following table sets forth the unaudited pro forma results of operations assuming that the Transaction occurred on January 1, 2012:

	Pro Forma
	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012
Net Revenues	$	22,929,281	$	23,190,839		$	42,528,003	$	42,471,860
Operating Expenses:
Cost of revenues	7,671,847		8,843,978			14,580,733		16,813,923
Selling, general and administrative	7,844,388		7,686,653			15,856,756		15,329,602
Depreciation and amortization	1,848,472		1,769,156			3,707,205		3,518,246
Loss (gain) on disposition of assets	43,042		(1,500		)	67,577		(50,000		)
Total operating expenses	17,407,749		18,298,287			34,212,271		35,611,771
Operating income	$	5,521,532	$	4,892,552		$	8,315,732	$	6,860,089

The unaudited pro forma results of operations for all periods set forth above includes the operating results of Cinelatino, stock-based compensation, corporate overhead and public company costs and amortization of intangibles created as a result of the Transaction and excludes all transaction related fees and expenses  and non-recurring expenses. Selling, general and administrative expenses for the three and six months ended June 30, 2012 were reduced as a result of the termination of a certain agreement with MVS that was terminated in connection with the Transaction.

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Subsequent Events (Details) (Subsequent events, Term Loan Facility, USD $)	0 Months Ended
	Jul. 30, 2013
Subsequent events | Term Loan Facility
Subsequent events
Amount of term loan	$ 175,000,000
Uncommitted accordion option base amount	20,000,000
Uncommitted accordion option multiplier of 1st lien net leverage	4.0
Reference rate basis	LIBOR
Interest rate margin (as a percent)	5.00%
Interest rate floor (as a percent)	1.25%
Original issue discount (as a percent)	1.00%
Net cash proceeds after repayment of all outstanding debt obligations and payment of fees and expenses	$ 85,000,000

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Nature of Business (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Numerator for (loss) earnings per common share calculation:
Net (loss) income	$ (1,183,107)	$ 2,651,037	$ (1,708,051)	$ 3,524,230
Denominator for earnings per common share calculation:
Weighted-average common shares, basic	40,710,542	1	20,467,732	1
Weighted-average common shares, diluted	40,710,542	1	20,467,732	1
Shares excluded from the computation of diluted (loss) income per common share	300,000	300,000	300,000	300,000
WAPA | Espanol and WAPA America
Nature of Business
Equity interest (as a percent)	100.00%		100.00%
Espanol | WAPA PR
Nature of Business
Equity interest (as a percent)	100.00%		100.00%

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Goodwill and Intangible Assets (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2011
Goodwill and Intangible Assets
Broadcast licenses	$ 41,355,700	$ 41,355,700
Goodwill	124,803,456	10,982,586	10,982,586
Other intangibles	24,416,071	1,677,500
Goodwill and intangible assets	$ 190,575,227	$ 54,015,786

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Stockholder's Equity (Details) (USD $) In Millions, except Share data, unless otherwise specified								0 Months Ended
	Apr. 04, 2013	Jun. 30, 2013 Class B Common Stock	Apr. 04, 2013 Class B Common Stock item	Dec. 31, 2012 Class B Common Stock	Jun. 30, 2013 Class A Common Stock	Apr. 04, 2013 Class A Common Stock item	Dec. 31, 2012 Class A Common Stock	Apr. 04, 2013 Cinelatino/WAPA Investors	Apr. 04, 2013 Cinelatino/WAPA Investors Class B Common Stock	Apr. 04, 2013 Cinelatino/WAPA Investors Class A Common Stock	Apr. 04, 2013 Azteca	Apr. 04, 2013 Azteca Class A Common Stock
Capitalization
Aggregate shares received									33,000,000
Common Stock, par value (in dollars per share)		$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001
Cash received for surrender of equity interests								$ 5.0
Warrants purchased from Azteca Acquisition Corporation (in shares)										2,333,334
Stock conversion ratio												1
Founder shares cancelled											250,000
Number of shares of common stock subject to forfeiture in the event the market price of common stock does not meet certain levels												250,000
Number of shares subject to forfeiture under pre-existing agreements												735,294
Stock outstanding (in shares)	43,991,100	33,000,000	33,000,000	0	11,241,000	10,991,100	0
Number of votes per share of common stock			10			1

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Accounts receivable, allowance for doubtful accounts	$ 206,406	$ 179,568
Due from related parties, allowance for doubtful accounts	$ 376,039	$ 0
Preferred Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, shares authorized	50,000,000	50,000,000
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	0	0
Treasury Stock, shares	65,549
Class A Common Stock
Common Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, shares authorized	100,000,000	100,000,000
Common Stock, shares issued	11,241,000	0
Common Stock, shares outstanding	11,241,000	0
Class B Common Stock
Common Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, shares authorized	33,000,000	33,000,000
Common Stock, shares issued	33,000,000	0
Common Stock, shares outstanding	33,000,000	0

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Stockholder's Equity

6 Months Ended

Jun. 30, 2013

Stockholder's Equity

Stockholder's Equity

Note 7. Stockholder’s Equity

Capitalization

On April 4, 2013, the merger by and among Cinelatino, WAPA and Azteca providing for the combination of Cinelatino, WAPA and Azteca as indirect, wholly-owned subsidiaries of Hemisphere (the “Transaction”) was consummated.

