**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-K/A**




x
              
              **ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
  **For
        the fiscal year ended December 31, 2007**
  **OR**
  o
              
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
  **For
        the transition period from** **** **to** **** ****




**Commission
      file number: 000-51418**




**Equity
      Media Holdings Corporation**


**(Exact
      name of registrant as specified in its charter)**







**Delaware**
            
            **20-2763411****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**




**One
      Shackleford Drive, Suite 400**


**Little
      Rock, Arkansas 72211**


**(Address
      of principal executive offices, including zip code)**




**(501) 219-2400**


**(Registrant’s
      telephone number, including area code)**





**Securities
      registered pursuant to Section 12(b) of the Act:**


**None**


**Securities
      registered pursuant to Section 12(g) of the Act:**


**Units
      consisting of one share of Common Stock, par value $.0001 per share, and two
      Warrants**


**Common
      Stock, par value $.0001 per share**


**Warrants
      to purchase Common Stock**




Indicate by check mark if the registrant is a well-known seasoned issuer, as
      defined in Rule 405 of the Securities Act. Yes o No x




Indicate by check mark if the registrant is not required to file reports
      pursuant to Section 13 or Section 15(d) of the Act. Yes o No x




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 if disclosure of delinquent filers pursuant to
      Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
      herein, and will not be contained, to the best of registrant’s knowledge, in
      definitive proxy or information statements incorporated by reference in
      Part III of this Form 10-K or any amendment to this Form 10-K.
      Yes o No x




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




Large
      Accelerated Filer o Accelerated Filer x Non-Accelerated Filer 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




The
      number of shares outstanding of the Registrant’s common stock as of March 29,
      2008 was 40,278,382 shares.




At
      June 30, 2007, the last business day of the registrant’s most recently
      completed second fiscal quarter, there were 40,162,909 shares of the
      registrant’s common stock outstanding, and the aggregate market value of such
      shares held by non-affiliates of the registrant (based upon the closing price
      of
      such shares as reported on the NASDAQ Capital Markets) was approximately
      $125.9 million. Shares of the registrant’s common stock held by the
      registrant’s executive officers and directors have been excluded because such
      persons may be deemed to be affiliates of the registrant. This determination
      of
      affiliate status is not necessarily a conclusive determination for other
      purposes.




**Documents
      Incorporated By Reference**




None.









**EQUITY
      MEDIA HOLDINGS CORPORATION**


**INDEX
      TO ANNUAL REPORT ON FORM 10-K FILED WITH**


**THE
      SECURITIES AND EXCHANGE COMMISSION**


**YEAR
      ENDED DECEMBER 31, 2007**


**ITEMS
      IN FORM 10-K** ****





PagePART
                I.Item
                1.
            BUSINESS
            4Item
                1A.
            RISK
                FACTORS
            24Item
                1B.
            UNRESOLVED
                STAFF COMMENTS
            33Item
                2.
            PROPERTIES
            34Item
                3.
            LEGAL
                PROCEEDINGS
            34Item
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            35PART
                II.Item
                5.
            MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES
            36Item
                6.
            SELECTED
                FINANCIAL DATA
            39Item
                7.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            40Item
                7A
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            61Item
                8.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA
            61Item
                9.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            97Item
                9A.
            CONTROLS
                AND PROCEDURES
            97Item
                9B.
            OTHER
                INFORMATION
            98PART
                III.Item
                10.
            DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            99Item
                11.
            EXECUTIVE
                COMPENSATION
            104Item
                12.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            113Item
                13.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            114Item
                14.
            PRINCIPAL
                ACCOUNTING FEES AND SERVICES
            116PART
                IV.




2




Item
                15.
            EXHIBITS
                AND FINANCIAL STATEMENT SCHEDULES
            117Ex-31.1
                Section 302 Certification of CEOEx-32.1
                Section 302 Certification of CFOEx-32.1
                Section 906 Certification of CEOEx-32.2
                Section 906 Certification of CFO




3




**PART
      I**




**ITEM
      1. BUSINESS**




**Overview**




In
      this
      report, Equity Media Holdings Corporation and its subsidiaries are referred
      to
      as EMHC, we , or the “Company”. For all periods prior to the effective date of
      the merger with Coconut Palm Acquisition Corporation (“Coconut Palm” or “CPAC”)
      as described herein, references to the Company include the operations of Equity
      Broadcasting Corporation and its related businesses (“EBC”).




The
      Company was incorporated in Delaware on April 29, 2005 as Coconut Palm
      Acquisition Corp. On March 30, 2007, the Company merged with Equity
      Broadcasting Corporation, with Coconut Palm remaining as the legal surviving
      corporation; however, the financial statements and continued operations are
      those of EBC as the accounting acquirer. Immediately following the merger,
      the
      Company changed its name to Equity Media Holdings Corporation. EBC started
      its
      business operations in 1998 when it owned 100% of five radio stations and
      twenty-four low power television stations and 50% of one low power television
      station. Since then, it has sold the five radio stations and fifteen of the
      low
      power television stations along with numerous other properties it has bought
      and/or sold.




The
      Company, headquartered in Little Rock, Arkansas currently owns and operates
      television stations across the United States and the Retro Television Network
      (“RTN”). Since its inception and up to December 31, 2007, the Company has built
      and aggregated a total of 120 full and low power permits, licenses and
      applications that it owns or has contracts to acquire. The Company’s current FCC
      license asset portfolio includes 23 full power stations, 38 Class A
      stations and 59 low power stations, including two metropolitan New York City
      low
      power stations that the Company is currently under contract to purchase. The
      Company’s stations service English and Spanish-language audiences in 41 markets
      that represent more than 32% of the U.S. population.




While
      the
      Company originally targeted small to medium-sized markets for development,
      it
      has been able to leverage its original properties into stations in larger
      metropolitan markets, including Denver, Detroit, Salt Lake City, Minneapolis
      and
      Oklahoma City. The Company’s stations are affiliated with broadcast networks as
      follows: 19 of the stations are affiliated with Univision, 12 are affiliated
      with the Company’s Retro Television Network (“RTN”), five are affiliated with
      MyNetworkTV, four are affiliated with FOX, three are affiliated with TeleFutura,
      and one is affiliated with ABC.




With
      19
      affiliates, the Company is the second-largest affiliate group of the top-ranked
      Univision and TeleFutura networks 13 of which operate amongst the nation’s
      top-65 Hispanic television markets. The Company believes that it has a superior
      growth opportunity in these Hispanic properties because of the projected
      continued Hispanic population growth in those markets combined with 15-year
      affiliation agreements with either Univision or TeleFutura,
      respectively.




RTN
      was
      developed to fulfill a need in the broadcasting industry that is occurring
      now
      and will continue to occur as broadcast stations switch over to digital
      programming pursuant to a Federal Communications Commission mandate with a
      February, 2009 deadline. Digital Television (“DTV”), will allow broadcasters to
      offer television content with movie-quality picture and CD-quality sound. DTV
      is
      a much more efficient technology, allowing broadcasters to provide a “high
      definition” (“HDTV”), program and multiple “standard definition” DTV programs
      simultaneously. Providing several programs streams on one broadcast channel
      is
      called “multicasting.” The challenge facing many broadcasters is how to
      effectively program and monetize the value created by DTV.




RTN
      is
      the first network designed for the digital arena. RTN takes some of the most
      popular and entertaining programs from the 60s, 70s, 80s, and 90s, all ratings
      proven and digitally re-mastered, and provides them to their RTN affiliates.
      RTN
      affiliates enjoy a scalable, cost efficient content solution for their digital
      channels. A major differentiator between RTN and other potential digital
      solutions is RTN’s ability to deliver local news, sports, and weather updates to
      the local RTN affiliate, in addition to the quality RTN programming. This
      enables the local affiliate to sell local advertising spots to generate
      revenue.




The
      ability to deliver localized programs to the RTN affiliate is accomplished
      through utilization of the Company’s proprietary digital satellite technology
      system known as “C.A.S.H.” The Central Automated Satellite Hub (“CASH”), system
      provides the means of delivering a fully automated, 24 hour a day custom feed
      for each local affiliate. The Company has the capability to launch localized
      network feeds in all 210 U.S. TV markets and internationally as
      well.




4




The
      Company has historically focused on aggregating stations and developing delivery
      systems. Over the past eight years, the Company financed itself largely by
      acquiring television construction permits and stations at attractive valuations.
      After acquiring the stations, the Company would construct and/or upgrade the
      facilities and, on a selective market basis, sell the station at an increased
      valuation to fund operations and acquisitions and to service debt.




Following
      the March, 2007 merger, the Company’s business focus shifted from primarily
      aggregating stations to increasing RTN affiliate penetration and maximizing
      revenue and profit for each station. The Company intends to achieve revenue
      growth and profitability through various entity and station-level initiatives
      in
      select markets. These initiatives, which the Company has recently begun to
      implement, include:


•
              continued
                  growth of the RTN affiliate base in key U.S. television
                  markets;•
              focusing
                  on growing national business;•
              addition
                  of experienced managers in select local markets;•
              upgrading
                  / increasing sales staffs in select local markets;•
              establishing
                  market appropriate rate cards;•
              upgrading
                  local news (where available) and expanding local programming in
                  select
                  markets;•
              upgrading
                  syndicated programming;•
              enhancing
                  cable and satellite
                  distribution




Generally,
      it takes a few years for the Company’s newly acquired or built stations to
      generate operating cash flow. In addition, it requires time to gain viewer
      awareness of new station programming and to attract advertisers. Accordingly,
      the Company has incurred, and expects to continue to incur, with newly acquired
      or built stations, losses at a station in the first few years after it acquires
      or builds the station. Occasionally unforeseen expenses and delays increase
      the
      estimated initial start-up expenses. This requires the Company’s established
      stations to generate revenues and cash flow sufficient to meet its business
      plan
      including the significant expenses related to newly acquired or built
      stations.




The
      Company is also one of the largest holders of broadcast spectrum in the US.
      Each
      of these stations is 6 MHz and is located in the 480-680 MHz band. Our spectrum
      adjoins the 700 MHz band and offers similar propagation characteristics. The
      Company anticipates that it will supplement its revenues by monetizing its
      significant spectrum portfolio through joint-ventures, leasing or sub-licensing
      to telecoms and new media companies.




Over
      the
      past 8 years, use of wireless minutes has increased over 18 fold, number of
      customers has increased over 400%, and wireless data revenues have increased
      from under $100 million to over $4 billion according to an Aloha Partners White
      Paper submitted to Congress on April 19, 2005.




To
      date
      the company has focused on using digital spectrum by launching a new broadcast
      channel specifically designed for digital carriage through multicasting –
Retro Television Network. Other potential uses for spectrum include WiMax data
      transmission, Video-on-demand, and mobile broadcasting for wireless carriers
      & consumer electronic device makers.




Currently,
      we estimate that the EMHC station digital footprint when fully built out would
      cover approximately 112, 500,000 people with 6 MHz of digital
      spectrum.




The
      Company also launched a new corporate and investor relations website
      (www.EMDAholdings.com) in August 2007. The website features new and expanded
      content about the Company’s operating businesses, senior management, news and
      public filings. All key information on the website is available in an
      up-to-date, interactive format.




5




Company
      History




EBC
      was
      originally formed through a stock and unit exchange of various entities and
      assets for common stock. In June 2001, EBC issued approximately $30 million
      of Series A Convertible Preferred Stock to various preferred shareholders,
      including a $25.0 million equity investment by Univision. Following its
      investment in EBC, Univision has historically in effect utilized the Company
      as
      a development vehicle for its network to enter into various new, strategic
      markets seeking to increase its footprint across the United States and to pursue
      its aggressive growth strategy. After the March 2007 merger with Coconut Palm,
      Univision continues to own approximately 5% of the Company on a fully-converted
      basis, with ownership consisting of common stock and preferred stock. In
      connection with the merger, Univision extended its affiliation agreements with
      the Company for a term totaling 15 years beginning March 2007 in all
      markets in which the Company operates with Univision and TeleFutura. The Company
      now has affiliation agreements for 44 of its stations, 19 of which have 15-year
      affiliation agreements with the top-ranked Univision primary network or the
      TeleFutura network.




Over
      the
      years, the Company has focused on high-growth underserved Hispanic markets
      as
      the U.S. Hispanic population is growing three times faster than that of
      non-Hispanic population, according to the U.S. Census Bureau estimates. The
      Top 10 Hispanic markets have grown at 21%, while the Company’s Hispanic markets
      have grown at more than double that rate, 43%, according to Nielsen 2001-2006
      Universe Estimates. The Company has continued to opportunistically acquire
      FCC
      licenses, construction permits, and stations in key markets, and identified
      these underserved markets by assessing the Top 100 Hispanic markets in the
      United States and identifying opportunities, either through FCC licenses or
      station sales, to enter into these markets. The Company focuses on driving
      sales
      in both the Spanish-language markets as well as our English language stations
      in
      early stages of development. Through the use and applications of the FCC
      historic television licensing process and its industry alliances, the Company
      has been able to develop its FCC asset portfolio to a total of 120 full and
      low
      power permits, licenses and applications that it owns or has contracts to
      acquire. During this time, the Company has operated or had signed agreements
      to
      acquire one of the largest portfolios of both television stations and digital
      spectrum in the United States, according to BIA Financial Network, Inc.
      Presently, the Company has 23 full power stations and construction permits,
      38
      Class A stations and 59 low power stations, which serve primarily as
      translator stations. Translator stations are low power stations that rebroadcast
      the primary station’s signal to expand the coverage and fill in holes. While the
      Company originally targeted small to medium-sized markets for development,
      the
      Company has been able to leverage its original properties into stations in
      larger metropolitan markets such as Denver, Colorado; Salt Lake City, Utah;
      Kansas City, Missouri; Detroit, Michigan; Minneapolis, Minnesota; and Oklahoma
      City, Oklahoma. For Hispanic and English broadcasting, the Company’s potential
      targets include: (1) large markets (designated market area
      (DMA) ranking #1-50) — independents; (2) middle markets (DMA
      ranking #51-100) — networks; (3) small markets (DMA
      ranking #100+) — major networks, and (4) small station groups (
      source: Nielsen Media Research ).




The
      Company believes it is uniquely positioned within the high growth areas of
      specialty or niche programming, with access to broadcast spectrum in several
      large markets. The Company developed and applied for a U.S. patent for the
      C.A.S.H. system, as described below. The design of the system allows for the
      addition of modules giving the system the ability to grow as system demand
      requires. In addition, the conversion to Mpeg-4 compression from the current
      Mpeg-2 compression will allow the Company to put almost twice as many signals
      in
      our current satellite bandwidth at approximately the same monthly cost. The
      Company also believes that it is well positioned with respect to data
      convergence, and that its significant spectrum assets provide an opportunity
      as
      a digital content delivery vehicle within its footprint.




The
      Company is the second largest affiliate of Univision, the leading
      Spanish-language television broadcaster in the U.S. that reaches
      approximately 99% of all U.S. “Hispanic Households” (defined as those with
      a head of household who is of Hispanic descent or origin, regardless of the
      language spoken in the household). Univision is a key source of programming
      for
      the Company’s television broadcasting business and continues to be a key
      strategic partner. Univision’s primary network, which is the most watched
      television network (English or Spanish-language) among Hispanic Households,
      provides the Univision affiliates with 24 hours per day of Spanish-language
      programming with a prime time schedule of substantially all first run
      programming (i.e., no re-runs) throughout the year.




6




Of
      the
      stations in the Company’s portfolio, 44 have strategic affiliation agreements in
      place to provide programming and generate revenue. A significant number of
      these
      affiliates are in early stages of development with growth potential. The nature
      of the television business is such that most costs excluding selling commissions
      are fixed. After start up many stations reach the breakeven point, a majority
      of
      the new revenue goes to the bottom line and the incremental profit margins
      are
      high. This creates a high growth potential on each new dollar of revenue. In
      addition, TV stations cannot mature and reach their full profit potential until
      they acquire good content and develop an audience and obtain advertisers.
      Historically a large number of the Company stations were selling paid
      programming and not acquiring quality content. The Company has started acquiring
      diversified content for the station group.




In
      the
      past several years, the Company’s management has been focused on acquisitions,
      developing stations and getting FCC approvals for licenses to operate in markets
      across the United States. During this period, the Company, in order to avoid
      excess dilution or high debt exposure, often would sell assets it had developed
      rather than borrow money for growth. Thus, the Company financed itself largely
      by acquiring television construction permits and acquiring stations at
      attractive valuations. Normally the company would sell an asset, if it could
      take a portion of the monies generated (usually less than 1 / 2 )
      and find one or two not yet developed assets that it could acquire to replace
      the asset being disposed of. After acquiring the stations, the Company would
      construct and/or upgrade the facilities. The Company would, on a selective
      market basis, acquire attractive programming, build up a local sales presence
      and sell the station at an increased valuation to fund operations, internal
      growth, acquisitions and to service debt. The Company has completed four
      material station sale transactions in the last three years of which three
      resulted in gains. As a result of the limited availability of funding, the
      Company has continued this selective station development and sale process and
      to
      date has not focused on implementing comprehensive programming, sales, marketing
      and advertising programs at each station to fully maximize the revenue or
      profitability potential for its properties. The Company does expect to evaluate
      and re-align its portfolio, selling under performing assets and using the
      proceeds for debt reduction, growth
      of
      RTNand to expand the potential of existing core stations.




Industry
      Overview and Trends




Television
                Broadcast Industry




Although
      television technology was developed in the late 1800s, the first television
      broadcast in the United States came approximately 50 years later when Very
      High Frequency (VHF) channels (channels 2-13) were introduced in the early
      1940s. Ultrahigh Frequency (UHF) channels (channels 14-83) were unveiled
      11 years later following a four year freeze on station licensing, which
      allowed engineers to work out the intricacies of adding these additional
      channels. It was almost a decade after the introduction of UHF channels when
      the
      first commercially-based Spanish television station began broadcasting in the
      United States.




The
      majority of over-the -air television stations in the U.S. are affiliated
      with major networks, such as NBC, CBS, ABC, Fox and Univision. Each of these
      networks contributes programming to affiliate stations in exchange for the
      use
      of advertising sales time within those programs. The networks typically retain
      the revenues generated from these advertising placements, which helps to offset
      the cost of providing the programming. Historically, affiliated broadcasters
      generate revenues through the remaining advertising time not taken by the major
      networks, through the advertising of non-network programming (either in-house
      or
      independent) and through network compensation agreements. However, the industry
      trends have begun to shift away from the concept of network compensation. For
      example, FOX is asking stations to essentially share in the cost of producing
      high-profile programming, including major sporting events such as NFL games.
      It
      is expected that ABC, CBS and NBC will implement such initiatives in the future.
      This trend increases the pressure on local stations to recoup related
      expenses.




In
      contrast to the major networks, smaller networks such as MyNetworkTV ( launched
      by FOX) and the CW (formed through the merger of WB and UPN) typically possess
      a
      smaller catalog of programming, and affiliated stations utilize more syndicated
      and, or local programming as they typically only supply two hours of programming
      during prime time hours. The syndicated and, or local programming normally
      allows the station to retain the rights to a significantly higher portion of
      advertising spots. This is attractive to broadcasters because it allows for
      more
      advertising spots, as well as decreases the network fees that are often
      associated with the larger networks, especially given the recent trend of
      networks having stations share in the cost of producing programs.




7




The
      Spanish Language Market Opportunity in the United States




Management
      believes that the Company benefits from the continued growth of the Hispanic
      market in the United States. Spanish-language media is expected to continue
      expanding due to growth in the Hispanic population and the increasing spending
      power of the Hispanic demographic. The discussion below references statistics
      primarily from the following sources: (1) U.S. Census Bureau;
      (2) the Advertising Age Hispanic Fact Pack; (3) Nielsen Media
      Research; (4) U.S. Bureau of Labor Statistics, and (5) Hispanic
      Business Inc., the U.S. Hispanic Media Market.




Hispanic
                Population Growth




According
      to the U.S. Census Bureau and Nielsen Media Research, the Hispanic
      population in the U.S. has increased from 22 million in 1990 to
      35 million in 2000 and 41 million in 2004. This number in 2004
      represented 14% of the total U.S. population. The growth rate of the
      Hispanic population is over three times the growth rate of the total
      U.S. population and five times the growth rate of the non-Hispanic
      population. According to the Advertising Age Hispanic Fact Pack, the total
      Hispanic community is expected to grow to 60 million by 2020 and represent
      18% of the total U.S. population. Certain Hispanic markets have grown at
      rates ranging from 20% up to more than double that rate, at over 40%. ( Source:
      Nielsen 2001, 2006 Universe Estimates ).




Spanish-language
        Advertising




U.S. Hispanic
      advertising spending was approximately $3.2 billion in 2005. Hispanic ad
      dollars were up 12.1% in 2005, compared with a 6.6% growth in overall
      U.S. advertising spending. ( Source: Hispanic Business Inc., the
      U.S. Hispanic media market ). Over 86% of total Hispanic media spending was
      in the form of TV and radio advertising. Total Hispanic advertising spending
      is
      projected to grow at 10.3% compound annual growth from 2004 through 2009 versus
      a 6.2% growth for all U.S. media. (Source: Hispanic Fact Pack
      ).




According
      to Nielsen Media Research, while Hispanics represent 14% of the total
      U.S. population, Spanish-language advertising spending only accounted for
      3.4% of total U.S. advertising spending in 2005. Increasing the focus on
      the Hispanic market will narrow this advertising spending gap. Based on the
      company’s experience, although approximately half of all Hispanics predominantly
      speak Spanish, Hispanics who predominately speak English and non-Hispanics
      who
      speak Spanish also watch Spanish language programming. In addition, there are
      currently several networks that target the predominantly English-speaking
      Hispanics, such as SiTV and MTV3, which not only reach bilingual Hispanics
      but
      also attract non-Hispanics, thus further increasing the potential advertising
      base. Therefore, the Spanish-language media market can still gain a significant
      market share, on a fair basis, of a currently $264 billion U.S. media
      spending market.




Business Strategy — Historical




The Company has historically operated through five primary revenue channels
      (described below): (i) paid programming and infomercials on its English
      language stations; (ii) spot sales on its Spanish-language stations
      (Univision and TeleFutura); (iii) spot sales on traditional network
      affiliate stations (FOX, ABC, UPN and WB); (iv) acquiring and divesting
      television properties (and using the proceeds, in part, for new station
      build-outs and/or acquisitions); and (v) the Company’s Media Services
      division. Products of the Media Services division, which the Company makes
      available to other broadcasters, include the C.A.S.H. Services (Central
      Automated Satellite Hub) system and ENS (Equity News Service). The C.A.S.H.
      Services system is a proprietary, state-of -the-art, server-based centralized
      programming system that uses digital satellite technology to allow the Company
      to feed all programming to station transmitters and cable systems from the
      Company’s master control facility in Little Rock, Arkansas. ENS is a news
      production facility that provides centralized news operations. Due to scarce
      resources and the limited window of opportunity to develop Univision markets,
      the Company had focused its efforts on acquiring high-growth, underserved
      Hispanic markets rather than fully developing each market before moving to
      the
      next market. A majority of the Company’s network stations have been acquired or
      built within the last five years and will, therefore, require a few years for
      these stations to generate operating cash.




8


Historically, the company has liquidated properties in smaller, highly
      competitive marketplaces where strong growth prospects were limited or markets
      where the company could replace the asset sold at a lower cost basis and expand
      its national coverage, such as the Portland sale where the company was able
      to
      acquire stations in Waco, TX; Nashville, TN; Jacksonville, FL; Grand Rapids,
      MI
      and Lexington, KY, three of which have Univision affiliates. Under its current
      operating plan, the Company is evaluating planned dispositions of various core
      and non-core station assets.




English-language Television




As
      of
      December 31, 2007, the Company’s English-language station group had the
      following network affiliations: ABC (1 station), FOX (4 stations), MyNetwork
      TV
      (5 primary affiliations and 4 secondary affiliations), and Retro Television
      Network (“RTN”) (12 stations). MyNetworkTV is a FOX network launched in 2006. It
      recently announced that it had acquired the rights to WWE Smackdown and will
      begin airing in September 2008.




Many
      start-up stations that do not have a strong local sales team allocate a
      substantial portion of their air time to paid programming and infomercials.
      This
      provides a stable cash flow for the time periods involved, but the revenue
      is
      normally substantially less than the amount that could be generated by spot
      sales during quality, syndicated programming. In addition, paid programming
      alienates most viewers and produces significantly reduced ratings, making spot
      sales harder to generate. In 2007, paid programming accounted for 14% of the
      Company’s total television revenue.




For
      the
      next several years, stations carrying the new networks should allow for higher
      growth rates than the traditional television model. As a result of these
      stations being in the process of developing their audience, they have an
      abundance of available inventory and are currently selling spots at low rates.
      As the station’s ratings mature, the inventory should sell out and spot rates
      should increase as demand exceeds supply. In contrast, most mature stations
      have
      very little available inventory and are dependent on inflationary spot rate
      increases for growth.




Retro
      Television Network




RTN
      is
      the first completely-customizable, national television network to provide a
      24/7
      digital feed of hit shows to each of its affiliates. RTN takes some of the
      most
      popular and entertaining programs from the 60s, 70s, 80s and 90s –
ratings-proven programming that has been digitally re-mastered, and mixes them
      with localized sports, weather and news, depending on each individual station’s
      needs. As the nation quickly approaches the mandated February 2009 deadline
      for
      switching to 100 percent digital programming, RTN is the first network designed
      for the digital arena. In effect, RTN is creating a new digital market and
      profit opportunity for local broadcasters.




The
      goal
      of RTN is to deliver affordable, recognizable programming to local affiliates
      through a one-of-a-kind, turnkey system developed specifically by RTN for the
      customized operation of multiple digital channels following the switch from
      analog to digital television. RTN executives believe that RTN meets the criteria
      for success in the digital era for the following reasons:




Broadcasters’
      growing desire to monetize their digital subchannels – Local broadcasters
      are beginning to understand the revenue potential that the extra bandwidth
      provides and are searching for quality programming that is
      affordable.




RTN’s
      quality programming is completely-customizable – RTN has established
      long-term programming agreements with some of the largest distributors and
      will
      work with its affiliates to develop the perfect lineup.




RTN’s
      unique, turnkey method of delivery - The real value of RTN lies in its unique
      design, which allows each affiliate to remain in complete control while RTN
      runs
      the local and national master control from its central hub.




Congress
      has set a February 18, 2009 deadline for television stations to switch entirely
      from analog to digital broadcasts. At this time, television as we now know
      it
      will be replaced by a more efficient system that offers movie-quality picture
      and CD-quality sound, along with a variety of other enhancements.




Digital
      Television (DTV) is a more flexible technology than the current analog broadcast
      technology. Rather than being limited to providing one analog programming
      channel, a broadcaster will be able to provide a super-sharp "high definition"
      (HDTV) broadcast and multiple "standard definition" DTV broadcasts
      simultaneously. Providing several program streams on one broadcast channel
      is
      called "multicasting." The number of programs a station can send on one assigned
      digital channel depends on the level of picture detail, also known as
      "resolution," desired in each programming stream.




9




The
      digital conversion creates new opportunities for local station’s to generate
      revenue because they can now air multiple broadcast streams. RTN is specifically
      designed to give local broadcasters a way to successfully monetize this excess
      digital capacity.




RTN’s
      custom feed gives local affiliates highly sought after flexibility in the
      digital age. RTN brings recognizable, ratings-proven, digitally-remastered,
      high-quality programming through our long-term programming arrangements with
      broadcast giants such as CBS, Sony and NBC Universal. The custom feed delivered
      by RTN allows each affiliate the opportunity to tailor the programming to meet
      the needs of its market and fill a programming gap that historically has been
      unfilled.




In
      addition to completely-customizable programming, RTN also offers market-specific
      news and weather breaks hosted by network-provided talent. Other RTN services
      include:




Ability
      of affiliate to deliver all spots to the RTN master control via FTP, for use
      in
      the C.A.S.H. system




Use
      of
      RTN’s digital master control




Switching
      of the feed for live sporting events




Production
      of station promotions, IDs and other station identification
      graphics




RTN
      knows
      that these services are important because they allow the affiliates to maintain
      the ‘local’ aspect without having to sacrifice the primary channel’s manpower.




RTN
      is
      distributed by Equity Media’s C.A.S.H. (Central Automated Satellite Hub) system,
      a state-of-the-art digital satellite uplink system that feeds
      programming to affiliates from its Little Rock, Ark., headquarters. This system
      allows for substantial cost savings through consolidation of operations.
      Additional benefits of the C.A.S.H. system include:




Centralcasting




Merging/Consolidating
      Master Control




Automated




Increased
      Cable Penetration




Digital
      Quality Picture




Lower
      Capital Expenditures and Operating Costs




Unlimited
      Capacity and Capability




Delivery
      of Other Services




The
      C.A.S.H. system allows affiliates to receive the RTN feed without having to
      establish a separate personnel base to run the daily operations. The C.A.S.H.
      system basically replaces the need for Master Control operations, engineers
      or a
      traffic department. Since the local affiliate retains the local advertising
      revenue, a sales staff dedicated to selling the local advertising inventory
      is
      the only personnel required.




10


Spanish-Language
        Television




Overview




Upon
      completion of the March, 2007 merger, nineteen of the Company’s stations were
      granted 15-year affiliation agreements with the top-ranked Univision’s primary
      network or its TeleFutura network. Of these 19 Hispanic stations, 13 are in
      the
      nation’s top 65 U.S. Hispanic markets, none of which fall within the
      nation’s top 10 Hispanic markets. The largest Hispanic market in which the
      Company has an affiliation agreement is Ft. Myers/Naples, Florida,
      currently ranked number 36 in the nation’s top Hispanic markets. The
      Company’s television stations include the second largest affiliate group of the
      Univision networks. Univision is the leading Spanish-language network in the
      United States, reaching 99% of all U.S. Hispanic households. Univision’s
      primary network is the most watched television network (English- or
      Spanish-language) among U.S. Hispanic households. Univision’s primary
      network and its TeleFutura Network represent approximately 34% of the total
      prime time viewing among Hispanics, regardless of language. The Company has
      24-hour access to Univision programming, which includes all first-run
      programming every day during prime time. No other major network offers first-run
      programming during prime time year round.




Univision
        Network Programming




Univision
      directs its programming primarily toward a young, family-oriented audience.
      Every Monday through Friday, programming begins with several talk/variety shows,
      followed by drama miniseries and several novelas. The late afternoon begins
      with
      an entertainment show and continues with a newsmagazine, as well as local news
      produced by the Company’s own stations and the network newscast. Prime time is
      filled with first run novelas, variety shows, talk shows, comedies, reality
      shows and specials. Another session of late news follows with a late night
      comedy show to conclude the daily programming. Weekend daytime programming
      begins with children’s programming and is generally followed by sports, reality
      shows, teen lifestyle shows and movies.




Approximately eight to ten hours of programming per weekday, including a large
      portion of weekday prime time, are currently programmed with novelas supplied
      primarily by Grupo Televisa, and to a lesser extent, Venevision. Though largely
      equated to the daytime soap operas of the major English networks, novelas have
      significant differences. Originally made as serialized books, novelas typically
      run four to eight months and target much wider audiences than the typical
      English soap operas.




TeleFutura
        Network Programming




TeleFutura is Univision’s other 24-hour general-interest Spanish-language
      broadcast network. TeleFutura programming includes sports (including boxing,
      soccer and a nightly wrap-up at 11 p.m.), movies (including a mix of
      English-language movies translated into Spanish) and novelas not run on
      Univision’s primary network, as well as reruns of popular novelas broadcast on
      Univision’s primary network.




TeleFutura’s programming schedule is strategically counter-programmed to the
      Univision programming, such as when TeleFutura will be airing a movie or soccer
      game.


Network
        Affiliation Agreements




Several
      of the Company’s stations have affiliation agreements granting them exclusive
      rights to broadcast Univision and TeleFutura programming in certain geographic
      areas. These agreements allow the stations to sell up to six minutes per hour
      of
      advertising on the Univision network and four and a half minutes on TeleFutura’s
      network, subject to occasional allocation adjustments by Univision.




11




As
      part
      of the March, 2007 merger, the affiliation agreements with Univision were
      extended for a term totaling 15 years through 2022, with provisions for
      several two-year renewals at Univision’s option and the Company’s
      consent.




Local
        Programming




The
      Company offers local news in several markets. The Company believes that its
      local news products brand its stations in their local television markets. The
      Company shapes its local news to relate to and inform its target audiences.
      Substantial investments have been made in people and equipment in order to
      provide local communities with quality newscasts. The Company strives to be
      the
      most important community voice in each of its local markets. In several of
      these
      markets, the Company believes that its local news is the most significant source
      of Spanish-language daily news for the Hispanic community. Many of the Company’s
      stations produce local weekly community affairs shows that cover important
      issues and topics for Hispanics. In addition, the Company also produces local
      news and weather updates throughout the broadcast day.


Television
        Station Portfolio




The
      table
      below lists information concerning each of the Company’s television
      stations/construction permits and its respective market, as of March 12,
      2008.


**DMA**
                  
                  **DMA**
                  
                  **CITY
                      of**
                  
                  **CALL****#**
                  
                  **NAME**
                  
                  **LICENSE**
                  
                  **SIGN**
                  
                  **CH.
                      #**
                  
                  **AFFILIATION**131
                  
                  Amarillo
                  
                  Borger,
                      TX
                  
                  KEYU-DT
                  
                  31
                  
                  UNIAmarillo,
                      TX
                  
                  KEYU-LP
                  
                  41
                  
                  UNIAmarillo,
                      TX
                  
                  K59HG
                  
                  59
                  
                  UNI131
                  
                  Amarillo
                  
                  Amarillo,
                      TX
                  
                  KEAT-LP
                  
                  22
                  
                  Retro
                      Jams131
                  
                  Amarillo
                  
                  Amarillo,
                      TX
                  
                  KAMT-LP
                  
                  50
                  
                  TLFAmarillo,
                      TX
                  
                  K38IP
                  
                  38
                  
                  TLF9
                  
                  Atlanta
                  
                  Atlanta,
                      GA
                  
                  WYGA-CA
                  
                  55
                  
                  Retro
                      Jams49
                  
                  Buffalo
                  
                  Springville,
                      NY
                  
                  WNGS
                  
                  67/7
                  
                  RTN90
                  
                  Burlington
                      / Plattsburgh
                  
                  Burlington,
                      VT
                  
                  WGMU-CA
                  
                  39
                  
                  MNTRutland,
                      VT
                  
                  W61CE
                  
                  61
                  
                  MNTBurlington,
                      VT
                  
                  WBVT-CA
                  
                  30
                  
                  MNTSt.
                      Albans, VT
                  
                  W52CD
                  
                  52
                  
                  MNTMonkton,
                      VT
                  
                  W19BR
                  
                  19
                  
                  MNTEllenburg,
                      NY
                  
                  W49BI
                  
                  49
                  
                  MNTClaremont,
                      NY
                  
                  W17CI
                  
                  17
                  
                  MNT192
                  
                  Butte
                      / Bozeman
                  
                  Butte,
                      MT
                  
                  KBTZ
                  
                  24
                  
                  FOX
                      & MNTBozeman,
                      MT
                  
                  KBTZ-LP
                  
                  32
                  
                  FOXBozeman,
                      MT
                  
                  K15HI
                  
                  15
                  
                  FOX89
                  
                  Cedar
                      Rapids / Waterloo
                  
                  Waterloo,
                      IA
                  
                  KWWF
                  
                  22
                  
                  RTN195
                  
                  Cheyenne
                      / Scottsbluff
                  
                  Cheyenne,
                      WY
                  
                  KKTU-LP
                  
                  40
                  
                  ABC195
                  
                  Cheyenne
                      / Scottsbluff
                  
                  Scottsbluff,
                      NE
                  
                  KTUW
                  
                  16/17
                  
                  RTN18
                  
                  Denver
                      / Cheyenne
                  
                  Cheyenne,
                      WY
                  
                  KDEV
                  
                  33/11
                  
                  RTNAurora,
                      CO
                  
                  KDEV-CA
                  
                  39
                  
                  RTNRawlins,
                      WY
                  
                  K21CV
                  
                  21
                  
                  RTNLaramie,
                      WY
                  
                  K61DX
                  
                  61
                  
                  RTN11
                  
                  Detroit
                  
                  Detroit,
                      MI
                  
                  WUDT-CA
                  
                  23
                  
                  UNI172
                  
                  Dothan
                  
                  Dothan,
                      AL
                  
                  WDTH-LP
                  
                  59
                  
                  PaidDothan,
                      AL
                  
                  W23DJ
                  
                  23
                  
                  Paid120
                  
                  Eugene
                  
                  Roseburg,
                      OR
                  
                  KTVC
                  
                  36/18
                  
                  RTNEugene,
                      OR
                  
                  KAMK-LP
                  
                  53
                  
                  RTN64
                  
                  Ft.
                      Myers / Naples
                  
                  Ft.
                      Myers, FL
                  
                  WTLE-LP
                  
                  18
                  
                  TLFNaples,
                      FL
                  
                  WUVF-CA
                  
                  2
                  
                  UNIFt.
                      Myers, FL
                  
                  WLZE-LP
                  
                  51
                  
                  UNI
  12
  64
                  
                  Ft.
                      Myers / Naples
                  
                  Ft.
                      Myers, FL
                  
                  WEVU-CA
                  
                  4
                  
                  UNI64
                  
                  Fort
                      Myers/Naples
                  
                  Naples,
                      FL
                  
                  WBSP-CA
                  
                  7
                  
                  Retro
                      Jams102
                  
                  Ft.
                      Smith - Fayetteville
                  
                  Ft.
                      Smith, AR
                  
                  KPBI-CA
                  
                  46
                  
                  MNTBentonville,
                      AR
                  
                  KHMF-CA
                  
                  14
                  
                  MNTSiloam
                      Springs, AR
                  
                  KKAF-CA
                  
                  33
                  
                  MNTParis,
                      AR
                  
                  KRAH-CA
                  
                  60
                  
                  MNTPoteau,
                      OK
                  
                  KSJF-CA
                  
                  50
                  
                  MNTFayetteville,
                      AR
                  
                  KEGW-LP
                  
                  64
                  
                  MNTWinslow,
                      AR
                  
                  KWNL-CA
                  
                  31
                  
                  MNTFort
                      Smith, AR
                  
                  K66FM
                  
                  66
                  
                  MNTFort
                      Smith, OK
                  
                  K48FL
                  
                  48
                  
                  MNTFort
                      Smith, AR
                  
                  K33HE
                  
                  33
                  
                  MNT102
                  
                  Ft.
                      Smith - Fayetteville
                  
                  Fort
                      Smith, AR
                  
                  K32GH
                  
                  32
                  
                  Retro
                      JamsHindsville,
                      AR
                  
                  KRBF-CA
                  
                  59
                  
                  Retro
                      Jams102
                  
                  Ft.
                      Smith - Fayetteville
                  
                  Ft.
                      Smith, AR
                  
                  KFDF-CA
                  
                  44
                  
                  UNIFayetteville,
                      AR
                  
                  KFFS-CA
                  
                  36
                  
                  UNIFt.
                      Smith, AR
                  
                  KUFS-LP
                  
                  54
                  
                  UNI102
                  
                  Ft.
                      Smith - Fayetteville
                  
                  Eureka
                      Springs, AR
                  
                  KPBI-TV
                  
                  34
                  
                  RTNFt.
                      Smith, AR
                  
                  KWFT-LP
                  
                  34
                  
                  RTNFt.
                      Smith, AR
                  
                  K58FB
                  
                  58
                  
                  RTN102
                  
                  Ft.
                      Smith - Fayetteville
                  
                  Springdale,
                      AR
                  
                  KJBW-CA
                  
                  4
                  
                  UNIFort
                      Smith, AR
                  
                  KXUN-LP
                  
                  43
                  
                  UNI162
                  
                  Gainesville
                  
                  Williston,
                      FL
                  
                  W56EJ
                  
                  56
                  
                  Retro
                      Jams162
                  
                  Gainesville
                  
                  Williston,
                      FL
                  
                  W63DB
                  
                  63
                  
                  Paid39
                  
                  Grand
                      Rapids
                  
                  Grand
                      Rapids, MI
                  
                  WUHQ-LP
                  
                  29
                  
                  Paid190
                  
                  Great
                      Falls
                  
                  Great
                      Falls, MT
                  
                  KLMN
                  
                  26
                  
                  FOX
                      & MNT87
                  
                  Jackson
                  
                  Jackson,
                      MS
                  
                  WJXF-LP
                  
                  49
                  
                  Paid87
                  
                  Jackson
                  
                  Jackson,
                      MS
                  
                  WJMF-LP
                  
                  53
                  
                  UNI50
                  
                  Jacksonville
                  
                  Maxville,
                      FL
                  
                  WUJF-LP
                  
                  33
                  
                  UNI31
                  
                  Kansas
                      City
                  
                  Kansas
                      City, MO
                  
                  KUKC-LP
                  
                  48
                  
                  UNI43
                  
                  Las
                      Vegas
                  
                  Goldfield,
                      NV
                  
                  KEGS
                  
                  7/50
                  
                  RTNReno,
                      NV
                  
                  KELM-LP
                  
                  43
                  
                  RTN43
                  
                  Las
                      Vegas
                  
                  Las
                      Vegas, NV
                  
                  KEGS-CA
                  
                  30
                  
                  RTN43
                  
                  Las
                      Vegas
                  
                  Ely,
                      NV
                  
                  KBNY
                  
                  6
                  
                  TolledLas
                      Vegas, NV
                  
                  KNBX-CA
                  
                  31
                  
                  SuTV63
                  
                  Lexington
                  
                  Lexington,
                      KY
                  
                  WBLU-LP
                  
                  62
                  
                  MNT
                      & RTN57
                  
                  Little
                      Rock
                  
                  Camden
                  
                  KKYK
                  
                  49
                  
                  RTNLittle
                      Rock, AR
                  
                  KKYK-CA
                  
                  20
                  
                  RTNHot
                      Springs, AR
                  
                  KTVV-CA
                  
                  63
                  
                  RTNLittle
                      Rock, AR
                  
                  KHTE-LP
                  
                  44
                  
                  RTN57
                  
                  Little
                      Rock
                  
                  Little
                      Rock, AR
                  
                  KHUG-CA
                  
                  14
                  
                  Retro
                      Jams57
                  
                  Little
                      Rock
                  
                  Little
                      Rock, AR
                  
                  KLRA-CA
                  
                  58
                  
                  UNI57
                  
                  Little
                      Rock
                  
                  Little
                      Rock, AR
                  
                  KWBF
                  
                  42/44
                  
                  MNTSheridan,
                      AR
                  
                  KWBF-LP
                  
                  47
                  
                  MNTPine
                      Bluff, AR
                  
                  KWBK-LP
                  
                  45
                  
                  MNTBatesville,
                      AR
                  
                  K38IY
                  
                  38
                  
                  MNT2
                  
                  Los
                      Angeles
                  
                  Ventura,
                      CA
                  
                  KIMG-LP
                  
                  23/17
                  
                  Paid178
                  
                  Marquette
                  
                  Marquette,
                      MI
                  
                  WMQF
                  
                  19
                  
                  FOX
                      & MNT15
                  
                  Minneapolis
                      / St. Paul
                  
                  Minneapolis,
                      MN
                  
                  WUMN-CA
                  
                  13
                  
                  UNI15
                  
                  Minneapolis
                      / St. Paul
                  
                  Minneapolis,
                      MN
                  
                  WTMS-CA
                  
                  7
                  
                  Daystar/TLF168
                  
                  Missoula
                  
                  Missoula,
                      MT
                  
                  KMMF
                  
                  17
                  
                  FOX
                      & MNTKalispell,
                      MT
                  
                  KMMF-LP
                  
                  34
                  
                  FOX
                      & MNTKalispell,
                      MT
                  
                  KEXI-LP
                  
                  35
                  
                  FOX
                      & MNT135
                  
                  Monroe
                      / El Dorado
                  
                  El
                      Dorado, AR
                  
                  K32HT
                  
                  32
                  
                  PaidEl
                      Dorado, AR
                  
                  K47JG
                  
                  47
                  
                  PaidDelhi,
                      LA
                  
                  K33IF
                  
                  33
                  
                  Paid30
                  
                  Nashville
                  
                  Nashville,
                      TN
                  
                  WNTU-LP
                  
                  26
                  
                  UNI
  13
  1
                  
                  New
                      York
                  
                  New
                      York
                  
                  WMBQ-CA
                  
                  46
                  
                  APABrooklyn
                  
                  WBQM-LP
                  
                  3
                  
                  APA45
                  
                  Oklahoma
                      City
                  
                  Woodward,
                      OK
                  
                  KUOK
                  
                  35
                  
                  UNIOklahoma
                      City, OK
                  
                  KCHM-CA
                  
                  36/59
                  
                  UNISulphur,
                      OK
                  
                  KOKT-LP
                  
                  20
                  
                  UNI45
                  
                  Oklahoma
                      City
                  
                  Norman,
                      OK
                  
                  KUOK-CA
                  
                  11
                  
                  Retro
                      Jams45
                  
                  Oklahoma
                      City
                  
                  Oklahoma
                      City, OK
                  
                  KWDW-LP
                  
                  48
                  
                  UNI156
                  
                  Panama
                      City
                  
                  Marianna,
                      FL
                  
                  WBIF
                  
                  51
                  
                  RTN110
                  
                  Reno
                  
                  Reno,
                      NV
                  
                  KRRI-LP
                  
                  25
                  
                  Retro
                      Jams35
                  
                  Salt
                      Lake City
                  
                  Logan,
                      UT
                  
                  KUTF
                  
                  12
                  
                  TLFSalt
                      Lake City, UT
                  
                  K45GX
                  
                  45
                  
                  TLF35
                  
                  Salt
                      Lake City
                  
                  Vernal,
                      UT
                  
                  KBCJ
                  
                  6/27
                  
                  CPPrice,
                      UT
                  
                  KCBU-DT
                  
                  3/11
                  
                  RTNSalt
                      Lake City, UT
                  
                  KUBX-LP
                  
                  58/27
                  
                  RTNVernal,
                      UT
                  
                  K060F
                  
                  6
                  
                  RTN14
                  
                  Seattle
                  
                  Seattle,
                      WA
                  
                  KUSE-LP
                  
                  58/30
                  
                  Retro
                      Jams77
                  
                  Spokane
                  
                  Pullman,
                      WA
                  
                  KQUP
                  
                  24
                  
                  RTNCouer
                      d'Alene, ID
                  
                  KQUP-LP
                  
                  47
                  
                  RTN76
                  
                  Springfield
                  
                  Harrison,
                      AR
                  
                  KWBM
                  
                  31
                  
                  MNTSpringfield,
                      MO
                  
                  KBBL-CA
                  
                  56
                  
                  MNTAurora,
                      MO
                  
                  KNJE-LP
                  
                  58/40
                  
                  MNT79
                  
                  Syracuse
                  
                  Ithaca,
                      NY
                  
                  WNYI
                  
                  52/20
                  
                  UNI62
                  
                  Tulsa
                  
                  Tulsa,
                      OK
                  
                  KUTU-CA
                  
                  25
                  
                  UNI95
                  
                  Waco
                      / Temple / Bryan
                  
                  Bryan,
                      TX
                  
                  KUTW-LP
                  
                  34
                  
                  UNIWaco,
                      TX
                  
                  KWKO-LP
                  
                  38
                  
                  UNI38
                  
                  West
                      Palm Beach
                  
                  Port
                      St. Lucie, FL
                  
                  WSLF-LP
                  
                  35
                  
                  Retro
                      Jams38
                  
                  West
                      Palm Beach
                  
                  Ft.
                      Pierce, FL
                  
                  WFPI-LP
                  
                  8
                  
                  SHOP146
                  
                  Wichita
                      Falls / Lawton
                  
                  Wichita
                      Falls, TX
                  
                  KTWW-LP
                  
                  68/14
                  
                  Retro
                      Jams146
                  
                  Wichita
                      Falls / Lawton
                  
                  Wichita
                      Falls, TX
                  
                  KUWF-LP
                  
                  36
                  
                  TLF146
                  
                  Wichita
                      Falls / Lawton
                  
                  Lawton,
                      OK
                  
                  K64GJ
                  
                  64/23
                  
                  UNI**120**
                  
                  **TOTAL**




Designated
      Market Areas are designated by Nielson Media Research.




UNI
            UnivisionTLF
            TelefuturaSHOP
            Shopping
                channel, such as Home Shopping Network or The Jewelry ChannelRTN
            Retro
                Television NetworkMNT
            MyNetworkTVCP
            Construction
                PermitAPA
            Asset
                Purchase AgreementDayStar
            DayStar
                Television Network




14




**The
      following table sets forth RTN affiliates that are either on air or have signed
      contracts to go on air. The list below is effective as of March 5,
      2008.**


**DMA
                  Ranking**
              
              **Station**
              
              **DMA**6
              
              KRON-DT
              
              San
                  Francisco8
              
              WSB-DT
              
              Atlanta9
              
              WJLA-DT
              
              Washington
                  D.C.11
              
              WXYZ-DT
              
              Detroit12
              
              KAZT-DT
              
              Phoenix14
              
              KIRO-DT
              
              Seattle-Tacoma18
              
              KDEV-LP
              
              Denver19
              
              WRDQ-DT
              
              Orlando21
              
              WPXS-TV
              
              St.
                  Louis22
              
              WPXI-DT3
              
              Pittsburgh25
              
              WMYT-DT
              
              Charlotte28
              
              WRAZ-DT2
              
              Raleigh-Durham35
              
              KUSG
              
              Salt
                  Lake City40
              
              WVTM-DT
              
              Birmingham41
              
              WHTM-DT
              
              Harrisburg-Lncstr-Leb43
              
              KEGS
              
              Las
                  Vegas50
              
              WNGS
              
              Buffalo52
              
              WJAR-DT
              
              Providence-New
                  Bedford56
              
              WTEN-DT
              
              Albany57
              
              KKYK
              
              Little
                  Rock61
              
              WKRG-DT
              
              Mobile-Pensacola64
              
              WBLU
              
              Lexington67
              
              WSET-DT
              
              Roanoke-Lynchburg69
              
              KGPT-LP
              
              Wichita-Hutchinson70
              
              WBAY-DT2
              
              Green
                  Bay72
              
              WNWO-DT
              
              Toledo77
              
              KQUP
              
              Spokane82
              
              KSHV-DT
              
              Shreveport84
              
              WRSP/WBUI-DT
              
              Champaign-Sprngfld-Decatur85
              
              WKOW
              
              Madison87
              
              KWWL
              
              Cedar
                  Rapids-Waterloo88
              
              KRGV-DT
              
              Harlingen-Wslco-Brnsvl-McA89
              
              WSJV
              
              South
                  Bend-Elkhart90
              
              WJTV-DT
              
              Jackson91
              
              WKPT-DT3
              
              Tri-Cities92
              
              WGMU
              
              Burlington93
              
              KXRM-DT
              
              Colorado
                  Springs94
              
              KZUP
              
              Baton
                  Rouge97
              
              WSAV-DT
              
              Savannah98
              
              KFOX-DT
              
              El
                  Paso101
              
              WEHT-DT
              
              Evansville102
              
              KFDF
              
              FtSmith-Fayetteville103
              
              WBTW-DT
              
              Myrtle
                  Beach-Florence110
              
              KRXI-DT
              
              Reno111
              
              KYTX
              
              Tyler-Longview114
              
              KWSD
              
              Sioux
                  Falls115
              
              WJBF-DT
              
              Augusta116
              
              WPBN-DT
              
              Traverse
                  City118
              
              WSFA
              
              Montgomery-Selma
  15
  120
              
              KTVC
              
              Eugene122
              
              KEYT-DT
              
              Santa
                  Barbara123
              
              KDCG
              
              Lafayette127
              
              WXOW/WQOW
              
              La
                  Crosse-Eau Claire128
              
              WRBL-DT
              
              Columbus,
                  GA132
              
              WREX
              
              Rockford134
              
              WAOW/WYOW
              
              Wausau-Rhinelander143
              
              KTIV
              
              Sioux
                  City147
              
              WRDE
              
              Salisbury153
              
              KXLT
              
              Rochester-Mason
                  City-Austin154
              
              WBIF
              
              Panama
                  City155
              
              WVVA
              
              Bluefield-Beckley-Oak
                  Hill175
              
              KOTA-DT
              
              Rapid
                  City180
              
              KWCE
              
              Alexandria196
              
              KTUW
              
              Cheyenne


Television
                Advertising




The Company targets local, regional and national advertisers to increase sales.
      The Company competes in each of these opportunities for advertising revenues
      primarily with other television stations, both affiliated and independent.
      Other
      competitors include newspapers, radio stations, magazines and regional digital
      content providers.


Content
        and Allocation




The Company takes an opportunistic approach to choosing content and affiliations
      on a market-by-market basis, based upon demographics and pre-existing
      affiliations in each market. In general, the Company evaluates several network
      affiliation opportunities in any given market or pursues independent
      opportunities including local content.




In determining how to allot content, the Company will explore available
      programming alternatives with networks, brokers and various content providers.
      The Company utilizes industry barter arrangements to obtain syndicated content
      in exchange for an advertising spot split for the given program. The Company
      will then allocate programming into four separate dayparts: morning, afternoon,
      primetime and late night. Each daypart is evaluated with respect to market
      demand, demographic breakdown and programming cost. Content allotment can then
      be modified as necessary based on market conditions and viewership. The
      Company’s operating approach also provides for maintaining a low cost base at
      its stations by leveraging station automation with the C.A.S.H. services system.




Local




Local advertising sales are achieved primarily through the use of local sales
      departments, as well as partnerships and joint sales agreements with existing
      television and radio station operations in certain markets. The Company receives
      local advertising revenue through the sale of 30 second and 60 second
      commercials, 30 minute and 60 minute paid programming and time brokerage
      agreements for longer time periods. The contract terms for ad sales contracts
      are generally weekly, monthly, or an annual agreement. the Company has extensive
      experience in the lengthy process of ensuring that the must-carry rights the
      FCC
      has awarded to full-power stations are actually secured from the cable systems.,
      Local advertising accounted for approximately 34% of the Company’s total
      broadcast revenue in 2007 and 39% in 2006. Target markets include those local
      markets where the Company elects to partner with another broadcast company
      as
      its local sales partner for its station through a Joint Sales Agreement (JSA).
      Where the Company believes that this structure will generate more revenues
      to
      the company and save the expense and time required in hiring staff and opening
      a
      local sales office, the Company will work with a JSA partner under this
      arrangement.




16





National


The Company’s national advertising revenue represents commercial broadcasting
      time sold for Univision and TeleFutura to a national advertiser by Univision,
      acting as the Company’s national representative firm. Univision is typically
      paid a 15% commission on the net revenue from the sales booked. The Univision
      representative works closely with each station’s national sales manager to
      target the largest national Spanish-language advertisers. This relationship
      has
      secured some of the largest national advertisers, including Ford Motor Company,
      General Motors, Dodge, Toyota, Verizon, AT&T, U.S. Cellular, Subway,
      Taco Bell, Pizza Hut, Wendy’s and McDonald’s. National advertising accounted for
      approximately 28% and 27% of the Company’s total broadcast revenue in 2007 and
      2006, respectively. The Company currently utilizes Millennium Media Sales as
      its
      national sales rep firm to sell 30 and 60 second spot sales for its Northwest
      Arkansas and Cheyenne, Wyoming stations and plans on engaging a national sales
      rep firm for several of its other non-Univision stations as well. The company
      uses Blair as it sales rep firm in Marquette, Michigan.




On
      February 11, 2008 Retro Programming Services, Inc. signed an exclusive sales
      representation agreement with Petry Media Corp. Inc to sell national advertising
      inventory to buyers throughout North America. This is a multi-year agreement
      with an initial commission rate equal to 15% of Net Billings. The Company also
      has strong relationships with paid programming brokers and buyers that generate
      substantial revenue for 30-minute and 60 minute paid programs.


Local
        and
        National Broadcast Revenue Categories




The Company’s broadcast revenues are generated by sales of air time on its
      stations. We use several types of sales contracts including spot sales, paid
      programming, and time brokerage agreements.




Spot Sales. Spot Sales are advertising purchases for 30-second or
                60-second commercials. Under this arrangement, an advertising schedule
                and
                rate are agreed to between the advertiser and the station to run
                its
                commercials during certain shows or dayparts for a defined period
                of time.
                An example would be a car dealer advertising 3 times per day between
                7-8 AM, 5-6 PM, and 10-11 PM, Monday — Friday for 13 weeks
                at a negotiated rate per spot. The Company bills customers on a monthly
                basis for the commercials that aired at the time outlined in the
                sales
                contract and the payment is due upon receipt. When a station has
                unsold 30
                or 60 second time slots available, it can run PI (Per Inquiry) which
                pays
                the station a commission for sales made airing their
                commercials.Paid Programming. Paid programming arrangements involve selling a
                30-minute or 60-minute time slot for an infomercial (such as exercise
                equipment, diet supplements, etc.) or to a local church, sports or
                hunting
                show, or other type of program produced by a third party. The sales
                contract outlines when the program will run, how long it will run
                and how
                much the advertiser will pay each time it runs. An example is where
                a
                local church purchases an hour on Sunday mornings to air its weekly
                church
                service. The station might sell the air time for $1,000 for the hour.
                The
                contract could provide that the church will deliver the tape for
                the
                station to air by Friday at noon to air on Sunday. The church will
                pay
                weekly for the previous week when the tape is delivered for the following
                week. The station provides an invoice warranting that the Church
                programming ran properly per the contract.Time Brokerage. Time Brokerage agreements are used when the station
                sells
                a block of time longer than one hour to a shopping network or other
                programming provider. Usually this is done with overnight programming
                from
                12:00 AM - 6:00 AM, seven days per week. The station sells
                the time per an hourly rate and bills the client monthly showing
                that the
                programming aired properly.




In each of the broadcast revenue categories described above, the Company pays
      commissions whether the sales are made by local station sales representatives
      or
      national reps that the Company contracts with. Commissions vary with national
      commission rates generally being between 5 to 15 percent and local
      commission rates generally between 10 to 20 percent. Commissions are
      usually paid on collection of the sale.




17




Network
 Advertisers seeking to capture a national audience typically purchase time
          from
          television networks directly, or select separate networks on an ad hoc
          basis.
          National advertisers that target a regional or local audience deal directly
          with
          local stations through national advertising placement firms. Local businesses
          typically purchase advertising time directly from the station’s local sales
          staff or local sales agents.
 
 Television
          Marketing/Audience Research
  The
        Company primarily derives its revenues from selling advertising time. The
        relative advertising rates charged by competing stations within a market
        depend
        on several factors including:
 •
                each
                    station’s ratings (households or people viewing its programming as a
                    percentage of total households or people in the viewing
                    area);
 
 •
                each
                    station’s audience share (households or people viewing its specific
                    programs as a percentage of households or people watching television
                    at
                    that specific time);
 
 •
                the
                    time of day the advertising will
                    run;
 
 •
                the
                    first-run, re-run or syndication status of the show to air the
                    advertisement;
 
 •
                the
                    demographic trends of a program’s viewers (primarily age and
                    gender); and
 
 •
                Competitive
                    conditions in each station’s market, including the availability of other
                    advertising media.
  Rating
          Service
  The Nielsen Station Index (“NSI”) measures local station viewing of all
        households and individuals in a specific market. This is the primary rating
        service for English-language stations and generally under-represents
        Spanish-language television.
  The Nielsen Hispanic Station Index (“NHSI”) measures U.S. Hispanic
        household and individual viewing information at the local market level. NHSI
        also weighs the varying levels of language usage by Hispanics in each market
        in
        order to reflect more accurately the Hispanic household population in the
        specific market. This methodology only measures the audience viewing of
        U.S. Hispanic households, defined as households where the head of the
        household is of Hispanic descent or origin.
 Television
          Competition
  Large markets already have an established and defined broadcast presence.
        While
        the Company believes that many of its target markets are emerging and
        underserved, the Company faces competition for viewers and revenues from
        established network affiliates and independent stations in each market. The
        Company believes that its ability to attract audience share and advertising
        revenues will determine its overall success.
 