In connection with the Transaction (i) the holders of Cinelatino common stock and the holder of membership interests in WAPA (the “Cinelatino/WAPA Investors”) surrendered their respective interests and received an aggregate of 33,000,000 shares of Hemisphere Class B common stock, par value $0.0001 (“Class B common stock”), a cash payment equal to an aggregate of $5.0 million, and purchased 2,333,334 warrants from Azteca founders to purchase Hemisphere Class A common stock, par value $0.0001 (such warrants, “Warrants” and such stock, “Class A common stock”); (ii) each share of Azteca common stock was automatically converted into one share of Class A common stock; (iii) each Amended Azteca Warrant, as defined below, was automatically converted into an equal number of Warrants; and (iv) immediately prior to the consummation of the Transaction,  Azteca Acquisition Holdings, LLC and certain existing shareholders of Azteca contributed 250,000 shares of Azteca common stock to Azteca for cancellation and agreed to subject an additional 250,000 shares of Class A common stock to certain forfeiture provisions (in addition to 735,294 shares of Class A common stock already subject to forfeiture under pre-existing agreements) if the market price of shares of Hemisphere Class A common stock does not reach certain levels.  Following the consummation of the Transaction, there were 10,991,100 shares of Class A stock outstanding and 33,000,000 shares of Hemisphere Class B stock outstanding.

From time to time the Company has issued Class A common stock to certain members of management and board of directors as equity compensation, subject to time and performance vesting conditions, as discussed below.

Voting

Class B common stock votes on a 10 to 1 basis with the Class A common stock, which means that each share of Class B common stock will have 10 votes and each share of Class A common stock will have 1 vote.

Equity Incentive Plans

An aggregate of 4,000,000 shares of our Class A common stock were authorized for issuance under the terms of the Hemisphere Media Group, Inc. 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”).  During the six months ended June 30, 2013, 1,135,002 shares of restricted Class A common stock and 1,575,000 options to purchase shares of Class A common stock were awarded under the Plan.  As of June 30, 2013, 1,355,547 shares remained available for issuance of stock options or other stock-based awards under our Equity Incentive Plan (including shares of restricted Class A common stock surrendered to the Company in payment of taxes required to be withheld in respect of vested shares of restricted Class A common stock and available for issuance).  The expiration date of the 2013 Equity Incentive Plan, on and after which date no awards may be granted, is April 4, 2023.  The Company’s board of directors (“Board”) administers the 2013 Equity Incentive Plan, and has the sole and plenary authority to, among other things:  (i) designate participants; (ii) determine the type, size, and terms and conditions of awards to be granted; (iii) determine the method by which an award may be settled, exercised, canceled, forfeited, or suspended.

The Company’s time-based restricted stock awards and option awards generally vest in three equal annual installments beginning on the first anniversary of the grant date, subject to the grantee’s continued employment or service with the Company. The Company’s event-based restricted stock awards and option awards generally vest either upon the Company’s Class A common stock attaining a $12.50 or $15.00 closing price per share, as quoted on the NASDAQ Global Market, on at least 10 trading days, subject to the grantee’s continued employment or service with the Company.  Other event-based restricted stock awards granted to certain members of our Board vest on the day preceding the Company’s 2014 annual shareholder meeting.

Stock-Based Compensation

Stock-based compensation expense related to stock options and restricted stock amounted was $3,106,531 for the three and six months ended June 30, 2013.  As of June 30, 2013, there was $5.5 million and $8.0 million of total unrecognized compensation cost related to non-vested stock options and restricted stock, respectively, which is expected to be recognized over weighted-average periods of 2.0 years and 1.3 years, respectively.

Stock Options

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes pricing model for time-based options and the Monte Carlo simulation model for event-based options.  The expected term of options granted is derived using the simplified method under ASC 718-10-S99-1/SEC Topic 14.D for “plain vanilla” options and the Monte Carlo simulation for event-based options.  Expected volatility is based on the historical volatility of the Company’s competitors given its lack of trading history. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has estimated forfeitures of 1.5% and has assumed no dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future.

	Six Months
	Ended June 30,
Black-Scholes Option Valuation Assumptions	2013	2012
Risk-free interest rates	0.93% - 1.02%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	6	—

	Six Months
	Ended June 30,
Monte Carlo Option Valuation Assumptions	2013	2012
Risk-free interest rate	1.78%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	5.3 - 6	—

The weighted average granted date fair value of options granted for the six months ended June 30, 2013 was $3.83 per option. The time-vesting option grants vest over a period of three years. The following table summarizes stock option activity for the six months ended June 30, 2013:

				Weighted-
		Weighted-		average	Aggregate
	Number	average		contractual	intrinsic
	of shares	exercise price		term	value
Outstanding at January 1, 2013:	—	$	—	—	$	—
Granted	1,575,000	11.19		10.0	4,375,000
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Outstanding at June 30, 2013:	1,575,000	$	11.19	10.0	$	4,375,000
Vested at June 30, 2013	275,000	$	10.20	10.0	$	962,500
Exercisable at June 30, 2013	275,000	$	10.20	10.0	$	962,500

Upon the exercise of stock options, the Company will issue new shares of its Class A common stock.  As of June 30, 2013, 300,000 options issued are unvested, event-based options.

Restricted Stock

Certain employees and directors have been awarded restricted stock under the 2013 Equity Incentive Plan. The time-based restricted stock grants vest primarily over a period of three years.  The fair value and expected term of event-based restricted stock grants is estimated at the grant date using the Monte Carlo simulation.