 Media
        Services
  The Company generates incremental revenue by providing media services for
        Equity
        News Services and outsourcing C.A.S.H. services
  Central
          Automated Satellite Hub (“C.A.S.H.”)
  18
  The Company’s C.A.S.H. services system is a state of the art/proprietary
        technology (patent pending) facility based in Little Rock, Arkansas that
        provides management services to broadcast television stations. Currently,
        the
        C.A.S.H. system manages approximately 71 television stations, the majority
        of
        which are owned by the Company.      The C.A.S.H.
        system has enabled the following key components of the Company’s Media Services
        infrastructure to date:
  Standardized Approach to Station Development. The Company has developed
                  a
                  standardized approach to station development and plans to utilize
                  that
                  model to achieve its RTN growth
                  strategy.
  Development
                  of the C.A.S.H. services system has contributed to the Company’s efforts
                  to consolidate programming, traffic, accounting and billing. As
                  new
                  stations are acquired or RTN affiliates added, they are converted
                  into the
                  C.A.S.H. services system, which allows these stations to be centrally
                  managed from the Company’s Little Rock, Arkansas facility. The C.A.S.H.
                  Services system greatly reduces capital requirements and ongoing
                  staffing
                  expenses at the station site. In the Company’s experience, this
                  standardized approach to building out stations typically allows
                  projects
                  to be completed within budget and on time. This approach requires
                  detailed
                  planning in order to review station configuration, maximize cable
                  subscriber penetration and ensure a “hands-free” operating environment to
                  maximize broadcast cash flow.Low Cost Operations. The Company acquired a majority of its stations
                  either through the FCC application process or by purchasing a construction
                  permit. In either event, the Company utilized its in house engineering
                  to
                  design and construct these television stations resulting in substantial
                  cost savings relating to the station’s development phase. Because the
                  Company uses its U.S. patent pending Central Automated Satellite Hub
                  (“C.A.S.H.”) system to run the master control operations, the Company
                  often saves between $1.0 million and $2.0 million in capital
                  expenditures related to building each local master control facility.
                  The
                  C.A.S.H. system creates a virtual duopoly minimizing the ongoing
                  operational costs. The C.A.S.H. system also creates a point to
                  multi-point
                  delivery system providing full distribution to all cable head ends
                  in the
                  station’s designated market area. This centralized satellite delivery
                  allows the station to operate a smaller primary transmitter system
                  resulting in lower capital costs as well as lower monthly operating
                  and
                  maintenance costs. The centralization of master control, traffic,
                  news,
                  weather, and accounting further reduce a station’s monthly operating
                  costs. With a large number of start-up stations and by continuing
                  to
                  develop its own stations and utilizing its U.S. patent pending
                  centralcasting model, the Company has created an operating model
                  that can
                  reduce the start-up losses and allow stations to break even at
                  a lower
                  revenue threshold.
  Equity
          News Services (“ENS”)
  ENS is a centralized news service that allows the Company to provide localized
        news content to stations throughout its national footprint from a centralized
        location. Using the Centralcast news concept, the Company can afford to provide
        newscasts at many startup stations that did not previously broadcast news
        content. ENS news management personnel in Little Rock, Arkansas communicate
        with
        local reporters at each station to determine news coverage each day. At ENS’s
        central facility, news scripts are entered into a computerized newsroom
        operations system, which consolidates data for all newscasts. This allows
        producers to share video and stories among ENS stations, greatly expanding
        the
“pool” of stories on any given day. Finished stories are fed back to Little Rock
        via the internet and/or the Company’s VSAT satellite system. All anchor talent
        is based in Little Rock and shared among multiple stations. For example,
        on the
        Company’s Univision stations, the same anchor person, meteorologist and sports
        anchor appear on all stations, while the news content is localized for each
        market. The finished product is a well-integrated, attractively priced newscast
        that is offered to smaller stations, which would otherwise not be able to
        justify the expense of required facilities and local staff. This news product
        localizes the station, allowing it to differentiate itself from its competitors
        and to increase its market penetration and ratings. Centralization of news
        services reduces per station cost and gives the Company a significant advantage
        over its competitors.
  19
 Univision
 The Company continues to benefit from its long-term strategic partnership
        with
        Univision, and it plans to continue to develop its inventory of highest quality
        brand programming and content. The Company anticipates pursuing additional
        strategic partnerships with additional content partners for both Spanish
        and
        English language content, and continuing to develop its ability to provide
        programming for the markets in which it operates.
  Spectrum
        Holdings
  The
        Company has accumulated one of the largest portfolios of broadcast spectrum
        in
        the U.S. in anticipation of the potential switch to digital television
        broadcasts. Congress has set a February 18, 2009 deadline for television
        stations to switch entirely from analog to digital broadcasts. The Company’s
        spectrum provides an opportunity to offer digital broadcast services, favorably
        positioning the Company with respect to data convergence since only a portion
        of
        the Company’s spectrum will be needed to broadcast its current television
        stations. The Company may seek to monetize the Company’s significant unused
        spectrum through joint-ventures, leasing or sub-licensing to telecommunications
        service providers or new media companies seeking digital delivery of
        services.
  The Company believes that the value of this spectrum is significant for a
        number
        of reasons. First, in August 2006, the FCC conducted the Advanced Wireless
        Services (AWS) auction in which other spectrum which can be used in similar
        ways was sold to telecommunications, satellite and cable service providers.
        In
        the auction, various companies in the wireless industry paid approximately
        $14 billion for 90MHz of AWS Spectrum.
  In another comparable spectrum development, specifically in the 700 MHz
        frequency, on February 1, 2005, Aloha Partners LP announced that it
        purchased Cavalier Group LLC and DataCom Wireless LLC, respectively the second
        and third largest owners of 700 MHz spectrum in the US. In October, 2007
        AT&T announced that it acquired Aloha Partners and its digital spectrum for
        approximately $2.5 billion in cash.      The Company’s
        digital spectrum is predominantly in the 480-680 MHz Bands, which is the
        adjoining spectrum to the 700 MHz Band and offers similar applications and
        features. The Company spectrum is at a lower frequency which travels 3-4
        times
        further than the AWS spectrum discussed above, has better building penetration
        and has the ability to use internet protocol, according to
        www.dailywireless.org.
  The FCC determined that all broadcasters could operate their DTV systems
        in
        Channels 2-51. That leaves the Upper 700 MHz Band (60 megahertz of spectrum
        corresponding to channels 60-69), and the Lower 700 MHz Band (48 megahertz
        of spectrum corresponding to channels 52-59), available for broadband wireless
        users. The Company’s digital spectrum exists predominantly in the
        480-680 MHz Bands, which is the adjoining spectrum to the 700 MHz Band
        and offers similar applications and features.
  Reliable service requires licensed bands, and 700 MHZ and the adjoining spectrum
        are considered the highest quality. The lower frequency travels 3-4 times
        further than 1.9 GHz cellular, penetrates buildings, resists multipath with
        orthogonal frequency-division multiplexing, and can use internet protocol.
        Other
        infrastructure costs are only one-tenth as expensive since fewer “cells” are
        required.
  Regulation
  Communications Act of 1934
  Television broadcasting is a regulated industry and is subject to the
        jurisdiction of the FCC under the Communications Act of 1934 (the
“Communications Act”). The Communications Act prohibits the operation of
        television broadcasting stations except under a license issued by the FCC.
        Licenses may be granted for up to eight years under current law, and they
        must
        be renewed as they expire to allow for continued operations. The Communications
        Act also prohibits the assignment of a broadcast license or the transfer
        of
        control of a broadcast licensee without the prior approval of the FCC.
        Additionally, a party must obtain a construction permit from the FCC in order
        to
        build a new television station and subsequently obtain a license to commence
        operations. The Communications Act empowers the FCC, among other things to
        issue, revoke and modify broadcast licenses; decide whether to approve a
        change
        of ownership or control of station licenses; regulate the equipment used
        by
        stations; and adopt and implement regulations to carry out the provisions
        of the
        Communications Act.
  20
 In determining whether to grant, renew, or permit the
        assignment or transfer of control of a broadcast license, the FCC considers
        a
        number of factors pertaining to the licensee, including:
 •
                compliance
                    with various rules limiting common ownership of media
                    properties;
 
 •
                the
                    character of the licensee (i.e., the likelihood that the licensee
                    will
                    comply with applicable law and regulations) and those persons
                    holding
                    attributable interests (i.e., the level of ownership or other
                    involvement
                    in station operations resulting in the FCC attributing ownership
                    of that
                    station or other media outlet to such person or entity in determining
                    compliance with FCC ownership
                    limitations; and
 
 •
                Compliance
                    with the Communications Act’s limitations on alien
                    ownership.
  Additionally, for a renewal of a broadcast
        license, the FCC will consider whether a station has served the public interest,
        convenience, and necessity, whether there have been any serious violations
        by
        the licensee of the Communications Act or FCC rules and policies, and whether
        there have been no other violations of the Communications Act and FCC rules
        and
        policies which, taken together, would constitute a pattern of abuse. Any
        other
        party with standing may petition the FCC to deny a broadcaster’s application for
        renewal. However, only if the FCC issues an order denying renewal will the
        FCC
        accept and consider applications from other parties for a construction permit
        for a new station to operate on that channel. The FCC may not consider any
        new
        applicant for the channel in making determinations concerning the grant or
        denial of the licensee’s renewal application. Although renewal of licenses is
        granted in the majority of cases even when petitions to deny have been filed,
        we
        cannot be sure our station licenses will be renewed for a full term or without
        modification.
  With respect to obtaining the FCC’s consent prior
        to assigning a broadcast license or transferring control of a broadcast
        licensee, if the application involves a substantial change in ownership or
        control, the filer must comply with the public notice requirements. During
        the
        public notice period of not less than 30 days, petitions to deny the
        application may be filed by interested parties, including certain members
        of the
        public. If the FCC grants the application, interested parties then have a
        minimum 30 day period during which they may seek reconsideration or review
        of that grant by the FCC or, as the case may be, a court of competent
        jurisdiction. The full FCC commission has an additional 10 days to set
        aside on its own motion any action taken by the FCC’s staff.
  Failure to observe FCC or other governmental
        rules and policies can result in the imposition of various sanctions, including
        monetary forfeitures, the grant of short, or less than maximum license renewal
        terms or for particularly egregious violations, the denial of a license renewal
        application, the revocation of a license or denial of FCC consent to acquire
        additional broadcast properties — any of which could negatively impact both
        our existing business and future acquisitions. Additionally, our inability
        to
        conclusively anticipate the timing and approval of license grants, renewals,
        transfers and assignments may result in uncertainty and negatively impact
        our
        business because of delays and additional expenses.
  The
        Communications Act prohibits the issuance of broadcast licenses to, or the
        holding of a broadcast license by, foreign citizens or any corporation of
        which
        more than 20% of the capital stock is owned of record or voted by non-U.S.
        citizens or their representatives or by a foreign government or a representative
        thereof, or by any corporation organized under the laws of a foreign country.
        The Communications Act also authorizes the FCC to prohibit the issuance of
        a
        broadcast license to, or the holding of a broadcast license by, any corporation
        controlled by any other corporation of which more than 25% of the capital
        stock
        is owned of record or voted by aliens. The FCC has interpreted these
        restrictions to apply to other forms of business organizations, including
        partnerships and limited liability companies. As a result of these provisions,
        the FCC licenses granted to our subsidiaries could be revoked if more than
        25%
        of our stock were directly or indirectly owned or voted by aliens. These
        restrictions limit our ability to attract foreign investment in us and may
        impact our ability to successfully sell our business if we were to ever
        determine that such actions are in the best interests of our company and
        stockholders.
 
 21
 
  Multiple
          Ownership Rules
 In June 2003, the FCC amended its multiple
        ownership rules, including, among other things, its local television ownership
        limitations, its prohibition on common ownership of newspapers and broadcast
        stations in the same market, as well as its local radio ownership limitations.
        Under the amended rules, a single entity would be permitted to own up to
        two
        television stations in a market with at least five television stations if
        one of
        the stations is not among the top-4 ranked stations and could own three
        television stations in a market with at least 18 television stations as long
        as
        two of the stations are not among the top-4 ranked stations. The amended
        rules
        also establish new cross media limits to govern the combined ownership of
        television stations, radio stations and daily newspapers. Specifically, in
        markets with 4-8 television stations, a single entity can own (1) a
        combination of one daily newspaper, one television station, and half the
        ownership limit of radio stations, (2) a combination of one daily newspaper
        and the full complement of allowed radio stations, or (3) a combination of
        two television stations (if otherwise permissible) and the full complement
        of
        radio stations but no daily newspaper. The effectiveness of these new rules
        was
        stayed pending appeal. In June 2004, a federal court of appeals issued a
        decision which upheld portions of the FCC decision adopting the rules, but
        concluded that the order failed to adequately support numerous aspects of
        those
        rules, including the specific numeric ownership limits adopted by the FCC.
        The
        court remanded the matter to the FCC for revision or further justification
        of
        the rules, retaining jurisdiction over the matter. The court has partially
        maintained its stay of the effectiveness of those rules, particularly as
        they
        relate to television. The rules are now largely in effect as they relate
        to
        radio. The United States Supreme Court has declined to review the matter
        at this
        time, and the FCC must review the matter and issue a revised order. We cannot
        predict whether, how or when the new rules will be modified, ultimately
        implemented as modified, or repealed in their entirety.
  The
        FCC’s
        current rules generally prohibit the issuance of a license to any party,
        or
        parties under common control, for a television station if that station’s Grade B
        contour overlaps with the Grade B contour of another television station in
        the
        same designated market area (“DMA”) in which that party or those parties already
        have an attributable television interest. FCC rules provide an exception
        to that
        general prohibition and allow ownership of two television stations with
        overlapping Grade B contours under any one of the following
        circumstances:
 
 •
there
        will be eight independent full-power television stations in the DMA after
        the
        acquisition or merger and one of the two television stations owned by the
        same
        party is not among the top four-ranked stations in the DMA based on audience
        share;
 •
the
        station to be acquired is a "failing" station under FCC rules and
        policies;
 •
the
        station to be acquired is a "failed" station under FCC rules and policies;
        or
 •
the
        acquisition will result in the construction of a previously un-built
        station.
  The new multiple ownership rules could limit our ability to acquire additional
        television stations in existing markets that we serve. Legislation went into
        effect in January 2004 that permits a single entity to own television stations
        serving up to 39% of U.S. television households. Large broadcast groups may
        take advantage of this law to expand further their ownership interests on
        a
        national basis.
 Regulation
          of the Content of Programming
  Stations must pay regulatory and application fees
        and follow various FCC rules that regulate, among other things:
  •
              political
                  advertising;•
              children’s
                  programming;•
              the
                  broadcast of obscene or indecent programming;•
              sponsorship
                  identification; and•
              technical
                  operations.
  The FCC requires licensees to present programming that is responsive to
        community problems, needs and interests. In addition, FCC rules require
        television stations to serve the educational and informational needs of children
        16 years old and younger through the stations’ own programming as well as
        through other means. FCC rules also limit the amount of commercial matter
        that a
        television station may broadcast during programming directed primarily at
        children 12 years old and younger. The FCC requires television broadcasters
        to maintain certain records and/or file periodic reports with the FCC to
        document their compliance with the foregoing obligations. Failure to observe
        these or other rules and policies can result in the imposition of various
        sanctions, including monetary forfeitures, the grant of short, less than
        the
        maximum, renewal terms, or for particularly egregious violations, the denial
        of
        a license renewal application or the revocation of a license.
 22
  Cable
          Television Consumer Protection and Competition Act of 1992
  Pursuant to the “must carry” provisions of the
        Cable Television Consumer Protection and Competition Act of 1992, television
        broadcast stations may elect to require that a cable operator carry its signal
        if the cable operator is located in the same market as the broadcast station.
        However, in such cases the broadcast station cannot demand compensation from
        the
        cable operator. Such mandatory carriage is commonly referred to as “must-carry.”
The future of “must carry” rights is uncertain, especially as they relate to the
        carriage of digital television. Under the current FCC rules, must-carry rights
        extend to digital television signals only in limited circumstances. While
        proposed legislation to broaden such rights has been proposed, we cannot
        predict
        whether such legislation will be adopted or the details of any legislation
        that
        may be adopted. Our full-power television stations often rely on “must-carry”
rights to obtain cable carriage on specific cable systems. New laws or
        regulations that eliminate or limit the scope of these cable carriage rights
        could significantly reduce our ability to obtain cable carriage, which would
        reduce our ability to distribute our programming and consequently our ability
        to
        generate revenues from advertising.
  In addition, a number of entities have commenced
        operation, or announced plans to commence operation of internet protocol
        video
        systems, using digital subscriber line (“DSL”), fiber optic to the home (“FTTH”)
        and other distribution technologies. The issue of whether those services
        are
        subject to the existing cable television regulations, including must-carry
        obligations, has not been resolved. There are proposals in Congress and at
        the
        FCC to resolve this issue. We cannot predict whether must-carry rights will
        cover such Internet Protocol Television (“IPTV”) systems. In the event IPTV
        systems gain a significant share of the video distribution marketplace, and
        new
        laws and regulations fail to provide adequate must-carry rights, our ability
        to
        distribute our programming to the maximum number of potential viewers will
        be
        significantly reduced and consequently our revenue potential will be
        significantly reduced.
 Regulation
          of Local Marketing Agreements
  The Company, from time to time, entered into
        local marketing agreements, generally in connection with pending station
        acquisitions which allow us to provide programming and other services to
        a
        station that we have agreed to acquire before we receive all applicable FCC
        and
        other governmental approvals. FCC rules generally permit local marketing
        agreements if the station licensee retains ultimate responsibility for and
        control of the applicable station, including finances, personnel, programming
        and compliance with the FCC’s rules and policies. We cannot be sure that we will
        be able to air all of our scheduled programming on a station with which we
        may
        have a local marketing agreement or that we would receive the revenue from
        the
        sale of advertising for such programming.
  The Company, from time to time, entered into
        joint sales agreements, or JSAs, which allow us to sell advertising time
        on
        another station. JSAs are arrangements whereby a television station in a
        given
        market may sell a certain amount of advertising time on another television
        station in that same market.
  FCC
          Regulation of the Commencement of Digital Operations
  FCC regulations required all commercial
        television stations in the United States to commence digital operations on
        a
        schedule determined by the FCC and Congress, in addition to continuing their
        analog operations. Digital transmissions were initially permitted to be
        low-power, but full-power transmission was required by July 1, 2005 for
        stations affiliated with the four largest networks (ABC, CBS, NBC and Fox)
        in
        the top one hundred markets and is required by July 1, 2006 for all other
        stations.
  As of December 31, 2007 , the Company had already
        constructed full power digital television facilities for six of our stations
        in
        the Cheyenne, Wyoming; Amarillo, Texas; Salt Lake City, Utah; Eugene, Oregon;
        Scottsbluff, Nebraska; and Little Rock, Arkansas markets. The Company has
        made
        significant capital expenditures in order to comply with the FCC’s digital
        television requirements. The Company will be required to convert an additional
        15 stations into full power digital television stations by
        February 17, 2009. The Company expects to spend approximately $1,300,000 on
        this process. All analog full-power television stations, except for extremely
        limited circumstances, must cease analog operations and commence digital-only
        operations, by February 17, 2009. At this point, the FCC has not set a
        transition date for LPTV and Class A stations to convert to digital-only
        operations, although once a date is set, we expect to make significant capital
        expenditures to accomplish such a goal.
  23
  Another major issue surrounding the implementation of digital television
        is the
        scope of a local cable television system’s obligation to carry the signals of
        local broadcast television stations. On February 10, 2005, the FCC decided
        that a cable television system is only obligated under the Communications
        Act to
        carry a television station’s “primary video” signal and, accordingly, that a
        cable television system does not have to carry the television station’s digital
        signal as well as its analog signal (but must carry the digital signal if
        the
        station does not have an analog signal). The new digital technology will
        enable
        a television station to broadcast four or more video streams of programming
        to
        the public, but the FCC said that the cable television system only has an
        obligation to carry one of those signals (the “primary video” signal) and not
        all of them, thus rejecting the broadcasters’ request for the FCC to impose a
“multicasting” obligation on cable television systems. In addition, the FCC has
        not yet promulgated rules regarding the obligation of direct broadcast satellite
        providers to carry the digital signal of a local broadcast station. The FCC
        decisions could limit the reach of our television stations’ digital programming
        and, to that extent, could have an adverse impact on the revenue we derive
        from
        station operations.
 The
          Satellite Home Viewer Extension and Reauthorization Act
  The Satellite Home Viewer Extension and
        Reauthorization Act allows direct broadcast satellite television companies
        to
        continue to transmit local broadcast television signals to subscribers in
        local
        markets provided that they offer to carry all local stations in that market.
        However, satellite providers have limited satellite capacity to deliver local
        station signals in local markets. Satellite providers may choose not to carry
        local stations in any of our markets. In those markets in which the satellite
        providers do not carry local station signals, subscribers to those satellite
        services are unable to view local stations without making further arrangements,
        such as installing antennas and switches. A principal component of the new
        regulation requires satellite carriers to carry the analog signals of all
        local
        television stations in a market if they carry one. The Company has taken
        advantage of that regulation to elect carriage of our stations on satellite
        systems in markets in which local-into-local carriage is provided, however,
        this
        has been a time consuming process to provide the local television broadcast
        signal to certain of these markets. Furthermore, when direct broadcast satellite
        companies do carry local television stations in a market, they are permitted
        to
        charge subscribers extra for such service. Some subscribers may choose not
        to
        pay extra to receive local television stations. In the event subscribers
        to
        satellite services do not receive the stations that we own and operate or
        provide services to, we could lose audience share which would adversely affect
        our revenue.
  **Employees**
  As
        of
        December 31, 2007, the Company had a total of 312 employees, comprised of
        306 full-time and 6 part-time or temporary employees. As of December 31,
        2007, none of our employees were covered by collective bargaining agreements.
        We
        believe that our employee relations are satisfactory, and we have not
        experienced any work stoppages at any of our facilities.
  **ITEM
        1A. RISK FACTORS –**
 
 *The
        following risk factors and other information included in this annual report
        should be carefully considered. The risks and uncertainties described below
        are
        not the only ones we face. Additional risks and uncertainties not presently
        known to us or that we currently deem immaterial also may impair our business
        operations. If any of the following risks occur, our business, financial
        condition and future results could be harmed*
 
 **Risk
        Factors That May Affect Future Results**
 
 This
        Annual Report on Form 10-K includes forward-looking statements within the
        meaning of Section 27A of the Securities Act of 1933, as amended, and
        Section 21E of the Securities Exchange Act of 1934, as amended. We have
        based these forward-looking statements on our current expectations and
        projections about future events. These forward-looking statements are subject
        to
        known and unknown risks, uncertainties and assumptions about us that may
        cause
        our actual results, levels of activity, performance or achievements to be
        materially different from any future results, levels of activity, performance
        or
        achievements expressed or implied by such forward-looking statements. In
        some
        cases, you can identify forward-looking statements by terminology such as
“may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar
        expressions. Factors that might cause or contribute to such a discrepancy
        include, but are not limited to, those described here in as “Risk Factors” and
        elsewhere and in our other Securities and Exchange Commission filings. Given
        such risks and uncertainties, investors are cautioned not to place undue
        reliance on such forward-looking statements. Forward-looking statements do
        not
        guarantee future performance and should not be considered statements of fact.
        These forward-looking statement speak only as of the date of this report
        and,
        unless required by law, we undertake no obligation to publicly update or
        revise
        any forward-looking statements to reflect new information or future events
        or
        otherwise.
  24
  ***The
        Company has a history of losses and there can be no assurance that the Company
        will become or remain profitable or that losses will not continue to
        occur.***
  The
        Company has a history of losses. The Company had a loss from operations of
        $33.4 million for the year ended December 31, 2007 as compared to a
        net loss of $14.9 million for the year ended December 31, 2006. There
        can be no assurance that the Company will become or remain profitable or
        that
        losses will not continue to occur.
  ***The
        Company must obtain additional sources of capital in the near term to fund
        its
        operations.***
  The
        Company’s existing capital resources are not sufficient to fund operations. If
        the Company is unable to obtain adequate additional sources of capital in
        the
        near term it will need to cease all or a portion of its operations, seek
        protection under U.S. bankruptcy laws and regulations, engage in a restructuring
        or undertake a combination of these and other actions. Additional sources
        of
        capital, if obtained, would likely come from sales by the Company of debt
        and/or
        equity and/or the sale of material assets of the Company. The Company is
        currently negotiating potential transactions that would supply it with capital
        necessary to meet its current requirements. However, these negotiations may
        not
        result in successful consummation of any transaction. If the Company is able
        to
        successfully consummate a transaction, such transaction may result in
        substantial dilution to the Company’s existing security holdings and/or the
        incurrence of substantial indebtedness on relatively expensive terms. The
        terms
        of any such transaction would also likely involve covenants that serve to
        substantially restrict the operations of the Company and its management and
        could result in a change of control of the Company.
  ***The
        Company is currently in default under its existing credit facilities and
        has
        negotiated with the lenders thereunder to agree to forbear on exercising
        any
        remedies available to them while the Company seeks alternative sources of
        funding.***
  On
        March
        20, 2008, the Company entered into an amendment to its Third Amended and
        Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC
        and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender
        group has agreed to forbear from exercising certain of their rights and remedies
        with respect to designated defaults under the Credit Agreement through the
        earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events
        or by which certain events have failed to occur, including the Company’s failure
        to enter into agreements with respect to the sale of certain of its assets
        and
        the Company’s failure to secure approvals for, and meet other criteria with
        respect to, financing alternatives necessary to meet the Company’s immediate
        capital requirements. If the Company is unable to meet all criteria under
        the
        forbearance agreement, the lender group will have all remedies available
        to them
        under the Credit Agreement, including demanding immediate payment of the
        obligation.
  ***We
        incur and may continue to incur losses on newly acquired or built stations
        without an immediate return on our investment.***
  Generally,
        it takes a few years for our newly acquired or built stations to generate
        operating cash flow. A majority of the Company’s network stations have been
        acquired or built within the last five years. During the initial period after
        acquisition or construction of a station, we incur significant expenses related
        to:
  25


•
              acquiring
                  syndicated programming;
 
 •
              improving
                  technical facilities;
 
 •
              increasing
                  and improving cable distribution;
 
 •
              hiring
                  new personnel; and
 
 •
              marketing
                  our television stations to
                  viewers.




In
      addition, it requires time to gain viewer awareness of new station programming
      and to attract advertisers. Accordingly, we have incurred, and expect to
      continue to incur, with newly acquired or built stations, losses at a station
      in
      the first few years after we acquire or build the station without an immediate
      return on our investment. Occasionally unforeseen expenses and delays increase
      the estimated initial start-up expenses. This requires our established stations
      to generate revenues and cash flow sufficient to meet our business plan
      including the significant expenses related to our newly acquired or built
      stations.




***The
      loss of the services of our senior management team or a significant number
      of
      our employees may negatively affect our business.***




Our
      success is largely dependent on the continued services of our senior management
      team, which includes Henry Luken, III, Chairman, President and Chief
      Executive Officer, Larry Morton, Chairman, President and Chief Executive Officer
      of Retro Programming Services, Inc., Thomas M. Arnost, President and Chief
      Executive Officer of the Broadcast Station Group, Patrick Doran, Chief Financial
      Officer, Mario Ferrari, Chief Strategic Officer, Gregory Fess, Senior Vice
      President and Chief Operating Officer, Mark Dvornik, Executive Vice President
      of
      Retro Television Network, James Hearnsberger, Vice President —
Finance & Administration, Lori
      Withrow, Secretaryand Glenn Charlesworth, Vice President and Chief
      Accounting Officer. The loss of the services of our senior management team
      could
      harm our business if we are not able to find an appropriate replacement on
      a
      timely basis. Our success will also be dependent in part on our ability to
      attract and retain quality general managers and other management personnel
      for
      our stations. Further, the loss of a significant number of employees or our
      inability to hire a sufficient number of qualified employees could have a
      material adverse effect on our business.




***We
      depend on our network affiliation relationship with Univision for maintaining
      our existing Spanish- business.***




Many
      of
      our television stations are affiliates of Univision and Telefutura (collectively
      for this discussion, “Univision”). These affiliated television stations
      accounted for 41% and 28% of the Company’s revenues and net loss from television
      operations, respectively, for the fiscal year ended December 31, 2007 and
      36% and 39% of the Company’s revenues and net loss from television operations,
      respectively, for the fiscal year ended December 31, 2006. Accordingly, our
      operating performance largely depends on our stations’ continued relationship
      with Univision and on Univision’s continued success as a broadcast network. We
      cannot be sure that the ratings of Univision programming will continue to
      improve or that Univision will continue to provide programming, marketing and
      other support to its affiliates on the same basis as currently provided.
      Finally, by aligning ourselves closely with Univision, we may forego other
      opportunities that could provide diversity of network affiliation and avoid
      dependence on any one network.




***We
      expect the competition for and the prices of syndicated programming will
      continue to increase and we may not be able to acquire desired syndicated
      programming on acceptable terms or at all.***




On
      our
      English language stations, one of our most significant operating costs is
      syndicated programming. We may be exposed in the future to increase syndicated
      programming costs that may adversely affect our operating results. In addition,
      syndicated programs that meet our criteria may not be available in the future
      or
      may not be available at prices that are acceptable to us. We believe that the
      prices of the most sought after syndicated programming will continue to
      increase.




26




Syndicated
      programming rights are often acquired several years in advance and may require
      multi-year commitments, making it difficult to accurately predict how a program
      will perform. In some instances, programs must be replaced before their costs
      have been fully amortized, resulting in write-offs that increase station
      operating costs.




Competition
      for popular programming licensed from third parties is intense, and we may
      be
      outbid by our competitors for the rights to new popular syndicated rerun
      programming or in connection with the renewal of popular rerun syndicated
      programming we currently license. In addition, renewal costs could substantially
      exceed the existing contract costs. If we are unable to acquire certain popular
      programming, our ratings could decrease which could adversely affect our
      revenue.




***Our
      planned expansion of Retro Television Network may not materialize as we
      anticipate.***





Although
      to date we have been very successful in signing up new RTN affiliates, we may
      not be able to continue signing up affiliates in key demographic markets.
      Failure to continue signing up key affiliate partners in top DMA markets will
      impact our ability to generate advertising revenue. An inability to sell
      sufficient advertising spots will impact our ability to generate profits. We
      also rely on our ability to license programming for our RTN affiliate stations
      at a reasonable cost to program the stations. An adverse change in our
      programming agreements could impact our profitability.




***Increasing
      competition in the broadcast television industry and its programming
      alternatives may adversely affect us.***




The
      broadcast television industry is highly competitive, and our success depends
      in
      large part on our ability to compete successfully with other network affiliated
      and independent broadcast television stations and  other
      media for viewers and advertising revenues. The ability of broadcast television
      stations to generate advertising revenues depends to a significant degree upon
      audience ratings. Through the 1970s, network television broadcasting generally
      enjoyed dominance in viewership and television advertising revenues, because
      network-affiliated television stations competed principally with each other
      in
      local markets. Beginning in the 1980s, however, this dominance began to
      decline.




Programming
      alternatives, such as independent broadcast stations, cable television and
      other
      multi-channel competitors, pay-per-view and home videos have fragmented
      television viewing audiences and subjected television broadcast stations to
      new
      types of competition. Since the mid-1980s, cable television and formerly
      independent stations now affiliated with new networks have captured increasing
      market share and overall viewership from general broadcast network television.
      Cable-originated programming in particular has emerged as a significant
      competitor for broadcast television programming. We also face increasing
      competition from home satellite delivery, direct broadcast satellite television
      systems and video delivery systems utilizing telephone lines. Many of our
      competitors have longer operating histories and greater resources than us.
      As a
      result of this competition, our revenues could be adversely
      affected.




***New
      technologies may have a material adverse effect on our results of
      operations.***




Advances
      in technology may increase competition for viewers and advertising revenue
      which
      may have a material adverse effect on our results of operations. For example,
      advances in video compression technology could lower entry barriers for new
      video channels and encourage the development of increasingly specialized “niche”
programming. This may increase the number of competitors targeting the same
      demographic group as us. Future competition in the television industry may
      include the provision of interactive video and data services capable of
      providing two-way interaction with commercial video programming, together with
      information and data services, that may be delivered by commercial television
      stations, cable television, direct broadcast satellite television and other
      video delivery systems.




27




***The
      loss of major advertisers, a reduction in their advertising expenditures, a
      decrease in advertising rates or a change in economic conditions may materially
      harm our business.***




We
      derive
      substantially all of our revenues from advertisers in diverse industries at
      the
      local, regional and national levels. The loss of any major advertiser, a
      reduction in their advertising expenditures, a general decrease in advertising
      rates, or adverse developments or changes in the local, regional or national
      economy could materially harm our business by reducing our revenue.




***Our
      revenues are affected by seasonal trends causing additional cash flow concerns
      during the slower seasons.***




The
      revenues and cash flows of our television stations are subject to various
      seasonal factors that influence the television broadcasting industry as a whole.
      Like other broadcasters, we experience higher revenues and cash flows during
      the
      second and fourth quarters of the year when television viewing and advertising
      is higher compared to the first and third quarters. The slower seasons result
      in
      lower revenue which causes additional cash flow concerns during these
      quarters.




***Failure
      to observe governmental rules and regulations governing the granting, renewal,
      transfer and assignment of licenses and our inability to conclusively anticipate
      timing and approval actions could negatively impact our
      business.***




Television
      broadcasting is a regulated industry and is subject to the jurisdiction of
      the
      FCC under the Communications Act. The Communications Act prohibits the operation
      of television broadcasting stations except under a license issued by the FCC.
      Licenses may be as long as eight years under current law. The Communications
      Act
      also prohibits the assignment of a broadcast license or the transfer of control
      of a broadcast licensee without the prior approval of the FCC. Additionally,
      a
      party must obtain a construction permit from the FCC in order to build a new
      television station and subsequently obtain a license to commence operations.
      The
      Communications Act empowers the FCC, among other things to issue, revoke and
      modify broadcast licenses; decide whether to approve a change of ownership
      or
      control of station licenses; regulate the equipment used by stations; and adopt
      and implement regulations to carry out the provisions of the Communications
      Act.




In
      determining whether to grant, renew, or permit the assignment or transfer of
      control of a broadcast license, the FCC considers a number of factors pertaining
      to the licensee, including:




•
            compliance
                with various rules limiting common ownership of media
                properties;





•
            the
                character of the licensee (i.e., the likelihood that the licensee
                will
                comply with applicable law and regulations) and those persons holding
                attributable interests (i.e., the level of ownership or other involvement
                in station operations resulting in the FCC attributing ownership
                of that
                station or other media outlet to such person or entity in determining
                compliance with FCC ownership
                limitations; and





•
            compliance
                with the Communications Act’s limitations on alien
                ownership.




Additionally,
      for a renewal of a broadcast license, the FCC will consider whether a station
      has served the public interest, convenience, and necessity, whether there have
      been any serious violations by the licensee of the Communications Act or FCC
      rules and policies, and whether there have been no other violations of the
      Communications Act and FCC rules and policies which, taken together, would
      constitute a pattern of abuse. Any other party with standing may petition the
      FCC to deny a broadcaster’s application for renewal. However, only if the FCC
      issues an order denying renewal will the FCC accept and consider applications
      from other parties for a construction permit for a new station to operate on
      that channel. The FCC may not consider any new applicant for the channel in
      making determinations concerning the grant or denial of the licensee’s renewal
      application. Although renewal of licenses is granted in the majority of cases
      even when petitions to deny have been filed, we cannot be sure our station
      licenses will be renewed for a full term or without modification.




28




With
      respect to obtaining the FCC’s consent prior to assigning a broadcast license or
      transferring control of a broadcast licensee, if the application involves a
      substantial change in ownership or control, the filer must comply with the
      public notice requirements. During the public notice period of not less than
      30 days, petitions to deny the application may be filed by interested
      parties, including certain members of the public. If the FCC grants the
      application, interested parties then have a minimum 30 day period during
      which they may seek reconsideration or review of that grant by the FCC or,
      as
      the case may be, a court of competent jurisdiction. The full FCC commission
      has
      an additional 10 days to set aside on its own motion any action taken by
      the FCC’s staff.




Due
      to
      the factors set forth above, it is possible that the FCC could not approve
      some
      or all of the licenses held by the Company in connection with the change in
      control from the proposed merger with Coconut Palm. The FCC’s denial of the
      change in control for some or all of the licenses or a delay in the FCC’s review
      of the change in control requests may negatively impact the merger and possibly
      prevent the merger from being consummated between the parties.




In
      addition, assuming the merger were to occur, the combined company’s failure to
      observe FCC or other governmental rules and policies can result in the
      imposition of various sanctions, including monetary forfeitures, the grant
      of
      short, or less than maximum license renewal terms or for particularly egregious
      violations, the denial of a license renewal application, the revocation of
      a
      license or denial of FCC consent to acquire additional broadcast
      properties — any of which could negatively impact both our existing
      business and future acquisitions. Additionally, our inability to conclusively
      anticipate the timing and approval of license grants, renewals, transfers and
      assignments may result in uncertainty and negatively impact our business because
      of delays and additional expenses.




***Changes
      in FCC regulations regarding media ownership limits have increased the
      uncertainty surrounding the competitive position of our stations in the markets
      we serve and may adversely affect our ability to buy new television stations
      or
      sell existing television stations.***




In
      June
      2003, the FCC amended its multiple ownership rules, including, among other
      things, its local television ownership limitations, its prohibition on common
      ownership of newspapers and broadcast stations in the same market, as well
      as
      its local radio ownership limitations. Under the amended rules, a single entity
      would be permitted to own up to two television stations in a market with at
      least five television stations if one of the stations is not among the top-4
      ranked stations and could own three television stations in a market with at
      least 18 television stations as long as two of the stations are not among the
      top-4 ranked stations. The amended rules also establish new cross media limits
      to govern the combined ownership of television stations, radio stations and
      daily newspapers. Specifically, in markets with 4-8 television stations, a
      single entity can own (1) a combination of one daily newspaper, one
      television station, and half the ownership limit of radio stations, (2) a
      combination of one daily newspaper and the full complement of allowed radio
      stations, or (3) a combination of two television stations (if otherwise
      permissible) and the full complement of radio stations but no daily newspaper.
      The effectiveness of these new rules was stayed pending appeal. In June 2004,
      a
      federal court of appeals issued a decision which upheld portions of the FCC
      decision adopting the rules, but concluded that the order failed to adequately
      support numerous aspects of those rules, including the specific numeric
      ownership limits adopted by the FCC. The court remanded the matter to the FCC
      for revision or further justification of the rules, retaining jurisdiction
      over
      the matter. The court has partially maintained its stay of the effectiveness
      of
      those rules, particularly as they relate to television. The rules are now
      largely in effect as they relate to radio. The Supreme Court has declined to
      review the matter at this time, and the FCC must review the matter and issue
      a
      revised order. We cannot predict whether, how or when the new rules will be
      modified, ultimately implemented as modified, or repealed in their
      entirety.




The
      new
      multiple ownership rules could limit our ability to acquire additional
      television stations in existing markets that we serve. Legislation went into
      effect in January 2004 that permits a single entity to own television stations
      serving up to 39% of U.S. television households, an increase over the
      previous 35% cap. Large broadcast groups may take advantage of this law to
      expand further their ownership interests on a national basis.




29




***The
      restrictions on foreign ownership may limit foreign investment in us or our
      ability to successfully sell our business.***




The
      Communications Act limits the extent of non-U.S. ownership of companies
      that own U.S. broadcast stations. Under this restriction, a
      U.S. broadcast company such as ours may have no more than 25%
      non-U.S.  ownership (by vote and by equity). These restrictions limit our
      ability to attract foreign investment in us and may impact our ability to
      successfully sell our business if we were to ever determine that such actions
      are in the best interests of our company and stockholders.




***Failure
      to observe rules and policies regarding the content of programming may adversely
      affect our business.***




Stations
      must pay regulatory and application fees and follow various FCC rules that
      regulate, among other things:




•
            political
                advertising;





•
            children’s
                programming;





•
            the
                broadcast of obscene or indecent
                programming;





•
            sponsorship
                identification; and





•
            technical
                operations.




The
      FCC
      requires licensees to present programming that is responsive to community
      problems, needs and interests. In addition, FCC rules require television
      stations to serve the educational and informational needs of children
      16 years old and younger through the stations’ own programming as well as
      through other means. FCC rules also limit the amount of commercial matter that
      a
      television station may broadcast during programming directed primarily at
      children 12 years old and younger. The FCC requires television broadcasters
      to maintain certain records and/or file periodic reports with the FCC to
      document their compliance with the foregoing obligations. Failure to observe
      these or other rules and policies can result in the imposition of various
      sanctions, including monetary forfeitures, the grant of short, less than the
      maximum, renewal terms, or for particularly egregious violations, the denial
      of
      a license renewal application or the revocation of a license.




***Because
      our television stations rely on “must carry” rights to obtain cable carriage,
      new laws or regulations that eliminate or limit the scope of these rights or
      failures could significantly reduce our ability to obtain cable carriage and
      therefore reduce our revenues.***




Pursuant
      to the “must carry” provisions of the Cable Television Consumer Protection and
      Competition Act of 1992, television broadcast stations may elect to require
      that
      a cable operator carry its signal if the cable operator is located in the same
      market as the broadcast station. However, in such cases the broadcast station
      cannot demand compensation from the cable operator. Such mandatory carriage
      is
      commonly referred to as “must-carry.” The future of “must carry” rights is
      uncertain, especially as they relate to the carriage of digital television.
      Under the current FCC rules, must-carry rights extend to digital television
      signals only in limited circumstances. While proposed legislation to broaden
      such rights has been proposed, we cannot predict whether such legislation will
      be adopted or the details of any legislation that may be adopted. Our full-power
      television stations often rely on “must-carry” rights to obtain cable carriage
      on specific cable systems. New laws or regulations that eliminate or limit
      the
      scope of these cable carriage rights could significantly reduce our ability
      to
      obtain cable carriage, which would reduce our ability to distribute our
      programming and consequently our ability to generate revenues from
      advertising.




In
      addition, a number of entities have commenced operation, or announced plans
      to
      commence operation of internet protocol video systems, using digital subscriber
      line (“DSL”), fiber optic to the home (“FTTH”) and other distribution
      technologies. The issue of whether those services are subject to the existing
      cable television regulations, including must-carry obligations, has not been
      resolved. There are proposals in Congress and at the FCC to resolve this issue.
      We cannot predict whether must-carry rights will cover such Internet Protocol
      Television (“IPTV”) systems. In the event IPTV systems gain a significant share
      of the video distribution marketplace, and new laws and regulations fail to
      provide adequate must-carry rights, our ability to distribute our programming
      to
      the maximum number of potential viewers will be significantly reduced and
      consequently our revenue potential will be significantly reduced.




30




***Our
      use of local marketing agreements and joint sales agreements may result in
      uncertainty regarding scheduled programming and/or revenue from the sale of
      advertising.***




We
      have,
      from time to time, entered into local marketing agreements, generally in
      connection with pending station acquisitions which allow us to provide
      programming and other services to a station that we have agreed to acquire
      before we receive all applicable FCC and other governmental approvals. FCC
      rules
      generally permit local marketing agreements if the station licensee retains
      ultimate responsibility for and control of the applicable station, including
      finances, personnel, programming and compliance with the FCC’s rules and
      policies. We cannot be sure that we will be able to air all of our scheduled
      programming on a station with which we may have a local marketing agreement
      or
      that we would receive the revenue from the sale of advertising for such
      programming.




We
      have,
      from time to time, entered into joint sales agreements, which allow us to sell
      advertising time on another station. The FCC’s New Rules make joint sales
      agreements for radio stations an attributable ownership interest if the selling
      station is located in the same market and sells more than 15% of the other
      station’s weekly advertising time. The FCC recently initiated a new rulemaking
      proceeding that could result in rules which make joint sales agreements for
      television an attributable ownership interest to the same extent that radio
      joint sales agreements are an attributable ownership interest. The FCC
      proceeding could result in the adoption of rules which would limit our
      opportunities to enter into joint sales agreements with other television
      stations in a market where we already own one or more television stations,
      and
      that could adversely affect our revenue from advertising.




***The
      industry-wide mandatory conversion to digital television has required us, and
      will continue to require us, to make significant capital expenditures without
      assurance that we will remain competitive with other developing
      technologies.***




FCC
      regulations required all commercial television stations in the United States
      to
      commence digital operations on a schedule determined by the FCC and Congress,
      in
      addition to continuing their analog operations. Digital transmissions were
      initially permitted to be low-power, but full-power transmission was required
      by
      July 1, 2005 for stations affiliated with the four largest networks (ABC,
      CBS, NBC and Fox) in the top one hundred markets and is required by July 1,
      2006 for all other stations.




We
      have
      already constructed full power digital television facilities for six of our
      stations in the Cheyenne, Wyoming, Amarillo, Texas, Salt Lake City, Utah,
      Eugene, Oregon, Montgomery, Alabama and Little Rock, Arkansas markets. We have
      made significant capital expenditures in order to comply with the FCC’s digital
      television requirements. We will be required to convert an additional fifteen
      stations into full power digital television stations by February 17, 2009.
      We expect to spend approximately $1,300,000 on this process.




Another
      major issue surrounding the implementation of digital television is the scope
      of
      a local cable television system’s obligation to carry the signals of local
      broadcast television stations. On February 10, 2005, the FCC decided that a
      cable television system is only obligated under the Communications Act to carry
      a television station’s “primary video” signal and, accordingly, that a cable
      television system does not have to carry the television station’s digital signal
      as well as its analog signal (but must carry the digital signal if the station
      does not have an analog signal). The new digital technology will enable a
      television station to broadcast four or more video streams of programming to
      the
      public, but the FCC said that the cable television system only has an obligation
      to carry one of those signals (the “primary video” signal) and not all of them,
      thus rejecting the broadcasters’ request for the FCC to impose a “multicasting”
obligation on cable television systems. In addition, the FCC has not yet
      promulgated rules regarding the obligation of direct broadcast satellite
      providers to carry the digital signal of a local broadcast station. The FCC
      decisions could limit the reach of our television stations’ digital programming
      and, to that extent, could have an adverse impact on the revenue we derive
      from
      station operations.




31




***If
      direct broadcast satellite companies do not carry the stations that we own
      and
      operate or provide services to, we could lose audience share and
      revenue.***




The
      Satellite Home Viewer Extension and Reauthorization Act allows direct broadcast
      satellite television companies to continue to transmit local broadcast
      television signals to subscribers in local markets provided that they offer
      to
      carry all local stations in that market. However, satellite providers have
      limited satellite capacity to deliver local station signals in local markets.
      Satellite providers may choose not to carry local stations in any of our
      markets. In those markets in which the satellite providers do not carry local
      station signals, subscribers to those satellite services are unable to view
      local stations without making further arrangements, such as installing antennas
      and switches. A principal component of the new regulation requires satellite
      carriers to carry the analog signals of all local television stations in a
      market if they carry one. We have taken advantage of that regulation to elect
      carriage of our stations on satellite systems in markets in which
      local-into-local carriage is provided, however, this has been a time consuming
      process to provide the local television broadcast signal to certain of these
      markets. Furthermore, when direct broadcast satellite companies do carry local
      television stations in a market, they are permitted to charge subscribers extra
      for such service. Some subscribers may choose not to pay extra to receive local
      television stations. In the event subscribers to satellite services do not
      receive the stations that we own and operate or provide services to, we could
      lose audience share which would adversely affect our revenue.




Unlike
      the statutory regulations governing cable carriage of qualified full power
      television stations, the direct broadcast satellite television companies (i.e.,
      DirecTV and Dish Network) have a choice as to whether or not to provide local
      television channels in a given television market However, once they decide
      to
      carry one local signal, they must carry all the
      qualified television stations (i.e., local-into-local service) in that market.
      We have filed carriage elections against the satellite companies for all of
      our
      qualified television stations in which local-into-local delivery is being
      provided. We have been delayed in certain instances in being carried, however,
      as we have to provide a good quality signal to a designated local receive
      facility in a given market, which is often in a building or site controlled
      by a
      third party. Therefore additional negotiations are needed to deliver our signal
      to this facility in a manner accepted and approved by the FCC, including but
      not
      limited to delivery via microwave, satellite or fiber.




***Our
      substantial indebtedness may negatively impact our ability to implement our
      business plan.***




As
      indicated below, the Company has a significant amount of indebtedness relative
      to our equity.




**As of December 31, 2007****(In
                thousands)**Total
                Current Assets
            
            $
            25,287,371Total
                Current Liabilities
            
            $
            83,988,265Total
                Long-term Liabilities
            
            $
            13,673,536




Our
      substantial indebtedness may negatively impact our ability to implement our
      business plan. For example, it could:




•
            limit
                our ability to fund future working capital and capital
                expenditures;





•
            limit
                our flexibility in planning for, or reacting to, changes in our business
                and the industry in which we
                operate;





•
            subject
                us to interest rate risk in connection with any potential future
                refinancing of our debt;





•
            limit
                our ability to borrow additional
                funds;





•
            increase
                our vulnerability to adverse general economic and industry
                conditions; and





•
            require
                us to restructure or refinance our debt, sell debt or equity securities,
                or sell assets, possibly on unfavorable terms in order to meet payment
                obligations.




32




In
      addition, our existing credit facility contains various financial and
      operational covenants, both affirmative and negative. The financial covenants
      include limitations on capital expenditures, restricted payments, minimum
      revenues and EBITDA and minimum availability. The affirmative covenants include
      provisions relative to preservation of assets, compliance with laws, maintaining
      insurance, payment of taxes, notice of proceedings, defaults or adverse changes,
      timely and accurate financial reporting, inspection rights, maintenance of
      a
      GAAP accounting system, renewal of licenses and compliance with environmental
      laws. The negative covenants include provisions and limitations concerning
      indebtedness, liens, disposition of assets, fundamental changes, and conditions
      to acquisitions, sale and leaseback of assets, investments, change in business,
      accounts receivable, transactions with affiliates, amendment of certain
      agreements, ERISA, margin stock, negative pledges and Local Marketing
      Agreements.




Violation
      of any covenant language could adversely affect our ability to draw down or
      incur additional indebtedness when we otherwise believe it is advisable to
      do
      so. Additionally, any violation of covenant language, if not waived, could
      result in acceleration of the indebtedness.




***Failure
      of the Company’s internal control over financial reporting could harm our
      business and financial results.***




The
      Company is obligated to establish and maintain adequate internal control over
      financial reporting. Internal control over financial reporting is a process
      to
      provide reasonable assurance regarding the reliability of financial reporting
      in
      accordance with GAAP. Internal control over financial reporting includes
      maintaining records that in reasonable detail accurately and fairly reflect
      the
      Company’s transactions and dispositions of assets, providing reasonable
      assurance that transactions are recorded as necessary for preparation of the
      financial statements in accordance with GAAP, providing reasonable assurance
      that receipts and expenditures of the Company are made only in accordance with
      management authorization, and providing reasonable assurance that unauthorized
      acquisition, use or disposition of the Company assets that could have a material
      effect on the financial statements would be prevented or detected on a timely
      basis. The Company’s growth of the RTN and entry into new markets and
      acquisitions of new stations, if any, will place significant additional pressure
      on our system of internal control over financial reporting. Any failure to
      maintain an effective system of internal control over financial reporting could
      limit our ability to report financial results accurately and timely or to detect
      and prevent fraud, which in turn would harm our business and financial
      results.




***An
      existing lawsuit against the Company and the members of the Company’s board of
      directors could distract the Company from their operational
      responsibilities.***





The
      Company and each member of the Company board of directors have been named in
      a
      lawsuit filed by a shareholder of pre-merger EBC in the circuit court of Pulaski
      County, Arkansas on June 14, 2006. The lawsuit was filed as a class action,
      meaning that the plaintiff, Mr. Max Bobbitt, seeks to represent all
      shareholders in the class, provided the class is certified by the court.
      Mr. Bobbitt owns 115,000 shares of Class A common stock, and thus
      represents less than 5% of any class of the Company equity. As a result of
      the
      merger between EBC and the Company, pursuant to which EBC merged into the
      Company, the Company, which was renamed Equity Media Holdings Corporation,
      is a
      party to the lawsuit. The lawsuit contains both a class action component and
      derivative claims. The class action claims allege various deficiencies in EBC’s
      proxy used to inform its shareholders of the special meeting to consider the
      merger. The Company views the lawsuit as baseless and will continue to
      vigorously defend the matter. During the course of this litigation it is
      possible that members of the Company’s senior management and members of the
      board of directors may have to devote significant time and effort to the
      resolution of such litigation adversely impacting their ability to properly
      attend to the operations of the combined company. It is also possible that
      any
      judgment or settlement may adversely affect the financial position of the
      combined company.





**ITEM
      1B. UNRESOLVED STAFF COMMENTS**




Not
      applicable.





33




**ITEM
      2. PROPERTIES**




Our
      corporate headquarters are located in Little Rock, Arkansas. We own a building
      with approximately 27,474 square feet of space housing our corporate
      headquarters, studio facilities and the C.A.S.H. technology equipment.
      Additionally, RTN occupies approximately 7,500 square feet, in the same
      building.




Generally,
      the types of properties required to support some of our television stations
      consists of offices, studios and tower sites.  Transmitter and tower sites
      are located to provide maximum signal coverage of our stations’ markets. 
We own substantially all of the equipment used in our television and network
      business. We believe that all of our properties, both owned and leased, are
      generally in good operating condition, subject to normal wear and tear and
      are
      suitable and adequate for our current business operations.  We believe that
      no one property represents a material amount of the total properties owned
      or
      leased.  See *Item
      1* . *Business,* for a
      listing of our station locations.




**ITEM
      3. LEGAL PROCEEDINGS**




**Litigation**




In
      connection with the merger between Equity Broadcasting Corporation ("EBC")
      and
      the Company, EBC and each member of EBC’s board of directors was named in a
      lawsuit filed by an EBC shareholder in the circuit court of Pulaski County,
      Arkansas on June 14, 2006. As a result of the merger between EBC and the
      Company, pursuant to which EBC merged into the Company, the Company, which
      was
      renamed Equity Media Holdings Corporation, is a party to the lawsuit. The
      lawsuit contains both a class action component and derivative claims. The class
      action claims allege various deficiencies in EBC’s proxy used to inform its
      shareholders of the special meeting to consider the merger. These allegations
      include: (i) the failure to provide sufficient information regarding the
      fair value of EBC’s assets and the resulting fair value of EBC’s Class A
      common stock; (ii) that the interests of holders of EBC’s Class A
      common stock are improperly diluted as a result of the merger to the benefit
      of
      the holders of EBC’s Class B common stock; (iii) failure to
      sufficiently describe the further dilution that would occur post-merger upon
      exercise of the Company’s outstanding warrants; (iv) failure to provide
      pro-forma financial information; (v) failure to disclose alleged related
      party transactions; (vi) failure to provide access to audited consolidated
      financial statements during previous years; (vii) failure to provide
      shareholders with adequate time to review a fairness opinion obtained by EBC’s
      board of directors in connection with the merger; and (viii) alleged sale
      of EBC below appraised market value of its assets. The derivative components
      of
      the lawsuit allege instances of improper self-dealing, including through a
      management agreement between EBC and Arkansas Media.




In
      addition to requesting unspecified compensatory damages, the plaintiff also
      requested injunctive relief to enjoin EBC’s annual shareholder meeting and the
      vote on the merger. An injunction hearing was not held before EBC’s annual
      meeting regarding the merger so the meeting and shareholder vote proceeded
      as
      planned and EBC’s shareholders approved the merger. On August 9, 2006,
      EBC’s motion to dismiss the lawsuit was denied. On February 21, 2007, the
      plaintiff filed a “Motion to Enforce Settlement Agreement” with the court
      alleging the parties reached an oral agreement to settle the lawsuit. The
      plaintiff subsequently filed a motion to withdraw the motion to settle and
      filed
      a “Third Amended Complaint” on April 10, 2007. This motion added two
      additional plaintiffs and expanded on the issues recited in the previous
      complaints. On July 31, 2007, the plaintiff filed a “Fourth Amended
      Complaint”. This pleading added three new plaintiffs and three new defendants to
      the proceedings. The three additional defendants bear a fiduciary relationship
      to three previously named defendants. On July 31, 2007, the plaintiffs filed
      a
“Motion for Class Certification.” Although the motion has been fully briefed by
      the parties, the plaintiffs have not yet sought a hearing date on the class
      certification issue. Currently, the parties continue to engage in discovery.
      No
      court date has been set for this case.




Management
      believes that this lawsuit has no merit and asserts that the Company has
      negotiated in good faith to attempt to settle the lawsuit. Regardless of the
      outcome management does not expect this proceeding to have a material impact
      of
      its financial condition or results of operations in 2008 or any future period.




Although
      the Company is a party to certain other pending legal proceedings in the normal
      course of business, management believes the ultimate outcome of these matters
      will not be material to the financial condition and future operations of the
      Company. The Company maintains liability insurance against risks arising out
      of
      the normal course of its business.




34




**EBC
      Dissenting Shareholders**




In
      connection with the Merger Transaction (see Note 4 – Merger Transaction)
      shareholders of EBC representing 66,500 shares of EBC Class A common stock
      elected to convert their shares to cash in accordance with Arkansas law. The
      Company recorded a liability in the amount of $368,410 to convert the shares
      plus $9,970 of accrued interest based on a conversion rate of $5.54 per share
      plus interest accruing from the date of the Merger Transaction at the rate
      of
      9.78% per annum. On July 10, 2007, the dissenting shareholders were
      paid $378,380 in cash for the value of their shares including all interest
      accrued to date. Pursuant to Arkansas Code, the dissenting shareholders
      exercised their right to contest the Company’s valuation and have demanded
      payment of an additional $17.78 per share plus accrued interest at
      9.78% per annum. In accordance with Arkansas Code, the Company has
      petitioned the court for a determination of the fair value of the shares and
      believes its valuation will prevail.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.




35




**PART
      II**





**ITEM
      5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES**




Market
      Information




Our
      units, common stock and warrants are traded on the NASDAQ
      Capital Markets under the symbols EMDAU, EMDA, and EMDAW respectively. The
      following table sets forth the high and low closing bid quotations for the
      calendar quarter for the fiscal year ended December 31, 2007 and 2006.
      Prior to the March 2007 Merger with Equity Broadcasting Corporation, the
      Company’s units, common stock, and warrants quoted on the OTC Bulletin Board.
      The over-the-counter market quotations for periods ended March 30, 2007 reported
      below reflect inter-dealer prices, without markup, markdown or commissions
      and
      may not represent actual transactions.


For year ended
              
              Units
              
              Common Stock
              
              WarrantsDecember 31, 2006
              
              High
              
              Low
              
              High
              
              Low
              
              High
              
              LowFirst
                  Quarter
              
              $
              7.50
              
              $
              6.18
              
              $
              5.77
              
              $
              5.20
              
              $
              0.90
              
              $
              0.45Second
                  Quarter
              
              $
              8.00
              
              $
              6.45
              
              $
              5.81
              
              $
              5.31
              
              $
              1.22
              
              $
              0.40Third
                  Quarter
              
              $
              6.26
              
              $
              6.05
              
              $
              5.44
              
              $
              5.34
              
              $
              0.47
              
              $
              0.38Fourth
                  Quarter
              
              $
              6.42
              
              $
              5.90
              
              $
              5.55
              
              $
              5.37
              
              $
              0.47
              
              $
              0.28
  For year ended
              
              Units
              
              Common Stock
              
              WarrantsDecember 31, 2007
              
              High
              
              Low
              
              High
              
              Low
              
              High
              
              LowFirst
                  Quarter
              
              $
              6.91
              
              $
              6.15
              
              $
              5.71
              
              $
              5.05
              
              $
              0.71
              
              $
              0.38Second
                  Quarter
              
              $
              6.48
              
              $
              5.25
              
              $
              5.20
              
              $
              4.10
              
              $
              0.70
              
              $
              0.50Third
                  Quarter
              
              $
              5.50
              
              $
              4.80
              
              $
              4.34
              
              $
              2.84
              
              $
              0.66
              
              $
              0.30Fourth
                  Quarter
              
              $
              2.97
              
              $
              2.50
              
              $
              3.25
              
              $
              1.95
              
              $
              0.46
              
              $
              0.10




Holders




As
      of
      March 17, 2008, there was one holder of record of Equity Media Holding
      Corporation’s units, 480 holders of record of Equity Media Holding Corporation’s
      common stock and nine holders of record of Equity Media Holding Corporation’s
      warrants. These numbers do not include beneficial owners holding shares through
      nominee names.




Dividends




We
      have
      not paid a dividend on any class of common stock and anticipate that we will
      retain future earnings, if any, to fund the development and growth of our
      business. Consequently, we do not anticipate paying cash dividends on our common
      stock in the foreseeable future.




36




Initial
      Public Offering




On
      September 14, 2005, the Company consummated its initial public offering of
      10,000,000 Units, with each unit consisting of one share of our common stock
      and
      two warrants, each to purchase one share of our common stock at an exercise
      price of $5.00 per share. On September 19, 2005, we closed on an additional
      1,500,000 units that were subject to the underwriters’ over-allotment option.
      The units were sold at an offering price of $6.00 per unit, generating total
      gross proceeds of $69,000,000. Morgan Joseph & Co. Inc. and
      EarlyBirdCapital, Inc. acted as lead underwriters. The securities sold in the
      offering were registered under the Securities Act of 1933 on a registration
      statement on Form S-1 (No. 333-125105). The Securities and Exchange
      Commission declared the registration statement effective on September 8,
      2005.





We
      paid a
      total of $4,830,000 in underwriting discounts and commissions, and approximately
      $561,956 has been paid for costs and expenses related to the offering.





After
      deducting the underwriting discounts and commissions and the offering expenses,
      the total net proceeds to us from the offering were approximately $63,608,044
      of
      which $62,620,000 was deposited into a trust fund (or $5.45 per share sold
      in
      the offering) and the remaining proceeds were available to be used to provide
      for business, legal and accounting due diligence on prospective business
      combinations and continuing general and administrative expenses.




Merger
      Transaction and Recapitalization




In
      connection with the Merger Transaction (see Note 4 to the audited financial
      statements — Merger Transaction), on March 29, 2007, the stockholders of
      the Company approved a proposal to amend and restate the Company’s Certificate
      of Incorporation. Upon approval, the Company (i) increased the number of
      authorized shares of common stock from 50,000,000 shares to 100,000,000 shares,
      (ii) increased the number of authorized shares of preferred stock from
      1,000,000 to 25,000,000, (iii) changed the Company’s name from “Coconut
      Palm Acquisition Corp.” to “Equity Media Holdings Corporation”, and
      (iv) authorized the issuance of approximately 2,050,519 shares of the
      Company Series A Convertible Non-Voting Preferred Stock, pursuant to the
      Certificate of Designation. Additional shares of Series A Convertible Non-Voting
      Preferred Stock were authorized for accrued and unpaid dividends through the
      date of the completion of the merger, increasing the number of authorized shares
      of Series A Convertible Non-Voting Preferred Stock from 1,736,746 to
      2,050,519.




As
      a
      result of the Merger Transaction, the Company acquired 1,908,911 shares from
      stockholders who opted to convert their stock to cash and issued 26,665,830
      shares to the shareholders of EBC in exchange for their shares and other
      consideration.




Use
      of
      trust funds





On
      March
      30, 2007, upon consummation of the Merger with EBC, the funds held in trust
      were
      distributed as follows:


Repurchase
                  of EBC Series A preferred stock
              
              $
              25,000,000Pay
                  down Senior Credit Facility Revolver
              
              
              17,450,000Payment
                    to CPAC shareholders electing not to convert their
                    shares
              
              
              10,899,882Settlement
                  of Arkansas Media Management Agreement
              
              
              3,200,000Purchase
                  of three low power television stations from Arkansas Media
              
              
              1,300,000Payment
                  to EBC dissenting shareholders
              
              
              378,380Payment
                  of note payable and accrued interest to Actron, Inc.
              
              
              533,000Available
                  for working capital, capital expenditures and general corporate
                  needs.
              
              
              3,858,738$
              62,620,000




37




Private
      placement





On
      June 21, 2007, the Company entered into a Unit Purchase Agreement with
      certain insiders and institutional investors (each a “Buyer” and collectively,
      the “Buyers”) in connection with a $9,000,000 private placement (the “Private
      Placement”) of an aggregate of 1,406,250 units (the “Units”), each Unit
      consisting of one share of the Company’s common stock, $0.0001 par value per
      share, and two warrants, each warrant exercisable for one share of the Company’s
      common stock at an exercise price of $5.00 per share (the “Warrants”). The
      purchase price of each Unit was $6.40. The Private Placement closed on
      June 21, 2007 (the “Private Placement Closing Date”).





Shares
      Issued to Retire Debt




On
      August 21, 2007, the Company exercised its option, under the terms of a
      $500,000 note payable, to retire the note with the issuance of 115,473 shares
      of
      common stock in lieu of a cash payment. This note was previously issued in
      connection with the purchase of certain television stations.





Securities
      Authorized for issuance under equity compensation plans as of December 31,
      2007:


Plan
                  Category
              
              Number of securities to be issued
                upon exercise of outstanding
                options, warrants and rights.
                (1)
              
              Weighted-average exercise price
                of outstanding options, warrants
                and rights
              
              Number of securities remaining
                available for future issuance
                under equity compensation plansEquity
                  compensation plans approved by security holders
              
              
              6,965,208
              
              $
              4.53
              
              
              5,309,645Equity
                  compensation plans not approved by security holders
              
              
              N/A
              
              
              N/A
              
              
              N/ATotal
              
              
              6,965,208
              
              $
              4.53
              
              
              5,309,645




(1)  Includes
      shares of Common Stock to be issued upon exercise of stock options granted
      under
      the Company’s 2007 Stock Incentive Plan.





**Comparative
      Stock Performance Graph**





The
      following graph compares the total return of our Common Stock based on closing
      prices for the period from October 25, 2005, the date our Common Stock was
      first traded on NASDAQ, through December 31, 2007 with the total return of
      (i) the NASDAQ Composite Index, (ii) the NASDAQ Capital Markets Composite
      (from 9/26/06) and (iii) a peer index consisting of the following publicly
      traded pure play television companies: ACME Communications, Inc., Gray
      Television, Inc., Hearst Argyle Television, Inc., LIN TV Corp., Nexstar
      Broadcasting Group, Inc., Sinclair Broadcast Group, Inc. and Young Broadcasting
      Inc. (the “Television Index”). The graph assumes the investment of $100 in our
      Common Stock and in each of the indices on October 25, 2005. The
      performance shown is not necessarily indicative of future
      performance.