	Six Months
	Ended June 30,
Monte Carlo Restricted Stock Valuation Assumptions	2013	2012
Risk-free interest rate	1.78%	—
Dividend yield	—	—
Volatility	32.5%	—
Weighted-average expected term (years)	0.8 - 1.4	—

The following table summarizes restricted share activity for the six months ended June 30, 2013:

			Weighted-
			average		Aggregate
	Number		grant date		intrinsic
	of shares		fair value		value
Outstanding at January 1, 2013:	—		$	—	$	—
Granted	1,135,002		9.53		4,814,250
Vested	(250,000	)	8.12		(1,395,000		)
Forfeited	—		—		—
Outstanding at June 30, 2013:	885,002		$	9.92	$	3,419,250

As of June 30, 2013, 150,000 shares of restricted stock issued are unvested, event-based shares.

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Condensed Consolidated Statements of Comprehensive Income (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Condensed Consolidated Statements of Comprehensive Income
Net (loss) income	$ (1,183,107)	$ 2,651,037	$ (1,708,051)	$ 3,524,230
Other comprehensive income:
Net unrealized gain on interest rate swap agreement	38,434		38,434
Comprehensive (loss) income	$ (1,144,673)	$ 2,651,037	$ (1,669,617)	$ 3,524,230

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Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2013	Dec. 31, 2012
Current Assets
Cash	$ 81,020,220	$ 10,084,434
Accounts receivable, net of allowance for doubtful accounts of $206,406 and $179,568, respectively	14,151,304	10,510,978
Due from related parties, net of allowance for doubtful accounts of $376,039 and $0, respectively	1,455,027
Programming rights	5,857,196	4,403,029
Deferred taxes	6,149,075	3,049,047
Prepaid expenses and other current assets	5,335,864	1,362,002
Total current assets	113,968,686	29,409,490
Programming Rights	7,823,078	2,664,100
Property and Equipment, net	25,604,327	26,861,359
Deferred Taxes	4,822,984	863,252
Broadcast License	41,355,700	41,355,700
Goodwill	124,803,456	10,982,586
Other Intangibles, net	24,416,071	1,677,500
Other Assets	2,712,432	2,043,703
Total Assets	345,506,734	115,857,690
Current Liabilities
Accounts payable	3,881,108	912,007
Accrued expenses	8,961,866	12,042,165
Programming rights payable	4,751,730	3,207,719
Current portion of long-term debt	9,761,102	4,608,000
Total current liabilities	27,355,806	20,769,891
Programming Rights Payable	1,455,563	926,984
Long-Term Debt, net of current portion	75,548,368	52,404,000
Other Liabilities	2,178,406	2,098,886
Total Liabilities	106,538,143	76,199,761
Commitments and Contingencies
Stockholder's Equity
Preferred Stock, $0.0001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2013 and December 31, 2012
Additional Paid In Capital	241,316,389	34,608,586
Fair Value of Contingent Consideration	(2,030,333)
Treasury Stock, at cost; 65,549 shares	(938,016)
Accumulated Earnings	1,392,603	5,837,331
Accumulated Comprehensive Loss	(776,476)	(787,988)
Total Stockholder's Equity	238,968,591	39,657,929
Total Liabilities and Stockholder's Equity	345,506,734	115,857,690
Class A Common Stock
Stockholder's Equity
Common Stock	1,124
Class B Common Stock
Stockholder's Equity
Common Stock	$ 3,300

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Business Combination (Details) (USD $)	0 Months Ended	6 Months Ended
	Apr. 04, 2013	Jun. 30, 2013
Business Combination
Estimated fair value of contingent consideration		$ 2,030,333
WAPA
Business Combination
Percentage of post-transaction common shares of combined entities obtained by acquirer	46.40%
Percentage of voting rights of combined entities obtained by acquirer	59.90%
Number of directors on the combined entity board of directors represented by acquirer	5
Number of directors on the combined entity board of directors	9
Percentage of total revenues of the combined entities represented as historical revenues by acquirer	69.00%
Amount of consideration issued by acquirer, if certain conditions fulfilled	0
Cinelatino
Business Combination
Total consideration	129,423,943
Cash consideration	3,800,000
Number of shares	12,567,538
Estimated fair value of contingent consideration	3,200,000
Number of Class B common stock shares issuable under contingent consideration	1,142,504
Number of common stock shares that have been vested and are no longer subject to forfeiture		571,252
Common stock shares that have been vested and are no longer subject to forfeiture		1,200,000
Significant assumptions utilized to value contingent consideration
Stock Price (in dollars per share)	$ 10.25
Volatility (as a percent)	32.50%
Risk-Free Rate (as a percent)	0.69%
Allocation of the purchase price
Cash	12,865,242
Accounts receivable, net	4,052,590
Programming rights	4,459,550
Prepaid expenses and other current assets	939,945
Property and equipment, net	21,415
Other assets	7,566,867
Intangible asset - affiliate agreements	23,700,000
Current liabilities	(6,271,770)
Long-term debt	(32,097,167)
Fair value of identifiable net assets acquired	15,236,672
Goodwill	114,187,271
Total	$ 129,423,943
Discount rate (as a percent)	10.00%
Estimated remaining useful lives	7 years

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Income Taxes

Schedule of income tax expense and effective tax rates

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income tax expense (benefit)	$	357,011		$	2,022,287		$	(6,136	)	$	2,822,544
Effective income tax rate	102.7		%	44.2		%	102.7		%	44.2		%