Equity Media Logo




38




**10/25/05**
            
            **12/31/05**
            
            **12/31/06**
            
            **12/31/07**Equity
                Media Holdings Corporation (EMDA)
            
            $
            100.00
            
            $
            98.29
            
            $
            104.55
            
            $
            61.48NASDAQ
                Composite Index
            
            $
            100.00
            
            $
            104.01
            
            $
            113.91
            
            $
            125.09Television
                Index (TV Index)
            
            $
            100.00
            
            $
            95.58
            
            $
            102.38
            
            $
            96.65NASDAQ
                Capital Markets Index
            
            
            
            
            
            -
            
            
            91.47
            
            
            85.66




**ITEM
      6. SELECTED FINANCIAL DATA**





**Fiscal
                Years Ended Dec. 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003****($
                in thousands, except earnings per share)****Consolidated
                Statements of Operations Data**Revenue:
            
            $
            28,264
            
            $
            30,395
            
            $
            27,471
            
            $
            22,402
            
            $
            19,617Operating
                expenses
            
            
            (62,106
            )
            
            (45,279
            )
            
            (43,327
            )
            
            (37,021
            )
            
            (29,555
            )(Loss)
                from operations
            
            
            (33,842
            )
            
            (14,884
            )
            
            (15,856
            )
            
            (14,619
            )
            
            (9,938
            )Interest
                expense, net
            
            
            (7,908
            )
            
            (7,377
            )
            
            (5,085
            )
            
            (3,189
            )
            
            (1,622
            )Gain
                (loss) on sale of assets
            
            
            414
            
            
            18,775
            
            
            7,676
            
            
            11,282
            
            
            3,075Other
                income (expense)
            
            
            593
            
            
            259
            
            
            548
            
            
            464
            
            
            457Income
                (loss) before income tax
            
            
            (40,742
            )
            
            (3,228
            )
            
            (12,717
            )
            
            (6,062
            )
            
            (8,028
            )Income
                tax (benefit) expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Preferred
                dividend
            
            
            12,692Net
                loss available to common shareholders
            
            $
            (53,434
            )
            $
            (3,228
            )
            
            (12,717
            )
            
            (6,062
            )
            
            (8,028
            )Net
                income (loss) per share available to common shareholders:Basic
            
            $
            (1.47
            )
            $
            (0.13
            )
            
            (0.50
            )
            
            (0.24
            )
            
            (0..34
            )Diluted
            
            $
            (1.47
            )
            $
            (0.13
            )
            
            (0.50
            )
            
            (0.24
            )
            
            (0..34
            )Weighted
                average common shares outstanding:Basic
            
            
            36,313
            
            
            25,371
            
            
            25,467
            
            
            24,849
            
            
            23,912Diluted
            
            
            36,313
            
            
            25,371
            
            
            25,467
            
            
            24,849
            
            
            23,912**Selected
                Balance Sheets Data (at period end)**Total
                assets
            
            $
            123,254
            
            $
            114,412
            
            $
            120,159
            
            $
            118,585
            
            $
            91,482Long-term
                obligations
            
            
            13,674
            
            
            58,978
            
            
            62,626
            
            
            44,556
            
            
            26,919Total
                liabilities
            
            
            97,661
            
            
            73,185
            
            
            75,663
            
            
            57,356
            
            
            38,607




See
      Notes
      to Financial Statements




39




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




*The
      following discussion and analysis of financial condition and results of
      operations should be read together with “Selected Financial Data,” and our
      financial statements and accompanying notes appearing elsewhere in this Annual
      Report on Form 10-K.*





**Risk
      Factors That May Affect Future Results**




This
      Annual Report on Form 10-K includes forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and
      Section 21E of the Securities Exchange Act of 1934, as amended. We have
      based these forward-looking statements on our current expectations and
      projections about future events. These forward-looking statements are subject
      to
      known and unknown risks, uncertainties and assumptions about us that may cause
      our actual results, levels of activity, performance or achievements to be
      materially different from any future results, levels of activity, performance
      or
      achievements expressed or implied by such forward-looking statements. In some
      cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar
      expressions. Factors that might cause or contribute to such a discrepancy
      include, but are not limited to, those described in this Annual Report on 10-K
      under “Risk Factors” and elsewhere and in our other Securities and Exchange
      Commission filings. Given such risks and uncertainties, investors are cautioned
      not to place undue reliance on such forward-looking statements. Forward-looking
      statements do not guarantee future performance and should not be considered
      statements of fact. These forward-looking statement speak only as of the date
      of
      this report and, unless required by law, we undertake no obligation to publicly
      update or revise any forward-looking statements to reflect new information
      or
      future events or otherwise.




The
      following Management’s Discussion and Analysis of Financial Condition and
      Results of Operations should be read in conjunction with our consolidated
      financial statements and related notes contained in Item 8 of this report
      Form 10-K. The following Management’s Discussion and Analysis of Financial
      Condition and Results of Operations (“MD&A”) includes the following
      sections:


**•**
              Company
                  Overview**•**
              Results
                  of Operations**•**
              Liquidity
                  and Capital Resources**•**
              Income
                  Taxes**•**
              Debt
                  Instruments and Related Covenants**•**
              Inflation**•**
              Off-Balance
                  Sheet Arrangements**•**
              Contractual
                  Obligations**•**
              Related
                  Party Transactions**•**
              Critical
                  Accounting Policies**•**
              New
                  Accounting Pronouncements




You
      should note that this MD&A discussion contains forward-looking statements
      that involve risks and uncertainties. Please see the section entitled *“Risk
      Factors”* at
      the
      beginning of Item 1A on pages 25 through 35 for important information to
      consider when evaluating such statements. You should read this MD&A in
      conjunction with the Company’s financial statements and related notes included
      in Item 8.





40




**Company
      Overview**





Equity
      Media Holdings Corporation (the “Company”) was incorporated in Delaware on
      April 29, 2005 as Coconut Palm Acquisition Corp. (“Coconut Palm”) to serve
      as a vehicle for the acquisition of an operating business through a merger,
      capital stock exchange, asset acquisition and/or other similar transaction.
      On
      March 30, 2007, Coconut Palm merged with Equity Broadcasting Corporation
      (“EBC”), with Coconut Palm remaining as the legal surviving corporation;
      however, the financial statements and continued operations are those of EBC
      as
      the accounting acquirer (See Note 4 — Merger Transaction). Immediately following
      the merger, Coconut Palm changed its name to Equity Media Holdings
      Corporation.





As
      of
      December 31, 2007, the Company has built and aggregated a total of 120 full
      and
      low power permits, licenses and applications that it owns or has contracts
      to
      acquire. The Company’s FCC license asset portfolio includes 23 full power
      stations, 38 Class A stations and 59 low power stations, including two
      metropolitan New York City low power stations that the Company is currently
      under contract to purchase. The Company’s English and Spanish-language stations
      are in 41 markets that represent more than 32% of the U.S.
      population.




While
      the
      Company originally targeted small to medium-sized markets for development,
      it
      has been able to leverage its original properties into stations in larger
      metropolitan markets, including Denver, Detroit, Salt Lake City, Minneapolis
      and
      Oklahoma City. The Company’s stations are affiliated with broadcast networks as
      follows: 20 of the stations are affiliated with LAT TV, 16 are affiliated with
      Univision, 12 are affiliated with the Company’s Retro Television Network
      (“RTN”) ,
      five
      are affiliated with MyNetworkTV, four are affiliated with FOX, three are
      affiliated with TeleFutura, two are affiliated with MTV Tr3́s and one is
      affiliated with ABC.





The
      Company is the second-largest affiliate group of the top-ranked Univision and
      TeleFutura networks with 19 affiliates, 13 of which are in the nation’s top-65
      Hispanic television markets. The Company believes that it has a superior growth
      opportunity in these Hispanic properties because each station has a 15-year
      affiliation agreement with either Univision or TeleFutura,
      respectively.





RTN
      was
      developed to fulfill a need in the broadcasting industry that is occurring
      now
      and will continue to occur as broadcast stations switch over to digital
      programming pursuant to a Federal Communications Commission mandate with a
      February, 2009 deadline.





Digital
      Television (“DTV”), will allow broadcasters to offer television content with
      movie-quality picture and CD-quality sound. DTV is a much more efficient
      technology, allowing broadcasters to provide a “high definition” (“HDTV”),
      program and multiple “standard definition” DTV programs simultaneously.
      Providing several programs streams on one broadcast channel is called
“multicasting.” The challenge facing many broadcasters is how to effectively
      program and monetize the value created by DTV.





RTN
      is
      the first network designed for the digital arena. RTN takes some of the most
      popular and entertaining programs from the 60s, 70s, 80s, and 90s, all ratings
      proven and digitally re-mastered, and provides them to their RTN affiliates.
      RTN
      affiliates enjoy a scalable, cost efficient content solution for their digital
      channels. A major differentiator between RTN and other potential digital
      solutions is RTN’s ability to deliver local news, sports, and weather updates to
      the local RTN affiliate, in addition to the quality RTN programming. This
      enables the local affiliate to sell local advertising spots to generate
      revenue.





The
      ability to deliver localized programs to the RTN affiliate is accomplished
      through utilization of the Company’s proprietary digital satellite technology
      system known as “C.A.S.H.” The Central Automated Satellite Hub (“CASH”), system
      provides the means of delivering a fully automated, 24 hour a day custom feed
      for each local affiliate. The Company has the capability to launch localized
      network feeds in all 210 U.S. TV markets and internationally as
      well.




The
      Company has historically focused on aggregating stations and developing delivery
      systems. Over the past eight years, the Company financed itself largely by
      acquiring television construction permits and stations at attractive valuations.
      After acquiring the stations, the Company would construct and/or upgrade the
      facilities and, on a selective market basis, sell the station at an increased
      valuation to fund operations and acquisitions and to service debt.




41




Following
      the March 2007 merger, the Company’s business focus shifted from primarily
      aggregating stations to increasing RTN affiliate penetration and maximizing
      revenue and profit for each station. The Company intends to achieve revenue
      growth and profitability through various entity and station-level initiatives.
      These initiatives, which the Company has recently begun to implement, include:





·
            continued
                growth of the RTN affiliate base in key U.S. television markets;


·
            focusing
                on growing national business;


·
            addition
                of experienced managers in select local
                markets;


·
            upgrading
                / increasing sales staffs in select local
                markets;


·
            establishing
                market appropriate rate cards;


·
            upgrading
                local news (where available) and expanding local programming in select
                markets;


·
            upgrading
                syndicated programming; and


·
            enhancing
                cable and satellite distribution




Generally,
      it takes a few years for the Company’s newly acquired or built stations to
      generate operating cash flow. In addition, it requires time to gain viewer
      awareness of new station programming and to attract advertisers. Accordingly,
      the Company has incurred, and expects to continue to incur, with newly acquired
      or built stations, losses at a station in the first few years after it acquires
      or builds the station. Occasionally unforeseen expenses and delays increase
      the
      estimated initial start-up expenses. This requires the Company’s established
      stations to generate revenues and cash flow sufficient to meet its business
      plan
      including the significant expenses related to our newly acquired or built
      stations.




The
      Company is one of the largest holders of broadcast spectrum in the United
      States. Each Equity Media Station is 6MHz and is located in the 480-680 MHz
      band. Our spectrum adjoins the 700 MHz band and offers similar propagation
      characteristics. Equity Media anticipates that it will supplement its revenues
      by monetizing its significant spectrum portfolio through joint-ventures, leasing
      or sub-licensing to telecoms and new media companies.




The
      Company also launched a new corporate and investor relations website ( www.EMDAholdings.com )
      in
      August 2007. The website features new and expanded content about the Company’s
      operating businesses, senior management, news and public filings. All key
      information on the website is available in an up-to-date, interactive
      format.




*Acquisition
      and Expansion Activity*





On
      August
      17, 2007, the Company announced that it had entered
      into a definitive asset purchase agreement to acquire two low power television
      stations in the metropolitan New York City market (WMBQ-CA, Channel 46 and
      WBQM-LP, Channel 3) from Renard Communications.




During
      the year ended December 31, 2007, the Company’s classic television network, RTN,
      announced fifteen new affiliates. Several of these new affiliations are in
      the
      nation’s top-50 television markets, including Pittsburgh and Raleigh/Durham In
      addition, the Company announced that the RTN affiliates in Savannah, GA and
      Myrtle Beach / Florence, SC had renewed their affiliation agreements for another
      year.




42




**RESULTS
      OF OPERATIONS — YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED
      DECEMBER 31, 2006**


***Revenue***




The
      following table sets forth the principal types of broadcast revenue earned
      by
      the Company and its stations for the periods indicated and the change from
      one
      period to the next both in dollars and percent:


For the Years ended December 31,%2007
              
              2006
              
              Change
              
              Change(in thousands, except percentages)Broadcast
                  RevenuesLocal
              
              $
              9,615
              
              $
              11,930
              
              $
              (2,315
              )
              
              (19.40
              )%National
              
              
              8,046
              
              
              8,145
              
              
              (99
              )
              
              (1.22
              )Other
              
              
              1,071
              
              
              1,830
              
              
              (759
              )
              
              (4.15
              )Trade
                  & Barter Revenue
              
              
              9,532
              
              
              8,490
              
              
              1,042
              
              
              12.27Total
                  Broadcast Revenue
              
              $
              28,264
              
              $
              30,395
              
              $
              (2,131
              )
              
              (7.01
              )%




As
      noted
      in the Overview, the operating revenue of the Company’s stations is derived
      primarily from advertising revenue. The above table segregates revenue received
      from local sources compared to national sources, together with gross trade
      and
      barter revenues, which is non-cash. Other broadcast revenue is a combination
      of
      production, uplink services, news services, and other non-spot broadcast
      revenue.




For
      the
      year ended December 31, 2007 as compared to 2006, total Broadcast Revenue
      decreased $2.131 million, or 7%, to $28.264 million. The primary
      reason for this decrease is due to the sale by the Company of KPOU-TV, Portland,
      OR, a Univision affiliate, on November 1, 2006 which accounts for $2.008
      million of the variance. Total Broadcast Revenue, excluding the decrease due
      to
      KPOU, decreased $0.1 million, or 0.4%. Total local and national revenue
      from the Company’s Spanish-language stations, excluding KPOU, increased
      $1.001 million, or 11% during the year. This increase was offset by a
      decrease of $1.679 million in local and national revenue from the Company’s
      English-language stations. The decrease in other revenue is attributed to lower
      JSA income of $266,000, due to the disposition of KPOU, lower uplink shared
      services revenue of $253,000, and lower time brokerage income of $371,000;
      offset by higher network compensation revenue of $174,000. Also, during the
      year
      ended December 31, 2007 trade and barter revenue increased $1.04 million,
      or 12.3%, as compared to the same period in 2006. This increase is due primarily
      to the continued growth in Company’s investment in syndicated programming as it
      continues its commitment to reduce the amount of shopping and long-form
      commercials and move to more traditional programming.


43
  ***Results
        of Operations***




The
      following table sets forth the Company’s operating results for the year ended
      December 31, 2007, as compared to the year ended December 31, 2006:




For the Years ended December 31,2007
              
              2006
              
              Change
              
              %
                Change(in thousands, except percentages, net income per share and weighted average shares)Broadcast
                  Revenue
              
              $
              28,264
              
              $
              30,395
              
              $
              (2,131
              )
              
              (7.01
              )%Program,
                  production & promotion
              
              
              15,028
              
              
              13,413
              
              
              1,615
              
              
              12.04Selling,
                  general & administrative
              
              
              32,419
              
              
              26,192
              
              
              6,337
              
              
              24.19Management
                  Settlement Agreement
              
              
              8,000
              
              
              --
              
              
              8,000Impairment
                  charge on assets held for sale
              
              
              -
              
              
              200
              
              
              (200
              )
              
              (100.00
              )Amortization
                  and Depreciation expense
              
              
              4,160
              
              
              3,283
              
              
              877
              
              
              26.71Rent
              
              
              2,499
              
              
              2,191
              
              
              308
              
              
              14.06Operating
                  loss
              
              
              (33,842
              )
              
              (14,884
              )
              
              (19,068
              )
              
              128.11Interest
                  expense, net
              
              
              (7,908
              )
              
              (7,377
              )
              
              (531
              )
              
              7.20Gain
                  on sale of assets
              
              
              414
              
              
              18,775
              
              
              (18,361
              )
              
              (97.79
              )Other
                  income, net
              
              
              593
              
              
              259
              
              
              334
              
              
              128.96(6,901
              )
              
              11,656
              
              
              (18,557
              )
              
              (159.20
              )Loss
                  before income taxes
              
              
              (40,742
              )
              
              (3,228
              )
              
              (37,625
              )
              
              1,165.58Income
                  taxes
              
              
              -
              
              
              -Net
                  loss
              
              $
              (40,742
              )
              $
              (3,228
              )
              $
              (37,625
              )
              
              1,165.58
              %Basic
                  net (loss) per common share
              
              
              (1.12
              )
              $
              (0.13
              )Weighted
                  average basic shares used in earnings per share
                  calculation
              
              
              36,312,638
              
              
              25,371,332





***Program,
      production and promotion expenses***




Program,
      production and promotion expense was $15.0 million in the year ended December
      31, 2007, as compared to $13.4 million in 2006, an increase of $1.6
      million, or 12.0%. The variance was primarily due to an increase in Syndicated
      Programming expense of $1.04 million and an increase of $0.5 million in
      Barter/Film Expense.




***Selling,
      general and administrative***




Selling,
      general and administrative expense was $32.5 million in the year ended
      December 31, 2007, as compared to $26.2 million in 2006, an increase of
      $6.3 million, or 24.2%. Contributing to this increase were increases in
      labor and benefits costs of $3.2 million, professional fees of $1.7 million,
      and
      share based compensation of $2.0 million., partially offset with a reduction
      in
      LMA and JSA expense of $1.2 million and bad debt expense of $0.4 million.




***Management
      Settlement Agreement***




The
      Company paid $8.0 million in the year ended December 31, 2007 in connection
      with a Management Settlement Agreement as a result of the March 2007 Merger
      transaction., as compared to $0.0 million in 2006, an increase of $8.0
      million.




***Depreciation
      and Amortization***




Depreciation
      and amortization was $4.1 million in the year ended December 31, 2007, as
      compared to $3.3 million in 2006, an increase of $0.8 million or 26.7%.
      This increase is primarily attributed to the continuing investment in broadcast
      equipment.




***Rent***




Rent
      expense was $2.5 million in the year ended December 31, 2007, as compared
      to $2.2 million in 2006, an increase of $0.3 million, or 14.0%. An
      increase in tower rent expense was the primary factor.




44




***Interest
      Expense, net***




Interest
      expense was $7.9 million in the year ended December 31, 2007, as compared
      to $7.4 million in 2006, an increase of $0.5 million, or 7.2%. This
      increase is primarily attributable to higher average interest rates in 2007.
      The
      combined average interest rates on the Company’s senior credit facility were
      13.3% and 12.2% for the years ended December 31, 2007 and 2006, respectively.




***Gain
      on sale of assets***




The
      gain
      on sale of assets was $0.4 million in the year ended December 31, 2007, as
      compared to a gain of $18.8 million in the year ended December 31, 2006, a
      decrease of $18.4 million. The Company sold land and a broadcast tower in 2007;
      the net gain on sale in 2006 included gains from the sale of several low power
      television stations located both in Idaho and in Central Arkansas, net of a
      loss
      arising from the sale of a station in Alabama.




***Other
      income, net***




Other
      income, net was approximately $0.6 for the year ended December 31, 2007 as
      compared to approximately $0.3 for the year ended December 31, 2006, an increase
      of $0.3. The Company increase is attributed to a reduction in losses from joint
      ventures of approximately $0.5 million, net of a reduction in rental income
      of
      approximately $0.2.




**RESULTS
      OF OPERATIONS — YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED
      DECEMBER 31, 2005**


***Revenue***




The
      following table sets forth the principal types of broadcast revenue earned
      by
      the Company and its stations for the periods indicated and the change from
      one
      period to the next both in dollars and percent:


For the Years ended December 31,2006
              
              2005
              
              Change
              
              %Change(in
                  thousands, except percentages)Broadcast
                  RevenuesLocal
              
              $
              11,930
              
              $
              9,971
              
              $
              1,959
              
              
              19.6
              %National
              
              
              8,145
              
              
              7,661
              
              
              484
              
              
              6.3Other
              
              
              1,830
              
              
              2,459
              
              
              (629
              )
              
              (25.6
              )Trade
                  & Barter Revenue
              
              
              8,490
              
              
              7,380
              
              
              1,110
              
              
              15.1Total
                  Broadcast Revenue
              
              $
              30,395
              
              $
              27,471
              
              $
              2,924
              
              
              10.6
              %




As
      noted
      in the Overview, the operating revenue of the Company’s stations is derived
      primarily from advertising revenue. The above table segregates revenue received
      from local sources compared to national sources, together with gross trade
      and
      barter revenues, which is non-cash. Other broadcast revenue is a combination
      of
      production, uplink services, news services, and other non-spot broadcast
      revenue. The growth in gross broadcast revenues is due to a number of factors,
      the predominant ones being:


•
                the
                    continuing maturity of all the Company
                    stations,
 
 •
                the
                    overall growth in the Hispanic sector of the broadcast
                    market, and
 
 •
                the
                    addition of eight Univision and Telefutura stations in late 2004
                    and early
                    2005.
 45


Of
      the
      increase in both Local and National broadcast revenues noted in the table above,
      over $2.2 million of the increase was from the eight Univision and
      Telefutura stations added in late 2004 and early 2005. In addition, both the
      Portland and Salt Lake City Univision stations contributed to the increase
      with
      sales increases in excess of 30% for the Portland station and in excess of
      40%
      for the Salt Lake City station.




Contributing
      to the decline in other broadcast revenues was:


•
              a
                  drop in News services revenue of approximately $206,000 due to
                  the
                  Company’s decision to focus its news and weather services production to
                  its own stations and no longer serve third
                  parties,
 
 •
              a
                  reduction in Time Brokerage revenues of approximately $485,000
                  which is a
                  reflection of moving programming away from shopping based programming
                  to
                  syndicated programming,
 
 •
              an
                  increase in JSA income of $315,000, $280,000 of which is income
                  from the
                  JSA agreement with Fisher Broadcasting regarding KPOU in Portland
                  that
                  became effective July 1, 2006, and terminated upon the sale of
                  that station to Fisher on September 30, 2006,
                  and
 
 •
              a
                  drop in Uplink Shared Services revenue, which is revenue from the
                  Company’s C.A.S.H Services, Inc. subsidiary, of approximately $213,000.
                  This decline is from the loss of a client during this comparative
                  period
                  due to business reversals affecting that
                  client.




The
      increase in Trade and Barter Revenue was due primarily to the significant
      increase in the amount of syndicated programming being aired by the non-Hispanic
      stations. The Company acquires syndicated programming either through a cash
      payment arrangement or a barter arrangement. The programming acquired via barter
      is valued and amortized as the shows air. The amortized amounts are reflected
      correspondingly as both barter revenue and barter expense, or trade revenue
      and
      trade expense. The Company’s commitment to move away from airing shopping and
      long-form commercials and into more traditional television programming is,
      in
      this instance, reflected in this increase. In addition, Trade Revenue includes
      the fair market value of spots that air in exchange for goods and services
      (aside from programming) received from various vendors in the various local
      markets. As the Company’s stations mature and develop larger local client bases,
      the opportunities for trade grows. The above increase is, in part, a reflection
      of this development as well.


***Results
        of Operations***




The
      following table sets forth the Company’s operating results for the year ended
      December 31, 2006, as compared to the year ended December 31, 2005:


For the Years ended December 31,2006
              
              2005
              
              Change
              
              %
                Change(in thousands, except percentages, net income per share and weighted average shares)Broadcast
                  Revenue
              
              $
              30,395
              
              $
              27,471
              
              $
              2,924
              
              
              10.6
              %Program,
                  production & promotion
              
              
              13,413
              
              
              11,540
              
              
              1,873
              
              
              16.2Selling,
                  general & administrative
              
              
              26,192
              
              
              24,509
              
              
              1,683
              
              
              6.9Impairment
                  charge on assets held for sale
              
              
              200
              
              
              1,689
              
              
              (1,489
              )
              
              (88.2
              )Amortization
                  and depreciation expense
              
              
              3,283
              
              
              3,652
              
              
              369
              
              
              (10.1
              )Rent
              
              
              2,191
              
              
              1,937
              
              
              254
              
              
              13.1Operating
                  (loss)
              
              
              (14,884
              )
              
              (15,856
              )
              
              972
              
              
              (6.1
              )Interest
                  expense, net
              
              
              (7,377
              )
              
              (5,085
              )
              
              (2,292
              )
              
              45.1Gain
                  on sale of assets
              
              
              18,775
              
              
              7,676
              
              
              11,098
              
              
              144.6Other
                  income, net
              
              
              259
              
              
              548
              
              
              (289
              )
              
              (52.7
              )11,656
              
              
              3,139
              
              
              8,517
              
              
              271.4(Loss)
                  income before income taxes
              
              
              (3,228
              )
              
              (12,717
              )
              
              9,489
              
              
              (74.6
              )Income
                  taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  (loss)
              
              $
              (3,228
              )
              $
              (12,717
              )
              $
              9,489
              
              
              (74.6
              )%Basic
                  net (loss) per common share
              
              $
              (0.13
              )
              $
              (0.50
              )Weighted
                  average basic shares used in earnings per share
                  calculation
              
              
              25,371,332
              
              
              25,467,844




46




The
      changes in operating results for the year ended December 31, 2006 as compared
      to
      the year ended December 31, 2005 were impacted by the fact that the Company
      acquired, built-out, or significantly changed the programming and/or affiliation
      in stations located in over twenty markets between June 2004 and December 2006.
      The development and maturity of these stations directly affected all material
      aspects of the Company’s operating results, more specifically noted below. These
      stations included Univision affiliations in Detroit, Ft. Myers,
      Minneapolis, Kansas City, Tulsa, Syracuse, Waco and Wichita Falls.


***Program,
        production and promotion expenses***




Program,
      production and promotion expense was $13.4 million in the year ended
      December 31, 2006, as compared to $11.5 million in the year ended December
      31, 2005, an increase of $1.9 million, or 16.2%. Contributing to this
      increase were the following material items:


•
              a
                  $0.3 million increase in Syndicated Film expense. The more
                  significant factors contributing to the increase are the growth
                  in the
                  number of the Company stations broadcasting as RTN affiliates and
                  management’s commitment to acquiring quality
                  programming.
 
 •
              a
                  $0.2 million increase in Satellite Time expense, which reflects the
                  additional costs under the contract with the satellite owner. Amendments
                  to the existing contracts were entered into in both the first and
                  second
                  quarter of 2005 to increase the bandwidth, both C-band and Ku-band,
                  available to the Company. Both the actual and anticipated growth
                  in the
                  number of the Company owned stations contributed to the need to
                  amend the
                  contracts and increase the costs.
 
 •
              a
                  $0.3 million increase in Advertising and Sales Promotion costs, the
                  primary component being an increase in advertising on cable and
                  in sales
                  promotion efforts.
 
 •
              a
                  $1.3 million increase in Trade and Barter expense, which indicates a
                  growth in syndicated barter programming airings and an increase
                  in the
                  trading for goods and services in the various local markets served
                  by the
                  Company stations. The local station managers negotiate trade arrangements
                  in their local markets for goods and services they believe are
                  beneficial
                  to their stations, all subject to the Company corporate approval.
                  The
                  growth in syndicated barter programming airings is an indication
                  of the
                  growth in RTN programming and the movement away from long-form
                  paid
                  programming to syndicated programming, typically thirty minutes
                  in
                  length.


47
  ***Selling,
        general and administrative***




Selling,
      general and administrative expense was $26.2 million in the year ended
      December 31, 2006, as compared to $24.5 million in the year ended December
      31, 2005, an increase of $1.7 million, or 6.9%. Contributing to this increase
      were the following material items:


•
              a
                  $0.3 million increase in Commission expense. Since Commission expense
                  is a direct result of broadcast revenue and broadcast revenue was
                  up $2.9
                  million during this time period, there was a corresponding increase
                  in
                  Commission expense.
 
 •
              a
                  $1.2 million decrease in local marketing agreement, or LMA, and JSA
                  expense. The decrease is due to a decrease in the JSA expense to
                  station
                  KPOU, which was the Company Univision affiliate broadcasting in
                  the
                  Portland, Oregon market and operated under the terms of a JSA with
                  Belo
                  Corporation thru June 30, 2006. Effective July 1, 2006, the JSA
                  agreement with Belo ended and a new JSA agreement with Fisher Broadcasting
                  went into effect. Differences in the two agreements impacted the
                  accounting treatment for the related JSA costs. Fisher subsequently
                  acquired KPOU on September 30, 2006, as discussed elsewhere in this
                  filing. In addition, the apportionment of costs relative to the
                  JSA
                  agreement with Univision for KUTH, the Univision affiliate in Salt
                  Lake
                  City, changed in calendar 2006 as compared to 2005. Costs previously
                  identified as JSA Expense in 2005 are now classified based on their
                  content and nature. The total costs vary month to month but the
                  costs
                  incurred in 2006 do not vary materially in nature or amount from
                  the costs
                  incurred in 2005.
 
 •
              a
                  $0.9 million increase in labor costs. The primary reason for the
                  increase in labor costs is due, simply, to the growth of the Company.
                  Besides the direct labor costs to staff the sales offices of the
                  new
                  locations, as noted elsewhere, there was also an increase in overhead
                  labor costs, including growth in master control, production, traffic,
                  accounting and the other supporting departments. Also, standard
                  cost of
                  living raises contributed to the
                  increase.




***Depreciation
        and Amortization***




Depreciation
      and amortization was $3.3 million in the year ended December 31, 2006, as
      compared to $3.7 million in the year ended December 31, 2005. Of those
      expense amounts, amortization expense was $126,000 for the year ended December
      31, 2006 compared to $105,000 for the year ended December 31, 2005, an increase
      of $21,000.


***Rent***




Rent
      expense was $2.2 million in the year ended December 31, 2006, as compared
      to $1.9 million in the year ended December 31, 2005, an increase of
      $0.3 million, or 16%. The increase was due primarily to the expansion by
      the Company into new markets, the costs related to new office and broadcast
      tower space and contractual annual increases in existing lease agreements.


48
  ***Interest
        Expense, net***




Interest
      expense, net of interest income, was $7.4 million in the year ended
      December 31, 2006, as compared to $5.1 million in the year ended December
      31, 2005, an increase of $2.3 million, or 45%. This increase was due
      primarily to:




•
              A
                  steady and continuing rise in interest rates over the respective
                  periods; and
 
 •
              A
                  steady increase in notes payable during 2006, except for significant
                  reductions in September of $6 million and in November of $9.5 million,
                  both from proceeds from the sale of KPOU, the Portland station.
                  The
                  additions to debt were used primarily for station acquisitions,
                  to
                  increase the investment in broadcast equipment and for general
                  operating
                  purposes.


***Gain
        on sale of assets***




The
      gain
      on sale of assets was $18.8 million in the year ended December 31, 2006, as
      compared to $7.7 million in the year ended December 31, 2005, an increase
      of $11.1 million, or 145%. The gain on sale in the year ended December 31,
      2006, included the sale of low power television stations in Boise and Pocatello,
      ID, for a gross sales price of $1.0 million and a net gain of
      $0.5 million, the sale of WBMM, a station in Montgomery, AL, for a sales
      price of $1.9 million and a net loss of $0.3 million, the sale of
      KPOU, a station in Portland, OR, for a sales price of $19.3 million and a net
      gain of $18.4 million, and the sale of other miscellaneous assets for no net
      gain. The gain on sale in the year ended December 31, 2005, included the sale
      of
      WPXS, an independent affiliate serving the St. Louis, MO market, for a net
      gain of $8.4 million. the Company received $5.0 million in cash from
      the buyer, and three Class-A low power licenses located in Atlanta, GA, Seattle,
      WA and Minneapolis, MN, respectively, with a combined appraised value of
      $14.7 million.


***Losses
        from Joint Ventures***




In
      December 2004, the Company sold a majority interest in the Arkansas Twisters,
      an
      AFL2 football team, to a local investor. Prior to that date the financial
      activity of the Twisters was consolidated into the Company’s financial
      statements. Subsequent to that date the Company recorded its minority share
      of
      any income or loss reported by the Twisters as income or loss from joint
      ventures. Also, the Company owned approximately a one third interest in Spinner
      Network Systems, LLC, a specialized media delivery company. During the years
      ended December 31, 2006 and December 31, 2005, the Company recognized losses
      from the Twisters of ($393,000) and ($240,000), respectively. Also, during
      the
      same periods, the Company recognized losses from Spinner of ($204,000) and
      ($317,000), respectively. Other losses from joint ventures during these time
      periods were immaterial.


***Net
        loss***




The
      net
      loss was $3.2 million for the year ended December 31, 2006, as compared to
      a net loss of $12.7 million for the year ended December 31, 2005, a
      decrease of $9.5 million, or 75%. This decrease was due to the items
      discussed above, primarily:




49




•
            a
                decrease in Operating Loss of
                $1.0 million;





•
            an
                increase in Interest expense, net of
                $2.3 million; and





•
            an
                increase in Gain on sale of assets of $11.1 million, all as compared
                to the year ended December 31,
                2005.