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Commitments (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Commitments
Rental expense	$ 51,547	$ 42,503	$ 102,972	$ 72,774
Future minimum payments for operating leases
Remainder of 2013	141,699		141,699
2014	92,850		92,850
2015	64,941		64,941
2016	7,274		7,274
Total	306,764		306,764
Future minimum payments for other commitments
Remainder of 2013	3,639,006		3,639,006
2014	3,022,163		3,022,163
2015	578,507		578,507
2016	78,578		78,578
Total	7,318,254		7,318,254
Future minimum payments for operating leases and other commitments
Remainder of 2013	3,780,705		3,780,705
2014	3,115,013		3,115,013
2015	643,448		643,448
2016	85,852		85,852
Total	$ 7,625,018		$ 7,625,018

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Taxes
Income tax expense (benefit)	$ 357,011	$ 2,022,287	$ (6,136)	$ 2,822,544
Effective income tax rate (as a percent)	102.70%	44.20%	102.70%	44.20%
Statutory federal income tax rate (as a percent)	34.00%	34.00%	34.00%	34.00%
Puerto Rico
Income Taxes
Income tax rate (as a percent)	30.00%	30.00%	30.00%	30.00%
Income tax rate before increase (as a percent)	39.00%	39.00%	39.00%	39.00%

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Long-Term Debt (Details) (USD $)			0 Months Ended	3 Months Ended		6 Months Ended			6 Months Ended		6 Months Ended					6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Apr. 13, 2011 Interest rate swap agreement	Jun. 30, 2013 Interest rate swap agreement	Jun. 30, 2012 Interest rate swap agreement	Jun. 30, 2013 Interest rate swap agreement	Jun. 30, 2012 Interest rate swap agreement	Dec. 31, 2012 Interest rate swap agreement	Jun. 30, 2013 Senior Notes due March 2016	Dec. 31, 2012 Senior Notes due March 2016	Jun. 30, 2013 Senior Notes due March 2016 LIBOR rate	Jun. 30, 2013 Senior Notes due March 2016 Base rate	Jun. 30, 2013 Senior Notes due June 2017	Dec. 31, 2012 Senior Notes due June 2017	Dec. 31, 2011 Senior Notes due June 2017	Jun. 30, 2013 Senior Notes due June 2017 Leverage ratio greater than or equal to 2.5 to 1.00	Jun. 30, 2013 Senior Notes due June 2017 Leverage ratio less than 2.5 to 1.00	Jun. 30, 2013 Revolving credit line	Jun. 30, 2012 Revolving credit line	Jun. 30, 2013 Revolving credit line	Jun. 30, 2012 Revolving credit line	Dec. 31, 2012 Revolving credit line	Mar. 31, 2011 Revolving credit line	Mar. 31, 2011 Term loan
Long-term debt
Long-term debt	$ 85,309,470								$ 54,789,000	$ 57,012,000			$ 30,520,470	$ 0
Less: current portion	(9,761,102)	(4,608,000)
Long-term debt less current portion	75,548,368	52,404,000
Amount of term loan																								66,000,000
Borrowing capacity																							10,000,000
Reference rate basis											LIBOR rate plus an applicable LIBOR rate margin	Base rate plus an applicable base rate margin	LIBOR
Debt Instrument Consolidated Leverage Ratio									0.0369
Annual commitment fee (as a percent)																				0.75%
Maximum period after each fiscal year for prepayment of debt									130 days				95 days
Commitment fee																		18,493	18,904	37,192	37,603
Prepayment of debt as a percentage of excess cash flow									50.00%							50.00%	25.00%
Prepayment of debt as a percentage of excess cash flow if lower leverage ratio is maintained									25.00%
Amount outstanding under the revolving credit commitment															40,000,000			0		0		0
Maturity term			2 years
Initial notional amount			33,000,000
Variable rate basis for interest receivable			Three months LIBOR
Fixed rate of interest (as a percent)			1.143%
Fair value				0		0		122,032
Additional financing income related to the change in the fair value of derivatives				61,230	43,140	122,032	33,059
Interest rate margin (as a percent)													4.00%
Interest rate at period end (as a percent)													4.27%
Debt instrument consolidated leverage ratio used to determine prepayment rate																2.5	2.5
Maturities of long-term debt
Remainder of 2013	4,225,051
2014	12,128,102
2015	15,688,127
2016	38,388,152
2017	14,880,038
Total maturities	$ 85,309,470								$ 54,789,000	$ 57,012,000			$ 30,520,470	$ 0

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Long-Term Debt

6 Months Ended

Jun. 30, 2013

Long-Term Debt

Long-Term Debt

Note 6. Long-Term Debt

Long-term debt as of June 30, 2013 and December 31, 2012 consists of the following:

	June 30,			December 31,
	2013			2012
Senior Notes due March 2016	$	54,789,000		$	57,012,000
Senior Notes due June 2017	30,520,470			—
Less: current portion	(9,761,102		)	(4,608,000		)
	$	75,548,368		$	52,404,000

Senior Notes due March 2016: On March 31, 2011, InterMedia Español, Inc. and Televicentro of Puerto Rico, LLC, collectively known in this note as the “Borrowers”, entered into a loan agreement that included a $66,000,000 term loan and a $10,000,000 revolving credit line with a maturity of March 31, 2016. The loan is guaranteed by WAPA Holdings, LLC, the direct holding company of InterMedia Español, Inc. and Televicentro of Puerto Rico, LLC, and its wholly-owned subsidiaries other than the Borrowers and secured by a first-priority perfected lien on all capital stock of and equity interests in each of the Borrowers and all other property and assets (tangible and intangible) of the Borrowers, whenever acquired and wherever located, subject to certain exceptions. The proceeds from the term loan were used to pay off in full a pre-existing loan, to finance a distribution to the WAPA member, and to, pay fees and expenses associated with the financing.