**Liquidity
      and Capital Resources**


***Current
        Financial Condition***




As
      of and
      for the year ended December 31, 2007 compared to the year ended December 31,
      2006:


For the years ended December 31,2007
              
              2006(in
                  thousands)Net
                  cash used by operating activities
              
              $
              (30,807
              )
              $
              (17,293
              )Net
                  cash provided (used) by investing activities
              
              
              (11,440
              )
              
              18,258Net
                  cash provided (used) by financing activities
              
              
              41,251
              
              
              (1,588
              )Net
                  increase (decrease) in cash and cash equivalents
              
              $
              (996
              )
              $
              (623
              )
 
 As of December 31,2007
              
              2006(in
                  thousands)Cash
                  and cash equivalents
              
              $
              634
              
              $
              1,630Long
                  term debt including current portion and lines of credit
              
              
              77,411
              
              
              57,962Available
                  credit under senior credit agreement
              
              
              ─0─
              
              
              5,440




The
      Company’s existing capital resources are not sufficient to fund its operations.
      If the Company is unable to obtain adequate additional sources of capital in
      the
      near term it will need to cease all or a portion of its operations, seek
      protection under U.S. bankruptcy laws and regulations, engage in a restructuring
      or undertake a combination of these and other actions. Additional sources of
      capital, if obtained, would likely come from sales by the Company of debt and/or
      equity and/or the sale of material assets of the Company. The Company is
      currently negotiating potential transactions that would supply it with capital
      necessary to meet its current requirements. However, these negotiations may
      not
      result in successful consummation of any transaction. If the Company is able
      to
      successfully consummate a transaction, such transaction may result in
      substantial dilution to the Company’s existing security holdings and/or the
      incurrence of substantial indebtedness on relatively expensive terms. The terms
      of any such transaction would also likely involve covenants that serve to
      substantially restrict the operations of the Company and its management and
      could result in a change of control of the Company.




On
      March
      20, 2008, the Company entered into an amendment to its Third Amended and
      Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC
      and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender
      group has agreed to forbear from exercising certain of their rights and remedies
      with respect to designated defaults under the Credit Agreement through the
      earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events
      or by which certain events have failed to occur, including the Company’s failure
      to enter into agreements with respect to the sale of certain of its assets
      and
      the Company’s failure to secure approvals for, and meet other criteria with
      respect to, financing alternatives necessary to meet the Company’s immediate
      capital requirements. If the Company is unable to meet all criteria under the
      forbearance agreement, the lender group will have all remedies available to
      them
      under the Credit Agreement, including making the loan immediately due and
      payable.




50




The
      principal ongoing uses of cash that affect the Company’s liquidity position
      include the following: the acquisition of and payments under syndicated
      programming contracts, capital and operational expenditures and interest
      payments on the Company’s debt. It should be noted that no principal is due on
      the existing senior credit facility (as refinanced in February 2008 – see
      below) until February 2011, except for mandatory principal payments from
      proceeds generated from the sale of any collateral assets through that period.




The
      Company currently has a working capital deficit of approximately $58.7million and has experienced losses from operations since inception.
      During the year ended December 31, 2007, the Company had a net loss of
      approximately $40.8 million and experienced cash outflows from operations during
      the same period of approximately $30.8 million. In the past, the Company has
      relied on equity and debt financing and the sale of assets to provide the
      necessary liquidity for the business to operate and will need to have access
      to
      substantial funds over the next twelve months in order to fund its operations.
      As of December 31, 2007, the Company had approximately $0.6 million of
      unrestricted cash on hand, and as more fully discussed in “Notes to Consolidated
      Financial Statements” - Note 13, the Company had access to a working capital
      line of credit provided to it from certain banking institutions (the “Credit
      Facility”). However, as of December 31, 2007, approximately $7.9 million,
      available per the terms of the Credit Facility, was not available due to certain
      restrictions based on the value of the loan collateral.




Prior
      to
      the amendment and restatement of the credit facility in February 2008, as well
      as with certain other notes outstanding, the Company was subject to certain
      financial covenants, including among others, that the Company meet minimum
      revenue and EBITDA levels. At December 31, 2007, the Company was in not
      compliance with these covenants. However, after the amendment and restatement
      of
      the credit facility, the Company’s previous events of default were waived and
      eliminated.




On
      February 13, 2008, the Company and its lenders entered into the Third Amended
      and Restated Credit Agreement to refinance the credit facility. The amended
      $53.0 million credit facility, comprised of an $8.0 million revolving credit
      line and term loans of $45.0 million, matures on February 13, 2011, was used
      to
      refinance the existing indebtedness senior credit facility. Outstanding
      principal balance under the credit facility bears interest at LIBOR or the
      alternate base rate, plus the applicable margin. The applicable margin is 9.5%
      for the LIBOR loans and 8.5% on the alternate base rate loan. The minimum LIBOR
      is 4.5%. The alternate base rate is (i)
      the
      greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such
      day
      plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%)
      per annum. We are required to pay an unused line fee of .5% on the unused
      portion of the credit facility. The credit facility is secured by the majority
      of the assets of the company. We are subject to new financial and operating
      covenants and restrictions based on trailing monthly and twelve month
      information. We have borrowed $50,512,500 under the new facility as of March
      11,
      2008 .
      Due to
      certain restrictions based on the value of the loan collateral, the Company
      does
      not have access to the remaining $2,487,500 at this time.




Even
      with
      the refinanced Credit Facility, the additional funds provided by the Amended
      Credit Facility are not sufficient to meet all of the anticipated liquidity
      needs to continue operations of the Company for the next twelve months.
      Accordingly, the Company will have to raise additional capital or increase
      its
      debt immediately to continue operations. If the Company is unable to obtain
      additional funds when they are required or if the funds cannot be obtained
      on
      favorable terms, management may be required to liquidate available assets,
      restructure the Company or in the extreme event, cease operations. The financial
      statements do not include any adjustments that might result from the outcome
      of
      these uncertainties.


51
  ***Sources
        and Uses of Cash***




**For
      the year ended December 31, 2007 as compared to the year ended December 31,
      2006:**




*Operating
        Activities*




*Operating
      Activities*




Net
      cash
      used in operating activities for the year ended December 31, 2007 and 2006
      was
      $30.8 million and $17.3 million, respectively. The increase in net cash
      used by operating activities of $13.5 million was due primarily to an increase
      in the net loss of $34.0 million net of increases in Management Agreement
      Settlement expense of $4.8 million, and Share Based Compensation expense of
      $2.0 million, both non-cash operating expenses.




*Investing
      Activities*




Net
      cash
      used by investing activities was $11.4 million in the year ended December
      31, 2007, an increase in the use of cash of $29.7 million compared to the
      year ended December 31, 2006, when $18.3 million was provided by investing
      activities. The increase in use was largely due to the acquisition of three
      low
      power television stations located in Oklahoma and Arkansas, including KLRA,
      the
      Univision affiliate in Little Rock, Arkansas for $1.3 million an increase in
      the
      investment of property and equipment, primarily in Little Rock for the expansion
      of our master control facilities in the amount of $3.9 million, the setup of
      a
      restricted cash fund for acquisition of broadcast assets of $4.2 million and
      a
      decrease in the proceeds from the sale of broadcast stations from $22.2 million
      in 2006 as compared to $0 in 2007.




*Financing
      Activities*




Net
      cash
      provided by financing activities was $41.3 million in the year ended
      December 31, 2007, compared to uses of $1.6 million in the year ended
      December 31, 2006, an increase of $42.9 million. During the year ended
      December 31, 2007, the Company completed its merger with the Company. As part
      of
      the Merger Transaction, the Company contributed pre-merger assets and
      liabilities to the surviving accounting entity, including operating cash of
      $22.8 million and $10.9 million of funds held in trust for the retirement
      of the stock held by the Company shareholders who elected not to participate
      in
      the merger. The funds held in trust were paid out by the trustee subsequent
      to
      the merger and before September 30, 2007, to the dissenting shareholders for
      their shares of the Company. Also, as part of the merger transaction, the
      Company re-purchased its outstanding preferred stock for $25 million, including
      the issuance of a note payable of $15 million. In June 2007, the Company
      completed a sale of Common Stock shares through a private placement which
      resulted in net proceeds of $9.0 million. The Company’s net decrease in debt was
      $4.7 million for the year ended December 31, 2007 as compared to a net
      increase of $1.6 million during the year ended December 31, 2006.




**For
      the year ended December 31, 2006 as compared to the year ended December 31,
      2005:**




As
      of and for the year ended December 31, 2006 compared to the year ended December
      31, 2005:


For the years ended December 31,2006
              
              2005(in
                  thousands)Net
                  cash used by operating activities
              
              $
              (17,293
              )
              $
              (15,657
              )Net
                  cash provided (used) by investing activities
              
              
              18,258
              
              
              3,061Net
                  cash provided by financing activities
              
              
              (1,588
              )
              
              13,630Net
                  increase (decrease) in cash and cash equivalents
              
              $
              (623
              )
              $
              1,035
 
 As of December 31,2006
              
              2005(in
                  thousands)Cash
                  and cash equivalents
              
              $
              1,630
              
              $
              2,254Long
                  term debt including current portion and lines of credit
              
              
              57,962
              
              
              59,550Available
                  credit under senior credit agreement
              
              
              5,440
              
              
              1,643


52
  *Operating
        Activities*




Net
      cash
      used in operating activities for the years ending December 31, 2006 and 2005
      was
      $17.3 million and $15.7 million, respectively. The increase in net
      cash used by operating activities of $1.6 million was due primarily to the
      following factors:


•
              Gross
                  broadcast revenues were up $2.9 million, as discussed
                  above.
 
 •
              Amounts
                  totaling $1.1 million of cash was received as Deposits Held for Sale
                  and reflecting deposits on options to purchase various the Company
                  television stations.
 
 •
              A
                  net increase of $10.6 million in gains from the sale of intangibles
                  between periods. the Company sold WPXS, in St. Louis, in June 2005
                  and recorded a gain of $8.4 million. the Company received
                  $4.9 million in cash and three low power television stations with
                  fair values totaling $14.7 million as consideration. In
                  May 2006, the Company sold stations in Boise and Pocatello Idaho and
                  recorded gains totaling $0.5 million. The sales price was
                  $1.0 million in cash which was received at closing. In
                  July 2006, the Company sold its station in Montgomery, Alabama, WBMM,
                  for $1.9 million in cash and recorded a loss on the sale of
                  $0.3 million. In September, the Company sold its station in Portland,
                  OR for $19.3 million in cash and recorded a gain on the sale of
                  $18.4
                  million. The cash from the sale was received in increments during
                  2006,
                  predominately in latter part of the year. Other sales of various
                  assets
                  occurred but did not generate material gains or losses, or receipts
                  of
                  cash.
 
 •
              Operating
                  expenses were up $2.0 million as further discussed above in Results
                  of Operations.
 
 •
              Trade
                  accounts receivable, net at December 31, 2006 was approximately
                  $3.9 million as compared to $3.2 million at December 31, 2005,
                  or an increase of $0.7 million. No specific event or set of
                  circumstances outside normal business operations and conditions
                  affected
                  these changes.
 
 •
              Trade
                  accounts payable and accrued expenses increased $0.2 million in the
                  year ended December 31, 2006 vs. a decrease of $0.9 million in the
                  year ended December 31, 2005. Trade accounts payable and accrued
                  expenses
                  totaled $3.4 million at December 31, 2006 as compared to a balance of
                  $3.2 million at December 31, 2005, a decrease of $0.7 million.
                  No specific event or set of circumstances outside normal business
                  operations and conditions affected these changes or
                  balances.
 
 •
              The
                  amortization of program broadcast rights was $6.2 million and
                  $5.1 million in the years ended December 31, 2006 and 2005,
                  respectively. However, of those amounts $4.8 million and
                  $4.0 million, respectively, represented amortization of rights
                  acquired via barter transactions and involved no cash
                  activity.


*Investing
        Activities*


Net
      cash
      provided by investing activities was $18.3 million in the year ended
      December 31, 2006, an increase of $15.2 million from the prior year ended
      December 31, 2005, when $3.1 million was provided by investing activities.
      The following changes in investing activities were noted:




53




•
              Capital
                  expenditures increased $0.3 million from $2.4 million in the
                  year ended December 31, 2005, to $2.7 million in the year ended
                  December 31, 2006. The capital expenditures in both years are indications
                  of the continuing growth of the Company and do not include any
                  single
                  material event or set of
                  circumstances.
 
 •
              Proceeds
                  from the sale of broadcast stations, or related capital assets,
                  was
                  $6.3 million in the year ended December 31, 2005 as compared to
                  $22.9 million in the year ended December 31, 2006. As noted above the
                  Company received, in 2005, $4.9 million in cash from the sale of WPXS
                  and $0.4 million from the sale of certain real estate in Casper, WY.
                  Also as noted above, the Company received, in 2006, $1.0 million from
                  the sale of stations in Boise and Pocatello, ID, $1.9 million from
                  the sale WBMM, the Montgomery station, and $19.1 million from the
                  sale of
                  its station in Portland, OR. In addition, the Company sold its
                  station in
                  Casper, WY, KTWO, but had previously received the majority of the
                  sales
                  price, or $1.0 million, which had been accounted for as a liability
                  until closing occurred.
 
 •
              In
                  the year ended December 31, 2005, the Company acquired a station,
                  WGMU,
                  located in Burlington, for approximately $0.7 million cash and a low
                  power television license located in Amarillo, Texas for approximately
                  $0.2 million. In the year ended December 31, 2006, the Company
                  purchased eight low power television stations located in Grand
                  Rapids, MI,
                  Waco, TX, Nashville, TN, Jacksonville and southwest, FL and Lexington,
                  KY
                  for $3.1 million cash and promissory notes totaling $0.8
                  million.


*Financing
        Activities*




Net
      cash
      used by financing activities was $1.6 million in the year ended December
      31, 2006, compared to net cash provided of $13.6 million in the year ended
      December 31, 2005. Proceeds from the Senior Credit Facility Revolver totaled
      $40.8 million and $19.6 million, in the years ended December 31, 2006
      and 2005, respectively. Additionally, payments of $41.2 million and
      $5.1 million were made towards the Senior Credit Facility Revolver in the
      same years, respectively. The funds used to pay down the revolver originated
      from the $19.1 million sales proceeds received on the KPOU transaction, the
      $1.0 million received from the sale of the Idaho stations, the
      $1.9 million received from the sale of the Montgomery station and the
      $6.0 million from the C Piece of the facility, all discussed above,
      and, in 2005, the $5.0 million down payment on WPXS, also discussed above.
      During the year ended December 31 2006, the Company amended the Senior
      Credit Facility and added the C Piece for $6.0 million. See “Debt
      Instruments and Related Covenants” below for further details on the Senior
      Credit Facility. The net proceeds in both years were primarily to finance the
      Company’s acquisition of television stations, increase the investment in
      broadcast equipment, and for general operating purposes, as further discussed
      above.




**Income
      Taxes**




EMHC
      and
      its subsidiaries file a consolidated federal income tax return and such state
      and local tax returns as are required. Based on the estimated net operating
      loss
      available for carryforward at December 31, 2007, of approximately $124.1million the Company does not expect to pay any significant amount of
      income taxes in the next several years.




**Debt
      Instruments and Related Covenants**




The
      Company’s Credit Facility is collateralized by substantially all of the assets,
      including real estate, of the Company and its subsidiaries. The Credit Facility
      contains certain restrictive provisions which include, but are not limited
      to,
      requiring the Company to achieve certain revenue and earnings goals, limiting
      the amount of annual capital investments, incur additional indebtedness, make
      certain acquisitions and investments, sell assets or make other restricted
      payments, including dividends (all are as defined in the loan agreement and
      subsequent amendments.) As of December 31, 2007, the Company was not in
      compliance with all covenants as required by the credit facility before its
      amendment and restatement on February 13, 2008. In connection with and as part
      of the amendment and restatement of the credit facility, the lenders waived
      and
      eliminated the covenant requirements as of December 31, 2007. The Company is
      subject to amended covenants as per the new credit agreement.




On
        March
        20, 2008, the Company entered into an amendment to its Third Amended and
        Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC
        and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender
        group has agreed to forbear from exercising certain of their rights and remedies
        with respect to designated defaults under the Credit Agreement through the
        earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events
        or by which certain events have failed to occur, including the Company’s failure
        to enter into agreements with respect to the sale of certain of its assets
        and
        the Company’s failure to secure approvals for, and meet other criteria with
        respect to, financing alternatives necessary to meet the Company’s immediate
        capital requirements. If the Company is unable to meet all criteria under
        the
        forbearance agreement, the lender group will have all remedies available
        to them
        under the Credit Agreement, including making the loan immediately due and
        payable.




54




As
      of
      December 31, 2007, the applicable margins for base rate advances and LIBOR
      advances under the revolver component of the Credit Facility were 6% and 7%,
      respectively. The amount outstanding under the Credit Facility as of December
      31, 2007 was $50.4 million and is allocated as follows: term loan facility
      of
      $20.0 million, term loan D of $12.4 million and a revolving loan of
      $18.0 million. At December 31, 2007, $7.9 million was available to borrow
      under the revolver component of the Credit Facility. However, due to certain
      restrictions based on the value of the loan collateral, the Company did not
      currently have access to the $7.9 million.(as further described in Note 2 –
Liquidity and Capital Resources).




. **Inflation**




Management
      does not believe that inflation has had a material impact on operations to
      date,
      nor is inflation expected to have a material effect on operations in the near
      future. However, there can be no assurances that a high rate of inflation in
      the
      future would not have an adverse impact on our operating results and increase
      borrowing costs.




**Off-Balance
      Sheet Arrangements**




The
      Company does not have any off-balance sheet arrangements.




**Contractual
      Obligations as of December 31, 200** **7**


Payments due by periodLess than1 year
              
              1 - 3 years
              
              3 - 5 years
              
              More than5 yearsTotal
              
              (2008)
              
              (2009 -2010)
              
              (2011 -2012)
              
              (after2012)Long-term
                  debt obligations (1)
              
              $
              77,410,558
              
              
              17,954,944
              
              
              57,782,302
              
              
              1,673,312
              
              
              -Capital
                  lease obligations (2)
              
              
              186,036
              
              
              44,541
              
              
              74,258
              
              
              67,237
              
              
              -Operating
                  lease obligations (3)
              
              
              9,654,636
              
              
              1,690,657
              
              
              2,531,753
              
              
              1,516,350
              
              
              3,915,876Program
                  rights (4)
              
              
              3,235,382
              
              
              2,094,737
              
              
              974,499
              
              
              154,218
              
              
              11,928$
              90,486,612
              
              
              21,784,879
              
              
              61,362,812
              
              
              3,411,117
              
              
              3,927,804




(1)
            “Long-term
                debt obligations” represent the current and all future payments of
                obligations under long-term borrowings referenced in FASB Statement
                of
                Financial Accounting Standards No. 47*Disclosure
                of Long-Term Obligations*,
                as may be modified or supplemented. This obligation consists primarily
                of
                obligations under the Company’s senior credit facility. These amounts are
                recorded as liabilities as of the current balance sheet
                date.(2)
            “Capital
                lease obligations” represent payment obligations under non-cancelable
                lease agreements classified as capital leases and disclosed pursuant
                to
                FASB Statement of Financial Accounting Standards No. 13*Accounting
                for Leases*,
                as may be modified or supplemented. These amounts are recorded as
                liabilities as of the current balance sheet date.(3)
            “Operating
                lease obligations” represent payment obligations under non-cancelable
                lease agreements classified as operating leases and disclosed pursuant
                to
                FASB Statement of Financial Accounting Standards No. 13*Accounting
                for Leases*,
                as may be modified or supplemented. These amounts are not recorded
                as
                liabilities as of the current balance sheet date.(4)
            “Program
                rights” represent obligations for syndicated television
                programming.




55




The
      above
      table does not include cash requirements for the payment of any dividends that
      our board of directors may decide to declare in the future on our Coconut Palm
      Series A preferred stock. See Note 10 to the 2005 consolidated
      financial statements.




**Related
      Party Transactions**




Until
      the Merger Transaction, Arkansas Media owned 75% of EBC’s Class B common
      shares outstanding. The owners of Arkansas Media held management and board
      of
      director positions within EBC. Arkansas Media had provided management services
      to EBC under the terms of a management agreement. An aspect of the merger of
      EBC
      with the Company was a settlement between Arkansas Media and the Company whereby
      the management agreement with Arkansas Media was terminated effective
      March 30, 2007, the date of the merger. As consideration for terminating
      the agreement, EBC paid Arkansas Media $3.2 million, issued 640,000 shares
      of
      the EBC’s pre-merger Class A common stock, purchased three low power
      television stations for $1.3 million, purchased an office building and land
      for $0.3 million and retired a note payable to a company affiliated with
      Arkansas Media for $0.5 million. The three owners of Arkansas Media also
      entered into either employment or consulting agreements with the Company for
      periods of one to three years, effective the date of the Merger Transaction.




Univision
      Communications, Inc. is a shareholder in the Company. Univision also acts as
      the
      national sales agent for the Company’s Spanish-language television stations. The
      Company pays Univision a 15% commission on those sales. The Company also
      operates its Salt Lake City Univision television station, KUTH through a local
      marketing agreement with Univision. Concurrent with the merger, EBC retired
      its
      preferred stock and paid Univision $19,588,670 for its preferred stock holdings.
      In addition, the Company issued 2,050,519 shares of new preferred stock to
      pay
      the dividends that had accrued on the EBC preferred stock since its issuance
      in
      June 2001. Those dividends totaled $10.5 million. The Company also
      issued a $15.0 million promissory note to Univision as further compensation
      for its preferred stock.




Univision
      also acts as the national sales agent for the Company’s Spanish-language
      television stations. The Company pays Univision a 15% commission on those sales.
      The Company also operates its Salt Lake City Univision television station,
      KUTH
      through a local marketing agreement (LMA) with Univision. The Company incurred
      expenses related to commissions in the amounts of $676,255, $449,848, and
      $154,577 for the years ended December 31, 2007, 2006 and 2005, respectively
      for
      sales made on behalf of the Company by Univision. Additionally, the Company
      accrued expenses related to operating fees of $323,338, $338,516 and $349,462
      for the years ended December 31, 2007, 2006 and 2005, respectively under the
      LMA
      with Univision.




In
      connection with the approval of the above described transaction, the Company’s
      stockholders ratified the Management Services Agreement between Royal Palm
      Capital Management, LLLP and the Company. The agreement generally provides
      that
      Royal Palm will provide general management and advisory services for an initial
      term of three years, subject to renewal thereafter on an annual basis by
      approval of a majority of the independent directors serving on the Company’s
      board of directors. The services to be provided include, but are not limited
      to,
      establishing certain office, accounting and administrative procedures, helping
      the Company obtain financing, advising the Company in securities matters and
      future acquisitions or dispositions, assisting the Company in formulating risk
      management policies, coordinating public relations and investor relations
      efforts, and providing such other services as may be reasonably requested by
      the
      Company and agreed to by Royal Palm. Royal Palm shall receive an annual
      management fee of $1,500,000, in addition to the reimbursement of budgeted
      out-of-pocket expenses incurred in the performance of Royal Palm’s management
      services. The management services agreement may be terminated upon the material
      failure of either party to comply with its stated duties and obligations,
      subject to a 30-day cure period.




Certain
      officers and directors of Royal Palm also serve as officers and directors of
      the
      Company. For this reason, Royal Palm is generally prohibited from engaging
      in
      activities competitive with the business of the Company post-closing, unless
      such restriction is waived by the board of directors of the Company.




Other
      related party activities were immaterial to the Company’s financial position and
      results of operations.




. **CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




56




The
      preparation of consolidated financial statements in conformity with generally
      accepted accounting principles requires the appropriate application of certain
      accounting policies, many of which require the Company to make estimates and
      assumptions about future events and their impact on amounts reported in the
      Company’s consolidated financial statements and related notes. Since future
      events and their impact cannot be determined with certainty, the actual results
      may differ from the Company’s estimates. Such differences may be material to the
      consolidated financial statements.




The
      Company believes its application of accounting policies, and the estimates
      inherently required therein, are reasonable. These accounting policies and
      estimates are periodically reevaluated, and adjustments are made when facts
      and
      circumstances dictate a change. Historically, the Company has found its
      application of accounting policies to be appropriate, and actual results have
      not differed materially from those determined using necessary
      estimates.




The
      Company’s accounting policies are more fully described in Note 2 “Summary
      of Significant Accounting Policies” in the “Notes to the Consolidated Financial
      Statements,” included elsewhere in this filing. the Company has identified the
      following critical accounting policies:


***Program
        Rights and Contract Costs***




Program
      rights represent costs incurred for the right to broadcast certain features
      and
      syndicated television programs. Program rights are stated at the lower of
      unamortized cost or estimated realizable value. The cost of such program rights
      and the corresponding liability are recorded when the initial
      program  becomes
      available to broadcast under the contract. Generally, program rights are
      amortized over the life of the contract on a per broadcast usage basis. The
      portion of the cost estimated to be amortized within one year and after one
      year, is reflected in the consolidated balance sheets as current and non-current
      assets, respectively. The gross payments under these contracts that are due
      within one year and after one year are similarly classified as current and
      non-current liabilities.




Certain
      program contracts provide that the Company may exchange advertising airtime
      in
      lieu of cash payments for the rights to broadcast certain television programs.
      The average estimated fair value of the advertising time available in each
      contract program is recorded as both a program right, an asset, and,
      correspondingly, as deferred barter revenue, a liability. The current and
      non-current portion of each are determined as noted above. As the programs
      are
      aired and advertising time used, both program rights and unearned revenue are
      amortized, correspondingly, based on a per usage basis of the available
      commercial time, to both program expense and broadcast revenue.


***Valuation
        of Intangible Assets, Goodwill and Long-lived
        Assets***




The
      Company accounts for its business acquisitions under the purchase method of
      accounting. The total cost of acquisitions is allocated to the underlying net
      assets, based on their respective estimated fair values. The excess of the
      purchased price over the estimated fair values of the tangible and identifiable
      intangible net assets is recorded as goodwill. Determining the fair values
      of
      assets acquired and liabilities assumed requires managements judgments and
      often
      involves the use of significant estimates and assumptions, including assumptions
      with respect to future cash inflows and outflows, discount rates , asset lives,
      and market multiples, among other variables.




The
      Company classifies intangible assets as either finite-lived or indefinite-lived.
      Indefinite-lived intangibles consist of FCC broadcasting licenses and goodwill
      which are not subject to amortization, but are tested for impairment at least
      annually.




57




At
      least
      annually, the Company performs an impairment test for indefinite-lived
      intangibles and goodwill using various valuation methods to determine the
      asset’s fair value. Certain assumptions are used in determining the fair value,
      including assumptions about the Company’s businesses, market conditions, station
      operating performance and legal factors. Additionally, the fair values can
      be
      significantly impacted by other factors including market multiples and long-term
      interest rates that exist at the time the impairment analysis is
      performed.




The
      Company reviews its long-lived assets and certain identifiable intangibles
      for
      impairment whenever events or changes in circumstances indicated that the
      carrying amount of any asset may not be recoverable. Recoverability of assets
      to
      be held and used is measured by a comparison of the carrying amount of an asset
      to fair value, which is determined using quoted market prices or estimates
      based
      on the best information available using valuation techniques acceptable in
      the
      industry. Management uses third-party, independent appraisals of all stations
      and operations which are updated on a regular basis upon which it bases its
      estimate of fair value.


***Revenue
        Recognition***




The
      Company’s primary source of revenue is the sale of television time to
      advertisers. Revenue is recorded when the advertisements are broadcast. Deferred
      revenue consists of monies received for advertisements not yet broadcast. The
      revenues realized from barter arrangements are recorded as the programs are
      aired and at the estimated fair value of the advertising airtime given in
      exchange for the program rights.




The
      revenue recorded by the Company’s wholly owned subsidiary, RTN, is primarily
      from the sale of television time to advertisers. RTN contracts with other
      television broadcasters across the United States to deliver programming content
      in a digital format to be broadcast on the broadcaster’s digital platform in the
      local markets in which the broadcasters are located. The agreements between
      RTN
      and the broadcasters provide RTN access to a certain portion of the commercial
      time within the programming for the sale to advertisers by RTN. Specifically,
      the local affiliate sells advertising time to local advertisers while RTN is
      able to sell to national and, in some instances, to regional advertisers. The
      revenue is recognized when the advertisements are broadcast.




Additional
      broadcast revenue includes uplink services to other media companies under
      contractual arrangements in which revenues are recognized as services are
      provided pursuant to the respective agreement. The revenue recorded from these
      uplink services, as provided to other media companies through the Company’s
      wholly owned subsidiary, C.A.S.H. Services, Inc. (“C.A.S.H.”), typically
      consists of one or more of the following component aspects provided by C.A.S.H.
      including, but not limited to, access to the Company’s available satellite
      bandwidth, master control services, access to the Company’s traffic software and
      services provided by the Company’s traffic personnel. All of these component
      aspects of the agreement, however, are delivered simultaneously to provide
      the
      service of up-linking the client’s television signal. The revenue, as defined in
      each agreement, is recognized as the collective service is provided, which
      is
      when the uplink service occurs, which is typically non-stop, twenty-four hours
      a
      day as long as the agreement is in force. Once the service is provided, the
      Company has no further post-delivery obligation. Each individual agreement
      is
      negotiated regarding the components of the uplink service to be provided based
      upon the cost of those components and the needs of the client. Until September
      2005, the Company provided broadcast based services to various third parties,
      consisting of the production and delivery, via satellite, of local news shows.
      Broadcast revenue from those services was recognized as the shows were aired,
      or
      as uplink services were provided. No such news production services were provided
      to third parties in 2007 and 2006, due to the fact that the Company fully
      utilized its news production and delivery capacity for internal purposes and,
      as
      such, no revenue was recorded in 2007 and 2006.


58
  ***Income
        taxes***




In
      establishing deferred income tax assets and liabilities, the Company makes
      judgments and interpretations based on enacted tax laws and published tax
      guidance applicable to its operations. the Company records deferred tax assets
      and liabilities and evaluates the need for valuation allowances to reduce
      deferred tax assets to realizable amounts. Changes in the Company’s valuation of
      the deferred tax assets or changes in the income tax provision may affect its
      annual effective income tax rate. As of December 31, 2007, and 2006 valuation
      allowances have been provided for the entire amount of our available federal
      and
      state net operating loss carryovers.


***Stock-Based
        Compensation***




Effective
      January 1, 2006, the Company adopted SFAS No. 123(R), which
      establishes accounting for stock-based awards exchanged for employee services,
      using the modified prospective application transition method. As of
      January 1, 2006, the Company was a non-public entity, and it used the
      exemptions provided by SFAS No. 123(R) and continued to account for
      the options issued prior to adoption of SFAS No. 123(R) using the
      previous methodology applying Accounting Principles Board (“APB”) No. 25
      and related interpretations, as permitted under SFAS No. 123. For awards
      issued or modified after January 1, 2006, the Company uses the fair value
      method as required under SFAS No. 123(R) and described below.




The
      fair
      value of each option award is estimated on the date of grant using the
      Black-Scholes valuation model that uses the following assumptions: expected
      volatility, expected life of the options, expected dividend yield and the risk
      free interest rate. The Company amortizes the fair value of all awards on a
      straight-line basis over the requisite service periods. Because Black-Scholes
      valuation models incorporate ranges of assumptions for inputs, those ranges
      are
      disclosed. Until such time as the Company’s common stock and related equity
      instruments have traded for a sufficient time period, the Company will determine
      the expected volatility of its common stock based on the weighted average of
      the
      historical volatility of the daily closing prices of a composite group of public
      companies with operations similar to the Company’s as a television broadcaster.
      The Company uses historical data to estimate option exercise and employee
      termination within the valuation model; separate groups of employees that have
      similar historical exercise behavior are considered separately for valuation
      purposes. The expected life of the options granted represents the period of
      time
      that they are expected to be outstanding. The risk-free interest rate is based
      on the U.S. Treasury yield curve in effect at the time of grant for issues
      with
      and equivalent remaining term equal to the expected life of the award. The
      Company uses an expected dividend yield of zero in the valuation model,
      consistent with the Company’s recent experience.




The
      exchange of options and change of terms upon consummation of the Merger
      Transaction was treated for purposes of SFAS 123(R) as a modification of the
      terms and conditions of the option awards which requires that the Company
      measure the incremental compensation cost by comparing the fair value of the
      modified award with the fair value of the award immediately before the
      modification. Based on a calculation of both the fair value of the original
      EBC
      options immediately before the merger and the fair value of the modified options
      immediately after the merger, it was determined that no incremental value was
      added due to the modification. Accordingly, there was no additional compensation
      expense charged to operations as result of the modification.




**Recent
      Accounting Pronouncements**





In
      December 2007, the FASB issued Statement No. 160, “ *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No. 51
      (“FASB No. 160”)* .”
The
      objective of FASB No. 160 is to improve the relevance, comparability, and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards for the non-controlling interest in a subsidiary and for the
      deconsolidation of a subsidiary. This Statement applies to all entities that
      prepare consolidated financial statements, except not-for-profit organizations.
      FASB No. 160 amends ARB 51 to establish accounting and reporting standards
      for the non-controlling interest in a subsidiary and for the deconsolidation
      of
      a subsidiary. It also amends certain of ARB 51’s consolidation procedures for
      consistency with the requirements of FASB No. 141 (R). This Statement is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008 Earlier adoption is prohibited. The
      effective date of this Statement is the same as that of the related Statement
      141(R). This Statement shall be applied prospectively as of the beginning of
      the
      fiscal year in which this Statement is initially applied, except for the
      presentation and disclosure requirements. The presentation and disclosure
      requirements shall be applied retrospectively for all periods presented.





59




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007)
“ *Business
      Combinations* ”
(“FASB
      No. 141(R)”). FASB No. 141(R) retains the fundamental requirements of
      the original pronouncement requiring that the purchase method be used for all
      business combinations. FASB No. 141(R) defines the acquirer as the entity
      that obtains control of one or more businesses in the business combination,
      establishes the acquisition date as the date that the acquirer achieves control
      and requires the acquirer to recognize the assets acquired, liabilities assumed
      and any non-controlling interest at their fair values as of the acquisition
      date. FASB No. 141(R) also requires that acquisition-related costs be
      recognized separately from the acquisition. FASB No. 141(R) is effective
      for business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after December
      15, 2008. The impact of adopting SFAS No. 141(R) will be dependent on the future
      business combinations that the Company may pursue after its effective date,
      if
      any.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which
      permits entities to choose to measure many financial instruments and certain
      other items at fair value that are not currently required to be measured at
      fair
      value. SFAS No. 159 will be effective for the Company on January 1,
      2008. We do not expect that the adoption of SFAS No. 159 will have a material
      impact on our financial position or results of operations.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plan” (“SFAS No. 158”), which requires
      employers to fully recognize the obligations associated with single-employer
      defined benefit pension, retiree healthcare and other postretirement plans
      in
      their financial statements. It requires employers to recognize an asset or
      liability for a plan’s over funded or under funded status, measure a plan’s
      assets and obligations that determine its funded status as of the end of the
      employer’s fiscal year and recognize in comprehensive income changes in the fund
      status of the defined benefit postretirement plan in the year in which changes
      occur. The requirement to recognize the funded status of a benefit plan and
      the
      disclosure requirement are effective for fiscal years ending after December
      31,
      2006. We have adopted the requirements of SFAS No. 158, which has had no impact
      on our financial position or results of operations.





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 157, **“** Fair
      Value Measurements” (“SFAS No. 157”), which applies whenever other standards
      require (or permit) assets or liabilities to be measured at fair value. SFAS
      No.
      157 establishes a fair value hierarchy that prioritizes the information used
      to
      develop the assumption that market participants would use when pricing an asset
      or liability. SFAS No. 157 is effective for financial statements issued for
      fiscal years beginning after November 15, 2007 and interim periods within those
      fiscal years. Earlier adoption is encouraged provided that the entity has not
      yet issued financial statements, including interim financial statements, for
      any
      period of that fiscal year. The effective date of this statement is the date
      than an entity adopts the requirements of this statement. Management does not
      expect this pronouncement to have a material impact on the Company’s financial
      position or results of operations.




In
      June
      2006, the FASB issued Financial Interpretation (“FIN”) No. 48, “Accounting
      for Uncertainty in Income Taxes—An Interpretation of FASB Statement
      No. 109” (“FIN 48”), regarding accounting for, and disclosure of, uncertain
      tax positions. FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognizing, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. The adoption of this pronouncement did not have a
      material impact on the consolidated financial statements of the Company.




60





**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




***General***





The
      Company is exposed to market risk from changes in domestic and international
      interest rates (i.e. prime and LIBOR). This market risk represents the risk
      of
      loss that may impact the financial position, results of operations and/or cash
      flows of the Company due to adverse changes in interest rates. This exposure
      is
      directly related to our normal funding activities. The Company does not use
      financial instruments for trading and, as of December 31, 2007 was not a party
      to any interest-rate derivative agreements.





***Interest
      Rates***





At
      December 31, 2007, approximately 75% of the Company’s total outstanding debt
      (credit agreement, lines of credit, asset purchase loans, real estate mortgage,
      etc.) bears interest at variable rates. The fair value of the Company’s fixed
      rate debt is estimated based on current rates offered to the Company for debt
      of
      similar terms and maturities and is not estimated to vary materially from its
      carrying value.





Based
      on
      amounts outstanding at December 31, 2007, if the interest rate on the Company’s
      variable debt were to increase by 1.0%, its annual interest expense would be
      higher by approximately $0.6 million.





**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





61





**EQUITY
      MEDIA HOLDINGS CORPORATION **AND
      SUBSIDIARIES****


**CONSOLIDATED
      BALANCE SHEETS**







December 312007
            
            2006AssetsCurrent
                assetsCash
                and cash equivalents
            
            $
            634,314
            
            $
            1,630,973Restricted
                cash
            
            
            4,162,567Certificate
                of deposit
            
            
            112,107
            
            
            107,611Trade
                accounts receivable, net of allowance for uncollectible accounts;
                $1,485,926 in 2007 and $ 1,542,114 in 2006
            
            
            3,
                514,635
            
            
            3,893,887Program
                broadcast rights
            
            
            6,921,465
            
            
            5,104,685Assets
                held for sale
            
            
            9,520,849
            
            
            12,352,613Other
                current assets
            
            
            321,434
            
            
            811,231Prepaid
                expenses - related party
            
            
            100,000
            
            
            -Total
                current assets
            
            
            25,287,371
            
            
            23,901,000Property
                and equipmentLand
                and improvements
            
            
            2,017,698
            
            
            2,200,330Buildings
            
            
            3,956,229
            
            
            2,348,475Broadcast
                equipment
            
            
            29,174,079
            
            
            23,354,491Transportation
                equipment
            
            
            283,151
            
            
            232,776Furniture
                and fixtures
            
            
            4,422,527
            
            
            3,337,654Construction
                in progress
            
            
            163,716
            
            
            203,81640,017,400
            
            
            31,677,542Accumulated
                depreciation
            
            
            (16,350,882
            )
            
            (12,161,846
            )Net
                property and equipment
            
            
            23,666,518
            
            
            19,515,696Intangible
                assetsIndefinite-livedBroadcast
                licenses
            
            
            66,498,347
            
            
            63,064,692Goodwill
            
            
            1,940,282
            
            
            1,940,282Total
                indefinite-lived
            
            
            68,438,629
            
            
            65,004,974Other
                assetsBroadcasting
                construction permits
            
            
            885,665
            
            
            926,000Program
                broadcast rights
            
            
            4,001,625
            
            
            4,120,753Investment
                in joint ventures
            
            
            435,860
            
            
            681,605Deposits
                and other assets
            
            
            98,705
            
            
            262,630Broadcasting
                station acquisition rights pursuant to assignment
                agreements
            
            
            440,000
            
            
            40,000Total
                other assets
            
            
            5,861,855
            
            
            6,030,988Total
                assets
            
            $
            123,254,373
            
            $
            114,412,658





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




62





**EQUITY
      MEDIA HOLDINGS CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




December 312007
            
            2006Liabilities
                and Stockholders' EquityCurrent
                liabilitiesTrade
                accounts payable
            
            $
            3,644,474
            
            $
            1,980,509Due
                to affiliates and related parties
            
            
            2,509,480
            
            
            1,338,557Lines
                of credit
            
            
            994,495
            
            
            -Accrued
                expenses and other liabilities
            
            
            1,777,240
            
            
            1,455,526Deposits
                held for sales of broadcast licenses
            
            
            1,024,601
            
            
            219,024Deferred
                revenue
            
            
            271,728
            
            
            212,299Current
                portion of program broadcast obligations
            
            
            2,094,741
            
            
            1,126,580Current
                portion of deferred barter revenue
            
            
            4,393,637
            
            
            3,903,770Note
                payable to Univision
            
            
            15,000,000
            
            
            -Current
                portion of notes payable
            
            
            52,233,322
            
            
            3,934,615Current
                portion of capital lease obligations
            
            
            44,546
            
            
            35,267Total
                current liabilities
            
            
            83,988,265
            
            
            14,206,147Non-current
                liabilitiesNotes
                payable, net of current portion
            
            
            8,996,705
            
            
            53,966,446Capital
                lease obligations, net of current portion
            
            
            141,491
            
            
            25,736Program
                broadcast obligations, net of current portion
            
            
            1,140,641
            
            
            1,020,937Deferred
                barter revenue, net of current portion
            
            
            2,618,143
            
            
            2,889,424Due
                to affiliates and related parties
            
            
            6,262
            
            
            51,499Security
                and other deposits
            
            
            213,500
            
            
            1,024,601Other
                liabilities
            
            
            556,795
            
            
            -Total
                non-current liabilities
            
            
            13,673,536
            
            
            58,978,643Commitments
                and Contingencies
            
            
            -
            
            
            -Mandatorily
                redeemable preferred stock
            
            
            10,519,162
            
            
            -Stockholders'
                equityCommon
                stock
            
            
            4,028
            
            
            2,537Additional
                paid-in capital
            
            
            136,217,425
            
            
            98,915,163Accumulated
                Deficit
            
            
            (121,146,692
            )
            
            (57,649,832
            )15,074,761
            
            
            41,267,868Treasury
                stock, at cost
            
            
            (1,352
            )
            
            -Total
                stockholders' equity
            
            
            15,073,409
            
            
            41,267,868Total
                liabilities and stockholders' equity
            
            $
            123,254,373
            
            $
            114,452,658





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





63





**EQUITY
      MEDIA HOLDINGS CORPORATION****AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


For the Years Ended December 31,2007
              
              2006
              
              2005Broadcast
                  Revenue
              
              $
              28,264,177
              
              $
              30,394,732
              
              $
              27,470,923Operating
                  ExpensesProgram,
                  production & promotion
              
              
              15,028,100
              
              
              13,413,200
              
              
              11,539,563Selling,
                  general & administrative
              
              
              29,791,043
              
              
              23,710,623
              
              
              22,433,191Selling,
                  general & administrative - related party
              
              
              1,079,905
              
              
              884,364
              
              
              600,039Management
                  agreement settlement
              
              
              8,000,000
              
              
              -
              
              
              -Impairment
                  charge on assets held for sale
              
              
              -
              
              
              200,000
              
              
              1,688,721Amortization
              
              
              37,135
              
              
              126,250
              
              
              105,283Depreciation
              
              
              4,122,938
              
              
              3,156,590
              
              
              3,547,140Management
                  fees - related party
              
              
              1,547,581
              
              
              1,596,682
              
              
              1,475,282Rent
              
              
              2,499,058
              
              
              2,191,217
              
              
              1,937,468Total
                  operating expenses
              
              
              62,105,761
              
              
              45,278,927
              
              
              43,326,687Loss
                  from operations
              
              
              (33,841,584
              )
              
              (14,884,194
              )
              
              (15,855,764
              )Other
                  income (expense)Interest
                  income
              
              
              189,884
              
              
              214,483
              
              
              147,947Interest
                  expense
              
              
              (7,310,423
              )
              
              (7,591,769
              )
              
              (5,232,807
              )Interest
                  expense - related party
              
              
              (787,500
              )
              
              -
              
              
              -Gain
                  (loss) on sale of assets
              
              
              414,378
              
              
              18,774,772
              
              
              7,676,468Other
                  income, net
              
              
              866,592
              
              
              1,073,495
              
              
              1,109,907Losses
                  from affiliates and joint ventures
              
              
              (273,657
              )
              
              (814,897
              )
              
              (563,169
              )Total
                  other income (expense)
              
              
              (6,900,726
              )
              
              11,656,085
              
              
              3,138,346Loss
                  before income taxes
              
              
              (40,742,310
              )
              
              (3,228,109
              )
              
              (12,717,418
              )Income
                  taxes
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              (40,742,310
              )
              
              (3,228,109
              )
              
              (12,717,418
              )Preferred
                  dividend
              
              
              (12,691,737
              )
              
              -
              
              
              -Net
                    loss available to common shareholders
              
              $
              (53,434,048
              )
              
              (3,228,109
              )
              $
              (12,717,418
              )Weighted
                  average of common shares outstanding:Basic
                  and diluted
              
              
              36,312,638
              
              
              25,371,332
              
              
              25,467,844Net
                  loss available to common shareholders per share:Basic
                  and diluted
              
              
              (1.47
              )
              
              (0.13
              )
              
              (0.50
              )




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




64


**EQUITY
        MEDIA HOLDINGS CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY**
 
 **Common Stock**
              
              **Paid-in Capital**
              
              **Accumulated**
              
              **Treasury Stock****Shares**
              
              **Amount**
              
              **in Excess of Par**
              
              **Deficit**
              
              **Shares**
              
              **Amount**
              
              **Total****Balance
                  at December 31, 2004, as restated**
              
              
              25,371,332
              
              $
              2,537
              
              $
              98,915,163
              
              $
              (41,704,305
              )
              
              -
              
              $
              -
              
              $
              57,213,395Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,717,418
              )
              
              -
              
              
              -
              
              
              (12,717,418
              )**Balance
                  at December 31, 2005**
              
              
              25,371,332
              
              
              2,537
              
              
              98,915,163
              
              
              (54,421,723
              )
              
              -
              
              
              -
              
              
              44,495,977Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,228,109
              )
              
              -
              
              
              -
              
              
              (3,228,109
              )**Balance
                  at December 31, 2006**
              
              
              25,371,332
              
              
              2,537
              
              
              98,915,163
              
              
              (57,649,832
              )
              
              -
              
              
              -
              
              
              41,267,868Retirement
                  of preferred stock
              
              
              
              
              
              
              
              
              (29,937,188
              )
              
              (10,062,812
              )
              
              
              
              
              
              
              
              (40,000,000
              )Shares
                  issued per consulting agreement
              
              
              43,860
              
              
              4
              
              
              (4
              )
              
              
              
              
              
              
              
              
              
              
              -Common
                  stock issued as payment of preferred dividends
              
              
              314,966
              
              
              32
              
              
              1,615,749
              
              
              (1,615,781
              )
              
              
              
              
              
              
              
              -Preferred
                  shares issued as payment of preferred dividends
              
              
              -
              
              
              -
              
              
              
              
              
              (10,519,162
              )
              
              
              
              
              
              
              
              (10,519,162
              )Acquisition
                  of net assets of Coconut Palm AcquisitionCorporation
              
              
              12,091,089
              
              
              1,209
              
              
              50,638,304
              
              
              
              
              
              
              
              
              
              
              
              50,639,513Charge
                  to additional paid-in capital for prepaid mergercosts
              
              
              
              
              
              
              
              
              (953,223
              )
              
              
              
              
              
              
              
              
              
              
              (953,223
              )Common
                  stock portion of settlement to terminateArkansas
                  Media Management Agreement
              
              
              935,672
              
              
              94
              
              
              4,799,906
              
              
              
              
              
              
              
              
              
              
              
              4,800,000Purchase
                  of fractional shares
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (260
              )
              
              (1,352
              )
              
              (1,352
              )Share
                  based compensation costs
              
              
              
              
              
              
              
              
              2,007,280
              
              
              
              
              
              
              
              
              
              
              
              2,007,280Common
                  shares issued in connection with privateplacement
              
              
              1,406,250
              
              
              140
              
              
              8,999,860
              
              
              
              
              
              
              
              
              
              
              
              9,000,000Retirement
                  of Equity Broadcasting Corporation dissentingshareholders
              
              
              
              
              
              
              
              
              (368,410
              )
              
              
              
              
              
              
              
              
              
              
              (368,410
              )Common
                  stock issued as payment of note payable
              
              
              115,473
              
              
              12
              
              
              499,988
              
              
              
              
              
              
              
              
              
              
              
              500,000Accretion
                  of preferred dividends
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              (556,794
              )
              
              
              
              
              
              
              
              (556,794
              )Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              (40,742,310
              )
              
              
              
              
              
              
              
              (40,742,310
              )**Balance
                  at December 31, 2007**
              
              
              **40,278,642**
              
              
              **4,028**
              
              
              **136,217,425**
              
              
              **(121,146,692**
              **)**
              
              **(260**
              **)**
              
              **(1,352**
              **)**
              
              **15,073,409**


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





65




**EQUITY
        MEDIA HOLDINGS CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007, 2006, 2005**
  2007
              
              2006
              
              2005**Cash
                  flows from operating activities**Net
                  loss
              
              $
              (40,742,310
              )
              $
              (3,228,109
              )
              $
              (12,717,418
              )Adjustment
                  to reconcile net income to net cash provided (used) by operating
                  activities:Provision
                  for bad debts
              
              
              1,273,736
              
              
              1,721,500
              
              
              419,457Depreciation
              
              
              4,122,938
              
              
              3,156,590
              
              
              3,547,140Amortization
                  of Intangibles
              
              
              37,135
              
              
              126,250
              
              
              105,283Amortization
                  of program broadcast rights
              
              
              7,769,321
              
              
              6,206,367
              
              
              5,145,937Amortization
                  of discounts on interest-free debt
              
              
              29,723
              
              
              -
              
              
              -Equity
                  in (gains) losses of subsidiaries and joint ventures
              
              
              273,657
              
              
              814,897
              
              
              563,169(Gain)
                  loss on sale of equipment
              
              
              (453,753
              )
              
              44,218
              
              
              533,643(Gain)
                  loss on sale of intangibles
              
              
              39,375
              
              
              (18,818,990
              )
              
              (8,210,113
              )Impairment
                  of Intangibles
              
              
              -
              
              
              200,000
              
              
              1,688,721Management
                  agreement settlement fees
              
              
              4,800,000
              
              
              -
              
              
              -Share
                  based compensation
              
              
              2,007,280
              
              
              -
              
              
              -Changes
                  in operating assets and liabilities:(Increase)
                  decrease in trade accounts receivable
              
              
              (894,485
              )
              
              (1,620,866
              )
              
              (34,077
              )(Increase)
                  decrease in deposits and other assets
              
              
              (476,769
              )
              
              299,967
              
              
              (530,119
              )Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              (486,132
              )
              
              228,454
              
              
              (533,958
              )Decrease
                  in program broadcast rights
              
              
              (9,466,967
              )
              
              (5,489,577
              )
              
              (9,283,015
              )Increase
                  (decrease in program broadcast obligations
              
              
              1,087,863
              
              
              (1,095,924
              )
              
              1,650,008Increase
                  in deferred barter revenue
              
              
              218,584
              
              
              169,192
              
              
              2,001,635Decrease
                  in security Deposits
              
              
              (5,523
              )
              
              (7,200
              )
              
              -Increase
                  in deferred income
              
              
              59,429
              
              
              -
              
              
              -Decrease
                  in other liabilities
              
              
              -
              
              
              -
              
              
              (3,097
              )Net
                  cash used by operating activities
              
              
              (30,806,898
              )
              
              (17,293,231
              )
              
              (15,656,804
              )**Cash
                  flows from investing activities**Purchases
                  of property and equipment
              
              
              (7,382,192
              )
              
              (2,730,264
              )
              
              (2,389,175
              )Proceeds
                  from sale of property and equipment
              
              
              621,462
              
              
              595,991
              
              
              350,956Proceeds
                  from collection on notes receivable
              
              
              -
              
              
              633,973
              
              
              10,434Proceeds
                  from sale of intangibles
              
              
              -
              
              
              123,332
              
              
              30,000Proceeds
                  from sale of broadcast stations
              
              
              -
              
              
              22,231,291
              
              
              5,965,517Acquisition
                  of broadcast assets
              
              
              (1,625,000
              )
              
              (3,781,027
              )
              
              (1,046,386
              )Restriction
                  of cash for acquisitions
              
              
              (4,162,567
              )
              
              -
              
              
              -Proceeds
                  from options to sell broadcast assets
              
              
              -
              
              
              1,128,666
              
              
              -(Purchase)
                  maturities of certificate of deposit
              
              
              (4,496
              )
              
              (3,600
              )
              
              46,737Purchase
                  of other intangible assets
              
              
              -
              
              
              (4,565
              )
              
              (55,612
              )Net
                  repayments from (advances to) affiliates
              
              
              1,112,519
              
              
              63,864
              
              
              148,671Net
                  cash provided (used) by investing activities
              
              
              (11,440,274
              )
              
              18,257,661
              
              
              3,061,142**Cash
                  flows from financing activities**Proceeds
                  from notes payable
              
              
              24,934,146
              
              
              42,910,775
              
              
              21,682,531Payments
                  of notes payable
              
              
              (20,183,227
              )
              
              (44,468,272
              )
              
              (7,960,584
              )Payments
                  of capital lease obligations
              
              
              (37,497
              )
              
              (30,196
              )
              
              (91,729
              )Recapitalization
                  through merger
              
              
              52,906,853
              
              
              -
              
              
              -Purchase
                  of common stock
              
              
              (1,352
              )
              
              -
              
              
              -Purchase
                  of preferred stock
              
              
              (25,000,000
              )
              
              -
              
              
              -Issuance
                  of common stock
              
              
              9,000,000
              
              
              -
              
              
              -Settlement
                  with dissenting shareholders
              
              
              (368,410
              )
              
              -
              
              
              -Net
                  cash provided (used) by financing activities
              
              
              41,250,513
              
              
              (1,587,693
              )
              
              13,630,218Net
                  decrease in cash and cash equivalents
              
              
              (996,659
              )
              
              (623,263
              )
              
              1,034,556Cash
                  and cash equivalents at beginning of period
              
              
              1,630,973
              
              
              2,254,236
              
              
              1,219,680Cash
                  and cash equivalents at end of period
              
              $
              634,314
              
              $
              1,630,973
              
              $
              2,254,236




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




66





**Supplemental
                disclosure of cash flow information**Cash
                paid during the period for interest
            
            $
            6,827,338
            
            $
            7,185,324
            
            $
            5,194,140**Supplemental
                disclosures of noncash activities:**Issuance
                of note payable to redeem preferred stock
            
            $
            15,000,000
            
            $
            -
            
            $
            -Settlement
                with dissenting shareholders
            
            
            10,899,882
            
            
            -
            
            
            -Issuance
                of mandatorily redeemable preferred stock to pay preferred dividends
            
            
            10,519,162
            
            
            -
            
            
            -Assumption
                of net liabilities of Coconut Palm Acquisition Corporation
            
            
            (2,267,340
            )
            
            -
            
            
            -Issuance
                of common stock to pay preferred dividends
            
            
            1,615,781
            
            
            -
            
            
            -Charge
                to stockholders' equity for prepaid merger costs
            
            
            953,223
            
            
            -
            
            
            -Issuance
                of common stock to retire debt
            
            
            500,000
            
            
            -
            
            
            -Acquisition
                of real property through assumption of debt
            
            
            205,347
            
            
            -
            
            
            -Accretion
                of preferred dividends
            
            
            556,795
            
            
            -
            
            
            -Issuance
                of common stock as consideration for the purchase of stations
            
            
            -
            
            
            -
            
            
            25,000Receipt
                of stock in asset exchange
            
            
            
            
            
            
            
            
            4,041,023Exchange
                of full power television license in St. Louis, MO for three class
                A low
                power television licenses located in Atlanta, Seattle and
                Minneapolis
            
            
            -
            
            
            
            
            
            14,747,000







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


67


**EQUITY
      MEDIA HOLDINGS CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**NOTE
      1 — ORGANIZATION AND BUSINESS OPERATIONS**




Equity
      Media Holdings Corporation (the “Company”) was incorporated in Delaware on
      April 29, 2005 as Coconut Palm Acquisition Corp. (“Coconut Palm”) to serve
      as a vehicle for the acquisition of an operating business through a merger,
      capital stock exchange, asset acquisition and/or other similar transaction.
      On
      March 30, 2007, Coconut Palm merged with Equity Broadcasting Corporation
      (“EBC”), with Coconut Palm remaining as the legal surviving corporation;
      however, the financial statements and continued operations are those of EBC
      as
      the accounting acquirer (See Note 4 — Merger Transaction). Immediately following
      the merger, Coconut Palm changed its name to Equity Media Holdings Corporation.




The
      Company, headquartered in Little Rock, Arkansas, owns and operates television
      stations across the United States. As of December 31, 2007, the Company owned
      23
      full power/network television stations, 38 Class A television stations and
      57 low power television stations. The Company also owns and operates Retro
      Television Network (“RTN”). RTN provides programming, primarily ratings proven
      programs from the 60’s, 70’s, 80’s and 90’s, to its affiliates in a fully
      digital format on an individual market basis that allows the affiliates to
      also
      broadcast local news, weather and sporting events to their local audiences,
      This
      allows the affiliates to sell local advertising spots to generate revenue.
      As of
      December 31, 2007, RTN had 15 third-party affiliates under contract. The Company
      also owns and operates its proprietary uplink services company known as C.A.S.H.
      Services. The Central Automated Satellite Hub (“CASH”), system provides the
      means to delivering a fully automated, 24 hour a day custom satellite feed
      for
      not only each RTN affiliate, but all of its owned and operated television
      stations. CASH also has non-affiliated customers that pay for uplink and related
      delivery services.




The
      accompanying consolidated financial statements also include the results of
      operations of a radio station operated by the Company pursuant to a local
      marketing agreement (“LMA”).





**NOTE
      2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**Estimates** –
The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the consolidated financial statements and the reported amounts
      of
      revenues and expenses during the reporting period. Actual results may differ
      from those estimates.




**Principles
      of Consolidation –** The
      consolidated financial statements of Equity Media Holdings Corp. include the
      accounts and balances of the Company and its subsidiaries in which a controlling
      interest is maintained. Controlling interest is determined by majority ownership
      and the absence of substantive third party participating rights. The Company
      applies the guidelines set forth in Financial Accounting Standards Board
      (“FSAB”) Interpretation 46R “Consolidation of Variable Interest Entities, an
      Interpretation of ARB No 51” (“FIN 46R”) in assessing its interests in variable
      interest entities to decided whether to consolidate that entity. Investments
      over which the Company has a significant interest or ownership of more than
      20%
      but less than 50%, without a controlling interest, are accounted for under
      the
      equity method. Investments of 20% or less over which the Company has no
      significant influence are accounted under the cost method. All inter-company
      transactions and balances of consolidated entities have been
      eliminated.




**Cash
      equivalents** –
      The Company considers all cash, money market balances and highly liquid
      instruments with an original maturity date of three months or less to be cash
      equivalents.




**Revenue
      recognition** –
The
      Company’s primary source of revenue is the sale of television time to
      advertisers. Revenue is recorded when the advertisements are broadcast. Deferred
      revenue consists of monies received for advertisements not yet broadcast. The
      revenues realized from barter arrangements are recorded as the programs are
      aired and at the estimated fair value of the advertising airtime given in
      exchange for the program rights.




68




The
      revenue recorded by the Company’s wholly owned subsidiary, RTN, is primarily
      from the sale of television time to advertisers. RTN contracts with other
      television broadcasters across the United States to deliver programming content
      in a digital format to be broadcast on the broadcaster’s digital platform in the
      local markets in which the broadcasters are located. The agreements between
      RTN
      and the broadcasters provide RTN access to a certain portion of the commercial
      time within the programming for the sale to advertisers by RTN. Specifically,
      the local affiliate sells advertising time to local advertisers while RTN is
      able to sell to national and, in some instances, to regional advertisers. The
      revenue is recognized when the advertisements are broadcast.




Additional
      broadcast revenue includes uplink services to other media companies under
      contractual arrangements in which revenues are recognized as services are
      provided pursuant to the respective agreement. The revenue recorded from these
      uplink services, as provided to other media companies through the Company’s
      wholly owned subsidiary, C.A.S.H. Services, Inc. (“C.A.S.H.”), typically
      consists of one or more of the following component aspects provided by C.A.S.H.
      including, but not limited to, access to the Company’s available satellite
      bandwidth, master control services, access to the Company’s traffic software and
      services provided by the Company’s traffic personnel. All of these component
      aspects of the agreement, however, are delivered simultaneously to provide
      the
      service of up-linking the client’s television signal. The revenue, as defined in
      each agreement, is recognized as the collective service is provided, which
      is
      when the uplink service occurs, which is typically non-stop, twenty-four hours
      a
      day as long as the agreement is in force. Once the service is provided, the
      Company has no further post-delivery obligation. Each individual agreement
      is
      negotiated regarding the components of the uplink service to be provided based
      upon the cost of those components and the needs of the client. Until September
      2005, the Company provided broadcast based services to various third parties,
      consisting of the production and delivery, via satellite, of local news shows.
      Broadcast revenue from those services was recognized as the shows were aired,
      or
      as uplink services were provided. No such news production services were provided
      to third parties in 2007 and 2006, due to the fact that the Company fully
      utilized its news production and delivery capacity for internal purposes and,
      as
      such, no revenue was recorded in 2007 and 2006.




**Accounts
      receivable** –
      Accounts receivable are recorded at the amounts billed to customers and do
      not
      bear interest. The Company reviews customer accounts on a periodic basis and
      records a reserve for specific amounts that management feels may not be
      collected. Management deems accounts receivable to be past due based on
      contractual terms. Amounts are written off at the point when collection attempts
      have been exhausted. Management uses significant judgment in estimating
      uncollectible amounts. In estimating uncollectible amounts, management considers
      factors such as current overall economic conditions, industry-specific economic
      conditions, historical customer performance and anticipated customer
      performance. While management believes the Company’s processes effectively
      address its exposure to doubtful accounts, changes in the economy, industry
      or
      specific customer conditions may require adjustment to any allowance recorded
      by
      the Company.




**Program
      broadcast rights and obligations** –
Program
      rights represent costs incurred for the right to broadcast certain features
      and
      syndicated television programs. Program rights are stated at the lower of
      unamortized cost or estimated realizable value. The cost of such program rights
      and the corresponding liability are recorded when the initial program becomes
      available to broadcast under the contract. Generally, program rights are
      amortized over the life of the contract on a per broadcast usage basis. Any
      reduction in unamortized costs to fair value is included in amortization of
      program rights in the accompanying consolidated statement of operations. Such
      reductions were negligible for all periods presented. The portion of the cost
      estimated to be amortized within one year and after one year, is reflected
      in
      the consolidated balance sheets as current and noncurrent assets, respectively.
      The gross payments under these contracts that are due within one year and after
      one year are similarly classified as current and noncurrent liabilities.




Certain
      program contracts provide that the Company may exchange advertising airtime
      in
      lieu of cash payments for the rights to broadcast certain television programs.
      The average estimated fair value of the advertising time available in each
      contract program is recorded as both a program right, an asset, and,
      correspondingly, as deferred barter revenue, a liability. The current and
      noncurrent portion of each are determined as noted above. As the programs are
      aired and advertising time used, both program rights and unearned revenue are
      amortized, correspondingly, based on a per usage basis of the available
      commercial time, to both program expense and broadcast revenue.




69




**Barter
      and trade transactions:** Revenue
      and expenses associated with barter agreements in which broadcast time is
      exchanged for programming rights are recorded at the estimated average rate
      of
      the airtime exchanged. Trade transactions, which represent the exchange of
      advertising time for goods or services, are recorded at the estimated fair
      value
      of the products or services received. Barter and trade revenue is recognized
      when advertisements are broadcast. Merchandise or services received from airtime
      trade sales are charged to expense or capitalized and expensed when used. Barter
      revenues and expenses for the year ended December 31 were approximately $5.3
      million in 2007, $4.8 million in 2006, and $4.0 million in 2005,
      respectively. Trade revenues and expenses for the year ended December 31 were
      approximately $3.1 million in 2007, $3.9 million in 2006, and $3.4 million
      in 2005, respectively.




**Property
      and equipment** –
      Purchases of property and equipment, including additions and improvements and
      expenditures for repairs and maintenance that significantly add to productivity
      or extend the economic lives of assets, are capitalized at cost. Property and
      equipment includes assets recorded under capital lease obligations. Capital
      lease amortization expense is included in depreciation expense on the
      accompanying consolidated statements of operations. Management reviews on a
      continuing basis, the financial statements carrying value of property plant
      and
      equipment for impairment. If events or changes in circumstances were to indicate
      that an asset carrying value may not be recoverable a write-down of the asset
      would be recorded through a charge to operations.