The loan bears interest at LIBOR rate plus an applicable LIBOR rate margin, or at a base rate plus an applicable base rate margin both as amended from time to time based upon the consolidated leverage ratio for the last day of the most recent fiscal quarter, which as of June 30, 2013 was 3.69%. Amounts outstanding under the term loan due as of June 30, 2013 and December 31, 2012 were $54,789,000 and $57,012,000, respectively.

The term loan principal payments shall be payable on quarterly due dates commencing July 15, 2011 and a final installment on March 31, 2016.

In addition, pursuant to the terms of the loan, within 130 days after the end of each fiscal year, the Borrowers shall make a prepayment of the loan principal in an amount equal to 50% of the excess cash flow of the most recently completed fiscal year. Excess cash flow is generally defined as net income plus depreciation and amortization expense, less mandatory prepayments of the term loan, interest charges, income taxes and capital expenditures, and adjusted for the change in working capital. The percentage of the excess cash flow used to determine the amount of the prepayment of the loan declines from 50% to 25% at a lower leverage ratio for the Borrowers.

There is an annual commitment fee of 0.75%, paid quarterly, on the revolving credit line for the unfunded amounts calculated daily as the amount by which the aggregate revolving credit line limit exceeds the aggregate outstanding unpaid principal amount. The commitment fees were approximately $18,493 and $18,904 for the three months ended June 30, 2013 and 2012, respectively, and $37,192 and $37,603 for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, there were no outstanding balances due under the revolving credit commitment.

The credit facilities require that the Borrowers maintain certain financial ratios and restrict certain expenditures. As of June 30, 2013, the Borrowers were in compliance with all the loan covenants.

On April 13, 2011, WAPA entered into a two-year interest rate swap agreement with an initial notional amount of $33,000,000 to receive interest at a variable rate equal to three (3) months LIBOR and to pay interest at a fixed rate of 1.143%. The interest rate swap agreement expired on April 15, 2013. As of June 30, 2013 and December 31, 2012, this interest rate swap agreement had a fair value of $0 and $122,032, respectively, and is recognized in other accrued expenses on the consolidated balance sheets. The Company recognized additional financing income of $61,230 and $43,140 for the three months ended June 30, 2013 and 2012, respectively, and $122,032 and $33,059 for the six months ended June 30, 2013 and 2012, respectively, related to the change in the fair value of the interest rate swap agreement, which is included in interest expense, net on the consolidated statements of operations.

Senior Notes due June 2017: During 2011, Cinelatino amended its credit facility with a financial institution and maximum borrowings were increased to $40,000,000. The loan is collateralized by the Cinelatino’s assets and common stock, which the stockholder has pledged, and is guaranteed by the Company’s subsidiary. Principal and interest payments are due quarterly with interest at LIBOR plus 4% (4.27% as of June 30, 2013) through June 2017, at which time a balloon payment of the remaining principal is due. Amounts outstanding under the term loan due as of June 30, 2013 and December 31, 2012 were $30,520,470 and $0, respectively.

Pursuant to the terms of the term loan agreement, within 95 days after the end of each fiscal year, the Company must make a prepayment of the loan principal. The prepayment is an amount equal to 50% of the excess cash flow of the most recently completed fiscal year, if the leverage ratio, as calculated as of the last day of such fiscal year, is 2.5 to 1.00 or greater, or 25% of such excess cash flow if the leverage ratio as of the last day of such fiscal year is less than 2.50 to 1.00. Excess cash flow is generally defined as net income plus depreciation and amortization expense, less mandatory prepayments of the term loan, interest charges, income taxes, and capital expenditures, and adjusted for the change in working capital.

The credit facilities require that the Cinelatino maintain certain financial ratios. As of June 30, 2013, Cinelatino was in compliance with all the loan covenants.

Following are maturities of long-term debt, as of June 30, 2013:

Year Ending
December 31,
Remainder of 2013	$	4,225,051
2014	12,128,102
2015	15,688,127
2016	38,388,152
2017	14,880,038
	$	85,309,470

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Business Combination (Details 2) (USD $)	3 Months Ended		6 Months Ended										0 Months Ended		3 Months Ended		6 Months Ended			0 Months Ended			0 Months Ended		0 Months Ended		3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Apr. 04, 2013	Dec. 31, 2012	Jun. 30, 2013 Class A Common Stock	Apr. 04, 2013 Class A Common Stock	Dec. 31, 2012 Class A Common Stock	Jun. 30, 2013 Class B Common Stock	Apr. 04, 2013 Class B Common Stock	Dec. 31, 2012 Class B Common Stock	Apr. 04, 2013 Azteca	Apr. 04, 2013 Merger transaction	Jun. 30, 2013 Merger transaction Pro Forma	Jun. 30, 2012 Merger transaction Pro Forma	Jun. 30, 2013 Merger transaction Pro Forma	Jun. 30, 2012 Merger transaction Pro Forma	Apr. 04, 2013 Merger transaction Class A Common Stock	Apr. 04, 2013 Merger transaction WAPA member and Cinelatino stockholders	Apr. 04, 2013 Merger transaction WAPA member	Apr. 04, 2013 Merger transaction WAPA member Class B Common Stock	Apr. 04, 2013 Merger transaction Cinelatino stockholders	Apr. 04, 2013 Merger transaction Cinelatino stockholders Class B Common Stock	Apr. 04, 2013 Merger transaction Azteca	Jun. 30, 2013 Merger transaction Cinelatino	Jun. 30, 2013 Merger transaction WAPA Cinelatino
Number of shares of stock of the Company issued and outstanding immediately following the consummation of the Transaction
Public shares outstanding prior to Transaction																									10,000,000
Founder shares																									2,500,000
Total shares outstanding prior to the Transaction																									12,500,000
Less: shareholders of public shares redeemed																									(1,258,900)
Less: founder shares cancelled													250,000												(250,000)
Shares issued																					20,432,462		12,567,538
Total shares outstanding at closing					43,991,100		11,241,000	10,991,100	0	33,000,000	33,000,000	0
Number of shares of common stock subject to forfeiture in the event the market price of common stock does not meet certain levels																			985,294			1,857,496		1,142,504
Cash flows related to the Transaction
Cash in trust																									$ 100,520,532
Cash on hand	81,020,220		81,020,220			10,084,434																				12,865,242
Less: redemption of public shares			(938,016)																						(12,651,945)
Less: cash consideration paid																				(5,000,000)					(7,333,334)		(3,800,000)
Less: payment of fees and expenses																									(5,963,030)
Net cash received by the Company			82,437,465											82,437,465
Pro Forma Information
Net Revenues	22,929,281	17,227,640	36,424,175	30,733,059											22,929,281	23,190,839	42,528,003	42,471,860
Operating Expenses:
Cost of revenues	7,671,847	7,439,854	13,527,389	14,023,949											7,671,847	8,843,978	14,580,733	16,813,923
Selling, general and administrative	11,644,388	3,325,613	15,073,633	6,605,990											7,844,388	7,686,653	15,856,756	15,329,602
Depreciation and amortization	1,848,472	921,228	2,859,037	1,822,389											1,848,472	1,769,156	3,707,205	3,518,246
Loss (gain) on disposition of assets	43,042	(1,500)	67,577	(50,000)											43,042	(1,500)	67,577	(50,000)
Total operating expenses	22,588,102	11,770,808	36,200,024	22,487,941											17,407,749	18,298,287	34,212,271	35,611,771
Operating income	$ 341,179	$ 5,456,832	$ 224,151	$ 8,245,118											$ 5,521,532	$ 4,892,552	$ 8,315,732	$ 6,860,089

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Commitments

6 Months Ended

Jun. 30, 2013

Commitments

Commitments

Note 9. Commitments

The Company has entered into certain rental property contracts with third parties, which are accounted for as operating leases. Rental expense was $51,547 and $42,503 for the three months ended June 30, 2013 and 2012, respectively, and $102,972 and $72,774 for the six months ended June 30, 2013 and 2012, respectively.

The Company has certain commitments including various operating leases.

Future minimum payments for these commitments and other commitments are as follows:

Year Ending	Operating		Other
December 31,	Leases		Commitments		Total
Remainder of 2013	$	141,699	$	3,639,006	$	3,780,705
2014	92,850		3,022,163		3,115,013
2015	64,941		578,507		643,448
2016	7,274		78,578		85,852
Total	$	306,764	$	7,318,254	$	7,625,018

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Taxes

Income Taxes

Note 5. Income Taxes

For the three and six months ended June 30, 2013 and 2012, the Company’s income tax expense and effective tax rates were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income tax expense (benefit)	$	357,011		$	2,022,287		$	(6,136	)	$	2,822,544
Effective income tax rate	102.7		%	44.2		%	102.7		%	44.2		%

For the three and six months ended June 30, 2013, the Company’s statutory Federal income tax rate of 34.0% increased to the effective income tax rate of 102.7% as a result of an increase in the tax rate in Puerto Rico from 30% to 39% that will not generate offsetting U.S. income tax credits, the loss of a deferred tax asset as a result of the increase in the tax rate in Puerto Rico, permanent differences as a result of costs related the Transaction, and statutory taxes.  For the three and six months ended June 30, 2012, the Company’s statutory Federal income tax rate of 34.0% increased to the effective income tax rate of 44.2% as a result of increases in taxes in Puerto Rico that will not generate offsetting U.S. tax credits and permanent differences for meals and entertainment, respectively.

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Condensed Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Reconciliation of Net (Loss) Income to Net Cash Used In Operating Activities:
Net (loss) income	$ (1,708,051)	$ 3,524,230
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	2,859,037	1,822,389
Program amortization	4,364,607	3,574,031
Amortization of deferred financing costs	437,523	438,109
Stock-based compensation	3,106,531
Provision for bad debts	61,497	60,000
Loss (gain) on disposition of assets	67,577	(50,000)
Deferred tax (expense) benefit	(698,967)	1,037,516
(Increase) decrease in:
Accounts receivable	350,768	454,495
Due from related parties	(913,403)
Programming rights	(6,518,201)	(6,738,826)
Prepaid expenses and other current assets	(1,589,738)	(3,063,669)
Increase (decrease) in:
Accounts payable	2,877,064	509,552
Accrued expenses	(8,372,821)	(3,232,976)
Programming rights payable	1,575,162	2,345,041
Income tax payable	(2,055,332)	102,000
Other liabilities	79,520	(41,435)
Net cash (used in) provided by operating activities	(6,077,227)	740,457
Cash Flows From Investing Activities
Transaction proceeds, net	82,437,465
Proceeds from sale of assets		50,000
Capital expenditures	(686,739)	(2,269,799)
Net cash provided by (used in) investing activities	81,750,726	(2,219,799)
Cash Flows From Financing Activities
Repayments of long-term debt	(3,799,697)	(4,038,000)
Purchase of treasury stock	(938,016)
Net cash used in financing activities	(4,737,713)	(4,038,000)
Net increase (decrease) in cash	70,935,786	(5,517,342)
Cash:
Beginning	10,084,434	10,182,539
Ending	81,020,220	4,665,197
Supplemental Disclosures of Cash Flow Information Cash payments for:
Interest	1,984,525	1,547,280
Income taxes	$ 2,276,752	$ 3,046,236

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Goodwill and Intangible Assets (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2011	Jun. 30, 2013 Broadcast licenses	Dec. 31, 2012 Broadcast licenses	Dec. 31, 2011 Broadcast licenses	Jun. 30, 2013 Other Intangibles	Dec. 31, 2012 Other Intangibles	Dec. 31, 2011 Other Intangibles
Changes in the goodwill
Net balance at the beginning of the period	$ 10,982,586	$ 10,982,586
Additions	113,820,870
Net balance at the end of the period	124,803,456	10,982,586
Changes in the other indefinite lived intangible assets
Net balance at the beginning of the period			41,355,700	41,355,700	41,355,700	700,000	700,000	700,000
Net balance at the end of the period			41,355,700	41,355,700	41,355,700	700,000	700,000	700,000
Changes in the goodwill and other indefinite lived intangible assets, on a net basis
Net balance at the beginning of the period	53,038,286	53,038,286
Additions	113,820,870
Net balance at the end of the period	$ 166,859,156	$ 53,038,286

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Nature of Business (Policies)

6 Months Ended

Jun. 30, 2013

Nature of Business

Basis of Presentation

Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements for Hemisphere and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.   Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Our financial condition as of, and operating results for the three month and six month periods ended, June 30, 2013 are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2013.  As further described in Note 2, WAPA is the accounting acquirer and predecessor, whose historical results are the historical results of Hemisphere.  The operating results presented for the three month period ended June 30, 2013 reflect the operating results of the businesses acquired in the Transaction.

Net (Loss) Earnings per Common Share:

Net (Loss) Earnings per Common Share:  Basic (loss) earnings per share (“EPS”) are computed by dividing income attributable to common stockholders by the number of weighted-average outstanding shares of common stock.  Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive.

The following table sets forth the computation of the common shares outstanding used in determining basic and diluted EPS:

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Numerator for (loss) earnings per common share calculation:
Net (loss) income:	$	(1,183,107	)	$	2,651,037	$	(1,708,051	)	$	3,524,230
Denominator for earnings per common share calculation:
Weighted-average common shares, basic	40,710,542			1		20,467,732			1
Effect of dilutive securities:
Stock options and restricted stock	—			—		—			—
Weighted-average common shares, diluted	40,710,542			1		20,467,732			1

The Company applies the treasury stock method to measure the dilutive effect of its outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted income per common share calculation. Potentially dilutive securities representing 0.3 million a shares of common stock for the three and six months ended June 30, 2013 and June 30, 2012, respectively, were excluded from the computation of diluted (loss) income per common share for this period because their effect would have been anti-dilutive. The net (loss) income per share amounts are the same for our Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

Stock based compensation

Stock based compensation:  The Company has given equity linked incentives to certain employees. The Company accounts for equity linked incentives in accordance with Accounting Standards Codification (“ASC”) 718 “Stock Compensation”. The Company measures compensation cost for equity settled awards at fair value on the date of grant and recognizes compensation cost in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. Compensation cost is determined by using option pricing models.

Recent accounting pronouncements

Recent accounting pronouncements:  In July 2012, the Financial Accounting Standards Board (“FASB”) issued guidance that is intended to reduce the cost and complexity of the annual impairment test for indefinite-lived intangible assets other than goodwill by providing entities an option to perform a qualitative assessment to determine whether a quantitative impairment test is necessary. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, but early adoption is permitted. The Company adopted this guidance effective January 1, 2013, and the adoption did not have a material effect on the Company’s consolidated financial position, results of operation and cash flows.

In February 2013, the FASB issued guidance related to reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. These amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional details about those amounts. For public entities, the amendments are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012.  The Company adopted this guidance effective January 1, 2013, and the adoption did not have a material effect on the Company’s consolidated financial position, results of operation and cash flows.

Use of estimates

Use of estimates:  In preparing these financial statements, management had to make estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the balance sheets date, and the reported revenues and expenses for the years then ended. Such estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. However, actual results could differ from those estimates.

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Contingencies

6 Months Ended

Jun. 30, 2013

Contingencies

Contingencies

Note 8. Contingencies

The Company is involved in various legal actions, generally related to its operations. Management believes, based on advice from legal counsel, that the outcome of such legal actions will not adversely affect the financial condition of the Company.

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets

Schedule of goodwill and intangible assets

	June 30,		December 31,
	2013		2012
Broadcast licenses	$	41,355,700	$	41,355,700
Goodwill	124,803,456		10,982,586
Other intangibles	24,416,071		1,677,500
	$	190,575,227	$	54,015,786

Summary of changes in the Company's goodwill and other indefinite lived intangible assets, on a net basis

	Net Balance at						Net Balance at
	December 31, 2012		Additions		Impairment		June 30, 2013
Broadcast licenses	$	41,355,700	$	—	$	—	$	41,355,700
Goodwill	10,982,586		113,820,870		—		124,803,456
Other Intangibles	700,000		—		—		700,000
Total indefinite lived intangibles	$	53,038,286	$	113,820,870	$	—	$	166,859,156

	Net Balance at						Net Balance at
	December 31, 2011		Additions		Impairment		December 31, 2012
Broadcast licenses	$	41,355,700	$	—	$	—	$	41,355,700
Goodwill	10,982,586		—		—		10,982,586
Other Intangibles	700,000		—		—		700,000
Total indefinite lived intangibles	$	53,038,286	$	—	$	—	$	53,038,286

Schedule of net amounts related to other amortizable intangible assets

	Amortization	June 30,		December 31,
	Term (Years)	2013		2012
Affiliate relationships	7 - 10	$	23,716,071	$	977,500

Schedule of future estimated amortization expense

Year Ending
December 31,
Remainder of 2013	$	1,807,857
2014	3,615,714
2015	3,615,714
2016	3,615,714
2017	3,443,214
2018	3,385,714
2019	3,385,714
2020	846,429
	$	23,716,071

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Nature of Business (Tables)

6 Months Ended

Jun. 30, 2013

Nature of Business

Schedule of the computation of the common shares outstanding used in determining basic and diluted EPS

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Numerator for (loss) earnings per common share calculation:
Net (loss) income:	$	(1,183,107	)	$	2,651,037	$	(1,708,051	)	$	3,524,230
Denominator for earnings per common share calculation:									~
Weighted-average common shares, basic	40,710,542			1		20,467,732			1
Effect of dilutive securities:
Stock options and restricted stock	—			—		—			—
Weighted-average common shares, diluted	40,710,542			1		20,467,732			1

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 10, 2013 Class A Common Stock	Aug. 10, 2013 Class B Common Stock
Entity Registrant Name	HEMISPHERE MEDIA GROUP, INC.
Entity Central Index Key	0001567345
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		12,060,553	33,000,000
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Business Combination (Tables)

6 Months Ended

Jun. 30, 2013

Business Combination

Schedule of allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed

Cash	$	12,865,242
Accounts receivable, net	4,052,590
Programming rights	4,459,550
Prepaid expenses and other current assets	939,945
Property and equipment, net	21,415
Other assets	7,566,867
Intangible asset - affiliate agreements	23,700,000
Current liabilities~	(6,271,770		)
Long-term debt	(32,097,167		)
Fair value of identifiable net assets acquired	15,236,672
Goodwill	114,187,271
Total	$	129,423,943

Schedule of number of shares of stock of the Company issued and outstanding

	Number of Shares
Azteca public shares outstanding prior to the Transaction	10,000,000
Azteca founder shares (1)	2,500,000
Total Azteca shares outstanding prior to the Transaction	12,500,000
Less: shareholders of Azteca public shares redeemded	(1,258,900	)
Less: Azteca founder shares cancelled	(250,000	)
Shares issued to WAPA member (2)	20,432,462
Shares issued to Cinelatino stockholders (3)	12,567,538
Total shares outstanding at closing, April 4, 2013	43,991,100

(1) Includes 985,294 shares of Hemisphere Class A common stock which are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

(2) Includes 1,857,496 shares of Hemisphere Class B common stock, which were issued in the Transaction by Hemisphere that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

(3) Includes 1,142,504 shares of Hemisphere Class B common stock, which were issued in the Transaction by Hemisphere that are subject to forfeiture in the event the market price of Hemisphere Class A common stock does not meet certain levels.

Summary of cash flows related to the Transaction

	Amount
Cash in trust at Azteca	$	100,520,532
Cash on hand at Cinelatino	12,865,242
Less: redemption of Azteca public shares	(12,651,945		)
Less: cash consideration paid to Azteca warrantholders	(7,333,334		)
Less: cash consideration paid to WAPA member and Cinelatino stockholders	(5,000,000		)(1)
Less: payment of Azteca fees and expenses	(5,963,030		)
Net cash received by the Company	$	82,437,465

(1) Includes $3.8 million paid by WAPA to Cinelatino.

Schedule of unaudited pro forma results of operations

	Pro Forma
	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012
Net Revenues	$	22,929,281	$	23,190,839		$	42,528,003	$	42,471,860
Operating Expenses:
Cost of revenues	7,671,847		8,843,978			14,580,733		16,813,923
Selling, general and administrative	7,844,388		7,686,653			15,856,756		15,329,602
Depreciation and amortization	1,848,472		1,769,156			3,707,205		3,518,246
Loss (gain) on disposition of assets	43,042		(1,500		)	67,577		(50,000		)
Total operating expenses	17,407,749		18,298,287			34,212,271		35,611,771
Operating income	$	5,521,532	$	4,892,552		$	8,315,732	$	6,860,089