Depreciation
      is provided using the straight-line method over the following estimated useful
      lives:


Building
                  and improvements
              
              
              7
                  - 39 yearsBroadcast
                  equipment
              
              
              5
                  – 10 yearsTransportation
                  equipment
              
              
              5
                  yearsFurniture
                  and Fixtures
              
              
              5
                  - 10 years




**Intangible
      assets and goodwill** –
The
      Company classifies intangible assets as either finite-lived or indefinite-lived.
      Indefinite-lived intangibles consist of Federal Communications Commission
      (“FCC”) broadcasting licenses and goodwill which are not subject to
      amortization, but are tested for impairment at least annually.




At
      least
      annually, the Company performs an impairment test for indefinite-lived
      intangibles and goodwill using various valuation methods to determine the
      assets’ fair values. Certain assumptions are used in determining the fair value,
      including assumptions about the Company’s businesses. Additionally, the fair
      values are significantly impacted by macro-economic factors including market
      multiples and long-term interest rates that exist at the time the impairment
      analysis is performed.




**Purchase
      price accounting** –
The
      Company determines the fair value of assets acquired in accordance with
      Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business
      Combinations,” with fair values assigned to equipment and fixed assets based on
      independent third party appraisals when material, to identifiable intangibles
      such as broadcasting licenses or permits, and finally to goodwill. Generally,
      acquisitions involve insignificant amounts of equipment and other fixed assets
      due to the nature of the Company’s ability to provide many broadcast
      capabilities on a centralized basis.




**Broadcasting
      construction permits** –
      Broadcasting construction permits represent permits granted by the FCC, that
      the
      Company owns or to which the Company has rights. The individual stations
      associated with these permits are in various stages of development at December
      31, 2007 and 2006. The Company reclassifies these permits to broadcasting
      licenses once they are granted an operating license by the FCC.




**Security
      and other deposits** –
      Security and other deposits include purchase options that have been received
      from potential buyers of television broadcasting licenses and any related
      operating assets for which the events required for transferring the broadcasting
      licenses have not yet been met. These events may include approval from either
      the FCC or other parties that hold an interest in the broadcasting
      licenses.




70




**Assets
      held for sale** –
Assets
      held for sale represent fixed assets and intangible assets, including FCC
      licenses and goodwill of television stations, which have been acquired and
      that
      management intends to divest during the next 12 months at amounts equal to
      or
      exceeding the asset carrying values at December 31, 2007 and 2006.




**Local
      marketing agreements** –
The
      Company occasionally enters into local marketing agreements (“LMAs”) with
      stations located in markets in which the Company already owns and operates
      a
      station and in connection with acquisitions pending regulatory approval of
      FCC
      license transfer. Under the terms of these agreements, the Company makes
      specified periodic payments to the owner-operator in exchange for the right
      to
      program and sell advertising on a specified portion of the station’s inventory
      of broadcast time. Conversely, the Company will sometimes enter into LMAs for
      stations it owns and has a desire to sell or otherwise dispose of. The terms
      of
      these agreements are similar in that, the Company receives specified periodic
      payments in exchange for the right by another party to program and sell
      advertising on the specified station’s inventory of broadcast time. The
      Company’s consolidated financial statements at December 31, 2007, 2006 and 2005
      reflect the operating results and certain assets and liabilities associated
      with
      both of these types of agreements.




**Advertising
      expenses** –
      Advertising expenses are charged to operations in the period incurred.
      Advertising expenses for the years ended December 31, 2007, 2006 and 2005,
      including advertising expenses associated with barter transactions, were
      approximately $307,000, $391,000, and $352,000, respectively.




**Impairment
      of long-lived assets** –
The
      Company reviews its long-lived assets and certain identifiable intangibles
      for
      impairment whenever events or changes in circumstances indicated that the
      carrying amount of any asset may not be recoverable. Recoverability of assets
      to
      be held and used is measured by a comparison of the carrying amount of an asset
      to fair value, which is determined using quoted market prices or estimates
      based
      on the best information available using valuation techniques. Management has
      obtained an appraisal of all stations and operations which it updates on a
      regular basis upon which it bases its estimate of fair value. Based on
      management’s assessment of the impairment indicators during the years ended
      December 31, 2007 and 2006, certain asset groups were determined to be impaired
      at December 31, 2006. The impairment resulted from the deterioration in value
      of
      certain broadcast equipment which is classified as assets held for sale as
      of
      December 31, 2007. This impairment of $200,000 was charged as an operating
      expense in 2006.




**Impairment
      of goodwill and intangible assets** –
The
      Company periodically reviews, but not less than annually, the carrying value
      of
      intangible assets not subject to amortization, including goodwill, to determine
      whether impairment may exist. SFAS No. 142, “Goodwill and Other Intangible
      Assets,” requires that goodwill and certain intangible assets be assessed
      annually for impairment using fair value measurement techniques. Specifically,
      goodwill impairment is determined using a two-step process. The first step
      of
      the goodwill impairment test is used to identify potential impairment by
      comparing the fair value of a reporting unit with its carrying amount, including
      goodwill. The estimates of fair value of a reporting unit, generally the
      Company’s operating segments, are determined using various valuation techniques.
      If the fair value of the reporting unit exceeds its carrying amount, goodwill
      of
      the reporting unit is considered not impaired and the second step of the
      impairment test is unnecessary. If the carrying amount of a reporting unit
      exceeds its fair value, the second step of the goodwill impairment test is
      performed to measure the amount of impairment loss, if any. The second step
      of
      the goodwill impairment test compares the implied fair value of the reporting
      units’ goodwill with the carrying amount of that goodwill. If the carrying
      amount of that reporting units goodwill exceeds the implied fair value of that
      goodwill, an impairment charge is recognized in an amount equal to that excess.
      The implied fair value of goodwill is determined in the same manner as the
      amount of goodwill recognized in a business combination. That is, the fair
      value
      of the reporting unit had been acquired in a business combination and the fair
      value of the reporting unit was the purchase price paid to acquire the reporting
      unit. Based on this analysis, management determined that no impairment existed
      at December 31, 2007 or 2006. However, based on management’s analysis at
      December 31, 2005, there was one asset group in which indefinite-lived
      intangible assets were determined to be impaired. This impairment resulted
      from
      the Company entering into a purchase agreement to sell WBMM in Montgomery for
      an
      amount less than the carrying value of the associated assets. The impairment
      charge of $1,688,721 was determined to be associated with the indefinite-lived
      intangible asset and charged as an operating expense in 2005. See further
      discussion at Note 11.a.




71




**Income
      taxes** –
The
      asset and liability method is used in accounting for income taxes. Under the
      asset and liability method, deferred tax assets and liabilities are determined
      based on differences between the financial statement carrying amount of existing
      assets and liabilities and their respective tax bases, and are measured using
      the enacted tax rates and laws that will be in effect when the differences
      are
      expected to be recovered or settled. The Company’s income tax provision consists
      of taxes currently payable, if any, and the change during the year of deferred
      tax assets and liabilities.




**Fair
      value of financial instruments** –
The
      book values of cash, trade accounts receivable, accounts payable and other
      financial instruments approximate their fair values principally because of
      the
      short-term maturities of these instruments. The fair value of the Company’s
      long-term debt and notes receivable are estimated based on current rates offered
      to the Company for instruments of similar terms and maturities with similar
      risk
      profiles.




**Stock-based
      compensation** –
      Effective January 1, 2006, the Company adopted SFAS No. 123 revised
      2004 “Share Based Payments” (“SFAS 123R”). SFAS 123R establishes accounting for
      stock-based awards exchanged for employee services, using the prospective
      application transition method. As of January 1, 2006, the Company was a
      non-public entity, and it used the exemptions provided by SFAS
      No. 123(R) and continued to account for the options issued prior to
      adoption of SFAS 123R using the previous methodology applying Accounting
      Principles Board (“APB”) No. 25 and related interpretations, as permitted
      under SFAS No. 123. For awards issued or modified after January 1,
      2006, the Company uses the fair value method as required under SFAS
      123R and described below.




The
      fair
      value of each option award is estimated on the date of grant using the
      Black-Scholes valuation model that uses the following assumptions: expected
      volatility, expected life of the options, expected dividend yield and the risk
      free interest rate. The Company amortizes the fair value of all awards on a
      straight-line basis over the requisite service periods. Because Black-Scholes
      valuation models incorporate ranges of assumptions for inputs, those ranges
      are
      disclosed. Until such time as the Company’s common stock and related equity
      instruments have traded for a sufficient time period, the Company will determine
      the expected volatility of its common stock based on the weighted average of
      the
      historical volatility of the daily closing prices of a composite group of public
      companies with operations similar to the Company’s as a television broadcaster.
      The Company uses the “simplified method”, as described in Staff Accounting
      Bulletin No. 107, to determine the expected term, or life, of the options
      outstanding. The expected life of the options granted represents the period
      of
      time that they are expected to be outstanding. The risk-free interest rate
      is
      based on the U.S. Treasury yield curve in effect at the time of grant for issues
      with and equivalent remaining term equal to the expected life of the award.
      The
      Company uses an expected dividend yield of zero in the valuation model,
      consistent with the Company’s recent experience.




The
      exchange of options and change of terms upon consummation of the Merger
      Transaction was treated for purposes of SFAS 123(R) as a modification of the
      terms and conditions of the option awards which requires that the Company
      measure the incremental compensation cost by comparing the fair value of the
      modified award with the fair value of the award immediately before the
      modification. Based on a calculation of both the fair value of the original
      EBC
      options immediately before the merger and the fair value of the modified options
      immediately after the merger, it was determined that no incremental value was
      added due to the modification. Accordingly, there was no additional compensation
      expense charged to operations as a result of the modification.




**Net
      earnings per share:** Basic
      loss per share is based upon net loss available to common shareholders divided
      by the weighted average number of common stock shares outstanding during the
      year. Number of shares for periods before March 30, 2007, the Date of the Merger
      with Coconut Palm, were converted using the corresponding conversion rate as
      per
      the merger agreement based on the outstanding number of shares outstanding
      during the period. See Note – 4 Merger Transactions.




**New
      Accounting Pronouncements:** In
      December 2007, the FASB issued Statement No. 160, “ *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No. 51
      (“FASB No. 160”)* .”
The
      objective of FASB No. 160 is to improve the relevance, comparability, and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards for the non-controlling interest in a subsidiary and for the
      deconsolidation of a subsidiary. This Statement applies to all entities that
      prepare consolidated financial statements, except not-for-profit organizations.
      FASB No. 160 amends ARB 51 to establish accounting and reporting standards
      for the non-controlling interest in a subsidiary and for the deconsolidation
      of
      a subsidiary. It also amends certain of ARB 51’s consolidation procedures for
      consistency with the requirements of FASB No. 141 (R). This Statement is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. Earlier adoption is prohibited.
      The effective date of this Statement is the same as that of the related
      Statement 141(R). This Statement shall be applied prospectively as of the
      beginning of the fiscal year in which this Statement is initially applied,
      except for the presentation and disclosure requirements. The presentation and
      disclosure requirements shall be applied retrospectively for all periods
      presented.




72




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007)
“ *Business
      Combinations* ”
(“FASB
      No. 141(R)”). FASB No. 141(R) retains the fundamental requirements of
      the original pronouncement requiring that the purchase method be used for all
      business combinations. FASB No. 141(R) defines the acquirer as the entity
      that obtains control of one or more businesses in the business combination,
      establishes the acquisition date as the date that the acquirer achieves control
      and requires the acquirer to recognize the assets acquired, liabilities assumed
      and any non-controlling interest at their fair values as of the acquisition
      date. FASB No. 141(R) also requires that acquisition-related costs be
      recognized separately from the acquisition. FASB No. 141(R) is effective
      for business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after December
      15, 2008. The impact of adopting SFAS No. 141(R) will be dependent on the future
      business combinations that the Company may pursue after its effective date,
      if
      any.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which
      permits entities to choose to measure many financial instruments and certain
      other items at fair value that are not currently required to be measured at
      fair
      value. SFAS No. 159 will be effective for the Company on January 1,
      2008. We do not expect that the adoption of SFAS No. 159 will have a material
      impact on our financial position or results of operations.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plan” (“SFAS No. 158”), which requires
      employers to fully recognize the obligations associated with single-employer
      defined benefit pension, retiree healthcare and other postretirement plans
      in
      their financial statements. It requires employers to recognize an asset or
      liability for a plan’s over funded or under funded status, measure a plan’s
      assets and obligations that determine its funded status as of the end of the
      employer’s fiscal year and recognize in comprehensive income changes in the fund
      status of the defined benefit postretirement plan in the year in which changes
      occur. The requirement to recognize the funded status of a benefit plan and
      the
      disclosure requirement are effective for fiscal years ending after December
      31,
      2006. We have adopted the requirements of SFAS No. 158, which has had no impact
      on our financial position or results of operations.





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 157, **“** Fair
      Value Measurements” (“SFAS No. 157”), which applies whenever other standards
      require (or permit) assets or liabilities to be measured at fair value. SFAS
      No.
      157 establishes a fair value hierarchy that prioritizes the information used
      to
      develop the assumption that market participants would use when pricing an asset
      or liability. SFAS No. 157 is effective for financial statements issued for
      fiscal years beginning after November 15, 2007 and interim periods within those
      fiscal years. Earlier adoption is encouraged provided that the entity has not
      yet issued financial statements, including interim financial statements, for
      any
      period of that fiscal year. The effective date of this statement is the date
      than an entity adopts the requirements of this statement. Management does not
      expect this pronouncement to have a material impact on the Company’s financial
      position or results of operations.





In
      June
      2006, the FASB issued Financial Interpretation (“FIN”) No. 48, “Accounting
      for Uncertainty in Income Taxes—An Interpretation of FASB Statement
      No. 109” (“FIN 48”), regarding accounting for, and disclosure of, uncertain
      tax positions. FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognizing, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. The adoption of this pronouncement did not have a
      material impact on the consolidated financial statements of the Company.




**Reclassifications** –
Certain
      amounts in the 2006 and 2005 consolidated financial statements have been
      reclassified to conform to the 2007 presentation.




73




**NOTE
      3 — LIQUIDITY AND CAPITAL RESOURCES**




The
      Company currently has a working capital deficit of approximately $58.7 million
      and has experienced losses from operations since inception. During the year
      ended December 31, 2007, the Company had a net loss of approximately $40.8
      million and experienced cash outflows from operations during the same period
      of
      approximately $30.8 million. In the past, the Company has relied on equity
      and
      debt financing and the sale of assets to provide the necessary liquidity for
      the
      business to operate and will need to have access to substantial funds over
      the
      next twelve months in order to fund its operations. As of December 31, 2007,
      the
      Company has approximately $0.6 million of unrestricted cash on hand, and as
      more
      fully discussed in Note 13, the Company has access to a working capital line
      of
      credit provided to it from certain banking institutions (the “Credit Facility”).
      However, as of December 31, 2007, an additional $7.9 million, available per
      the
      terms of the Credit Facility, was not available due to certain restrictions
      based on the value of the loan collateral.




In
      February 2008, we refinanced our previous credit facility with our existing
      lender group. The amended $53.0 million credit facility, comprised of an $8.0
      million revolving credit line and term loans of $45.0 million, matures on
      February 13, 2011, was used to refinance the existing indebtedness senior credit
      facility. Outstanding principal balance under the credit facility bears interest
      at LIBOR or the alternate base rate, plus the applicable margin. The applicable
      margin is 9.5% for the LIBOR loans and 8.5% on the alternate base rate loan.
      The
      minimum LIBOR is 4.5%. The alternate base rate is (i)
      the
      greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such
      day
      plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%)
      per annum. We are required to pay an unused line fee of .5% on the unused
      portion of the credit facility. The credit facility is secured by the majority
      of the assets of the company. We are subject to new financial and operating
      covenants and restrictions based on trailing monthly and twelve month
      information. We have borrowed $50,512,500 under the new facility as of March
      11,
      2008 .
      Due to
      certain restrictions based on the value of the loan collateral, the Company
      does
      not have access to the remaining $2,487,500 at this time.





On
      March
      20, 2008, the Company entered into an amendment (“Amendment”) to its Third
      Amended and Restated Credit Agreement (“Credit Agreement”) with Silver Point
      Finance, LLC and Wells Fargo Foothill, Inc. Under the terms of the Amendment,
      the lender group has agreed to forbear from exercising certain of their rights
      and remedies with respect to designated defaults under the Credit Agreement
      through the earlier of (a) April 18, 2008 and (b) the date of occurrence of
      certain events or by which certain events have failed to occur, including the
      Company’s failure to enter into agreements with respect to the sale of certain
      of its assets and the Company’s failure to secure approvals for, and meet other
      criteria with respect to, financing alternatives necessary to meet the Company’s
      immediate capital requirements. Pursuant to the Amendment the Lenders may
      exercise any and all remedies available under the Credit Agreement, including
      making the loan immediately due and payable.




Even
      with
      the refinanced Credit Facility, the additional funds provided by the Amended
      Credit Facility are not sufficient to meet all of the anticipated liquidity
      needs to continue operations of the Company for the next twelve months.
      Accordingly, the Company will have to raise additional capital or increase
      its
      debt immediately to continue operations. If the Company is unable to obtain
      additional funds when they are required or if the funds cannot be obtained
      on
      favorable terms, management may be required to liquidate available assets,
      restructure the company or in the extreme event, cease operations. The financial
      statements do not include any adjustments that might result from the outcome
      of
      these uncertainties.




**NOTE
      4 — MERGER TRANSACTION**




On
      March 30, 2007 (the “Merger Closing”), the Company consummated a merger
      with EBC in which EBC merged with and into the Company, with the Company
      remaining as the legal surviving corporation (the “Merger Transaction”),
      pursuant to the Agreement and Plan of Merger dated April 7, 2006, as
      amended on May 5, 2006 and on September 14, 2006, among the Company,
      EBC and certain shareholders of EBC (the “Merger Agreement”). Upon the Merger
      Closing, the Company changed its name to “Equity Media Holdings Corporation.” In
      connection with the Merger Transaction, the holders of EBC Class A common
      stock were issued an aggregate of 20,037,016 shares of the Company’s common
      stock, and the holders of EBC Class B common stock were issued an aggregate
      of 6,313,848 shares of common stock. The holders of EBC Series A preferred
      stock were paid $25,000,000 in cash and issued a promissory note in the amount
      of $15,000,000 in exchange for their shares and were issued an aggregate of
      2,050,519 shares of the Company’s Series A Convertible Non-Voting Preferred
      Stock reflecting accrued and unpaid dividends through the date of Merger Closing
      and 314,966 shares of the Company’s common stock.




74




In
      connection with the Merger Transaction, on March 29, 2007, the Company’s
      stockholders (i) adopted the Equity Media Holdings Corporation 2007 Stock
      Incentive Plan under which the Company reserved up to 12,274,853 shares of
      common stock for issuance under the 2007 Stock Incentive Plan, (ii) adopted
      the Company’s Amended and Restated Certificate of Incorporation to
      (a) increase the number of authorized shares of common stock from
      50,000,000 shares to 100,000,000 shares, (b) increase the number of
      authorized shares of preferred stock from 1,000,000 shares to 25,000,000 shares,
      (c) change the Company’s name from “Coconut Palm Acquisition Corp.” to
“Equity Media Holdings Corporation,” and (d) authorize the issuance of
      approximately 2,050,519 shares of Series A Convertible Non-Voting Preferred
      Stock under a Certificate of Designation, (iii) adopted the Company’s
      Amended and Restated Certificate of Incorporation to continue to provide for
      a
      staggered board with three classes of directors, and (iv) ratified the
      Management Services Agreement between Royal Palm Capital Management, LLLP and
      the Company. Additional shares of Series A Convertible Non-Voting Preferred
      Stock were authorized for accrued and unpaid dividends through the date of
      the
      completion of the merger, increasing the number of authorized shares of
      Series A Convertible Non-Voting Preferred Stock from 1,736,746 to
      2,050,519.




Additionally,
      the Company issued 3,187,134 options to purchase its common stock, where each
      outstanding option to purchase EBC Class A common stock was converted into
      the right to receive options to purchase 1.461988 shares of the Company’s common
      stock. The fair value of the options at the date of the merger was
      $4.7 million based on a Black-Scholes valuation on March 30, 2007, the
      date of the Merger (see Note 18 — Stock Option Plans).




Because
      the former owners of EBC ended up with control of the Company, the Merger
      Transaction has been accounted for as a recapitalization for accounting and
      financial reporting purposes. Under this method of accounting, the Company
      was
      treated as the “acquired” company for financial reporting purposes. In
      accordance with guidance applicable to these circumstances, the Merger
      Transaction is considered to be a capital transaction in substance. Accordingly,
      for accounting purposes, the Merger Transaction was treated as the equivalent
      of
      EBC issuing stock for the net monetary assets of the Company, accompanied by
      a
      recapitalization. The net monetary assets of the Company were recorded at their
      fair value, essentially equivalent to historical costs, with no goodwill or
      other intangible assets recorded. The accumulated deficit of EBC has been
      carried forward after the Merger Closing. Operations prior to the Merger Closing
      for all periods presented are those of EBC. The costs of the transaction
      incurred by EBC were charged directly to additional paid in capital and those
      incurred by the Company were expensed prior to consummation of the transaction.




On
      March
      30, 2007, upon consummation of the Merger with EBC, the funds held in trust
      were
      distributed as follows:


Repurchase
                  of EBC Series A preferred stock
              
              $
              25,000,000Pay
                  down Senior Credit Facility Revolver
              
              
              17,450,000Payment
                  to CPAC shareholders electing not to convert their shares
              
              
              10,899,882Settlement
                  of Arkansas Media Management Agreement
              
              
              3,200,000Purchase
                  of three low power television stations from Arkansas Media
              
              
              1,300,000Payment
                  to EBC dissenting shareholders
              
              
              378,380Payment
                  of note payable and accrued interest to Actron, Inc.
              
              
              533,000Available
                  for working capital, capital expenditures and general corporate
                  needs.
              
              
              3,858,738$
              62,620,000




In
      connection with and prior to the execution of the Merger Transaction,
      stockholders representing approximately 1,908,911 shares of the Company’s common
      stock elected to convert their shares to cash in accordance with the terms
      of
      the Company’s governing documents. As result of such conversion, the Company
      left in deposit with its transfer agent $10,899,882 in cash to satisfy the
      demands of these shareholders. Following the merger, the transfer agent
      completed the distribution of such cash in connection with the conversion.




75




In
      connection with the Merger Transaction, shareholders of EBC representing 66,500
      shares of EBC Class A common stock elected to convert their shares to cash
      in accordance with Arkansas law. The Company recorded a liability in the amount
      of $368,410 to convert the shares plus $9,970 of accrued interest based on
      a
      conversion rate of $5.54 per share plus interest accruing from the date of
      the
      Merger Transaction at the rate of 9.78% per annum. On July 10, 2007,
      the dissenting shareholders were paid $378,380 in cash for the value of their
      shares including all interest accrued to date. Pursuant to Arkansas Code, the
      dissenting shareholders have contested the Company’s valuation of their shares
      as of the merger date. As per Arkansas Code, the Company has petitioned the
      Court for a determination of the fair value of the shares and believes that
      its
      valuation will prevail (see Note 20 – Commitment and
      Contingencies).




**NOTE
      5 — ARKANSAS MEDIA SETTLEMENT TRANSACTION**




Immediately
      prior to the closing of the Merger Transaction (see Note 4 — Merger
      Transaction), EBC entered into a settlement agreement, dated April 7, 2006,
      by and among EBC, Arkansas Media, a related party (see Note 21 — Related Party
      Transactions), Larry Morton, Gregory Fess and Max Hooper (the “Arkansas Media
      Settlement Agreement”) which provided for the resolution of the following
      matters between the parties:




·
            
            The
                cancellation of a management agreement, dated June 1, 1998, between
                Arkansas Media and EBC in exchange for the following: (i) payment to
                Arkansas Media of (a) $3,200,000 in cash, and (b) 640,000 newly
                issued shares of EBC’s Class A common stock (valued at $4,800,000);
                and (ii) payment of all accrued management fees and commissions
                through the closing date of the Merger Transaction. EBC is also required
                to reimburse Arkansas Media, Morton, Fess and Hooper for all expenses
                incurred in negotiating and consummating the settlement agreement.
                In
                connection with the cancellation of the management agreement, the
                Company
                recorded a charge of $8,000,000 to operations in March,
                2007.




·
            
            The
                purchase by EBC from Arkansas Media of one low-power broadcast station
                in
                Oklahoma City, Oklahoma and two low-power broadcast stations in Little
                Rock, Arkansas, for a combined purchase price of $1,300,000;




·
            
            EBC’s
                payment to Actron, Inc. (a controlling interest in which is owned
                by Larry
                Morton and Gregory Fess) of $533,000 in settlement of EBC’s obligations
                under a Promissory Note to Actron, Inc. dated January 1, 2003,
                including accrued interest through March 30, 2007. This obligation
                relates to EBC’s purchase of Central Arkansas Payroll Company in 2003;




·
            
            EBC’s
                purchase of an office building in Fort Smith, Arkansas from Arkansas
                Media, which prior to the settlement, the Company leased from Arkansas
                Media for use as its local sales office. The purchase price was
                approximately $268,000; and




·
            
            The
                agreement of Max Hooper and Gregory Fess to resign as directors of
                Kaleidoscope Foundation, a nonprofit corporation, and a related agreement
                that Larry Morton may remain as a director of Kaleidoscope Foundation
                provided his duties do not conflict with those owed to the Company;




**NOTE
      6 — ASSETS HELD FOR SALE**




Assets
      held for sale represent fixed assets and intangible assets, including FCC
      licenses, of television stations, which have been acquired and that management
      intends to divest within the next 12 months at amounts equal or exceeding the
      asset carrying values at the respective balance sheet dates.




In
      connection with the merger the Company and Univision Television Group, preferred
      stock holders, entered into a one year $15.0 million promissory note secured
      by
      two television stations located in Utah. In lieu of a cash repayment, the
      Company filed an application with the FCC on July 26, 2007 to transfer the
      television stations to Univision Television Group, Inc. in satisfaction of
      the
      principal amount of the note. The television station assets include broadcast
      licenses with book values of $7,884,631 and broadcasting equipment with book
      values of $481,363, a total of $8,365,994, as of December 31, 2007. Accordingly,
      these assets are classified as held for sale as of December 31, 2007. These
      assets were included in assets held for sale as of December 31, 2006 since
      as part of the Merger Transaction these assets were to be transferred to
      Univision Television Group, Inc, as payment for their Series A preferred shares.
      The latter described transfer was exchanged for the $15 million promissory
      note
      at the Merger Closing.




76




In
      October, 2007, the Company signed a non-binding letter of intent for the sale
      of
      certain television stations which include broadcast licenses with book values
      of
      $1,052,548 and broadcasting equipment with book values of $102,307, a total
      of
      $1,154,855. The Company has these assets classified as additional assets held
      for sale as of December 31, 2007.




Assets
      held for sale at December 31, 2006, included certain television station assets
      with net book values of $3,933,793 held for sale under an asset purchase
      agreement which was terminated in October, 2007. Accordingly, the Company
      reclassified these assets as held for use and recorded a charge to current
      operations in the amount of $263,517 for depreciation that would have been
      recognized during the period they were classified as held for sale.




**NOTE
      7 — ASSET PURCHASE AGREEMENT**




The
      Company entered into an asset purchase agreement (“Agreement”) with Renard
      Communications Corp. (“Seller”) for the purchase of certain licenses,
      construction permits and other instruments of authorization (collectively
“Licenses,” described below) issued by the Federal Communications Commission
      (“FCC”) and certain other assets (together with the Licenses, “Assets”). The
      Agreement became effective on August 15, 2007 upon approval by the Equity
      Media’s board of directors and the lender.




The
      Assets include Licenses for Class A television station WMBQ-CA, Channel 46,
      Manhattan, New York with a corresponding digital authorization for Channel
      10
      (WMBQ-LD) and WBQM-LP, Channel 3, Brooklyn, New York (collectively, the
“Stations”), and related items as specified in the Agreement.




The
      Company will pay an aggregate of $8,000,000 for the Assets, which constitute
      all
      the assets used in connection with operating the Stations. In connection with
      the transaction, the Company deposited $400,000 (“Deposit”), which will be held
      in escrow pending closing. At the closing, the Company will pay $6,000,000
      in
      immediately available funds, which amount will include the Deposit, and will
      deliver a secured promissory note (“Note”) for the remaining $2,000,000. The
      Note will have a three-year term and will accrue interest at 6% per year,
      requiring monthly interest payments only until the expiration of the term,
      at
      which time the principal amount will become due and payable. The Seller will
      have a security interest, documented by a Security Agreement executed
      simultaneously with the closing, in the Brooklyn station only. The payment
      will
      be increased or decreased such that Seller is entitled to all revenue and is
      liable for all expenses allocable to the period prior to the closing and the
      Company is entitled to all revenue and is liable for all expenses allocable
      to
      the period following the closing. Seller will assign and the Company will assume
      certain listed contracts.




The
      closing of the Agreement is subject to conditions, including FCC consent to
      the
      assignment of the Licenses. Seller and the Company agree to promptly prepare
      an
      application for assignment of the Licenses and to fully prosecute the
      application, but neither party is required to engage in a trial-type hearing.
      Each party will bear its own costs, and the filing fees shall be split evenly.
      The closing will occur between five business days after the FCC grants consent
      and ten business days after the grant becomes a final order.




The
      Agreement may be terminated by either party if the closing has not occurred
      by
      June 1, 2008; the conditions of the other party have not been met as of the
      closing date; or the other party is in breach.




**NOTE
      8 — CASH RESTRICTED FOR ACQUISITION OF BROADCAST ASSETS**




The
      Company had set aside $4.2 million in cash which was restricted for the
      acquisition of broadcast assets. These funds were intended for payment of the
      assets being acquired pursuant to the Asset Purchase Agreement described in
      Note
      7 — Asset Purchase Agreement. With lender approval, the Company has used these
      funds for other purposes subsequent to year end.




77




**NOTE
      9 —** **ACQUISITIONS
      AND DISPOSITIONS**





The
      Company’s significant transactions for the year ended December 31, 2007 were as
      follow:





On
      March
      15, 2007, the Company sold a broadcast tower and associated real property in
      central Arkansas for $625,000 cash.





The
      Company’s significant transactions for the year ended December 31, 2006 were as
      follows:





On
      May 5,
      2006, the Company sold a low power television station in central Arkansas for
      $125,000 cash.





On
      May
      15, 2006, the Company finalized the sale of two low power television stations
      located in Boise and Pocatello, Idaho, respectively, for $1,000,000 cash. The
      APA had been executed on December 7, 2005, but the transaction had not closed
      prior to December 31, 2005, pending FCC approval.





On
      May
      31, 2006, the Company finalized the sale of a full power television station
      in
      Casper, Wyoming with the receipt of $250,000 in cash from the buyer. The APA
      had
      been executed on August 14, 2004, and as of December 31, 2005, the Company
      had
      received $950,000 cash from the buyer toward the purchase price.





On
      July
      3, 2006, the Company exchanged a low power television construction permit in
      Sherman, Texas for a low power television license located in Ft. Pierce,
      Florida. No cash or other consideration was included and no assets other than
      the permit and the license were involved.





On
      July
      26, 2006, the Company finalized the sale of a full power television station
      in
      Montgomery, Alabama for $2,000,000 in cash. The APA had been executed on
      November 23, 2005, but the transaction had not closed prior to December 31,
      2005, pending FCC approval.





On
      August
      14, 2006, the Company finalized the sale of an interest in a full power
      television construction permit in Hawaii with the receipt of $122,000. The
      APA
      had been executed on November 4, 2004, and as of December 31, 2005, the Company
      had received $278,000 in cash from the buyer toward the purchase
      price.





On
      October 4, 2006, the Company sold certain real property associated with a full
      power television station in southwest Missouri for $615,000 in
      cash.





On
      November 1, 2006, the Company finalized the sale of one full power television
      station and one low power television station for $19,300,000 cash. The APA
      had
      been executed December 7, 2005, but the transaction had not closed prior to
      December 31, 2005, pending FCC approval.





On
      November 7, 2006, the Company purchased a low power television station in Grand
      Rapids, Michigan for $350,000 cash.





On
      November 7, 2006, the Company purchased a low power television station permit
      in
      Sommerville, Texas for $370,000 cash.





On
      November 13, 2006, the Company purchased a low power television station in
      Nashville, Tennessee for $525,000 cash.





On
      November 17, 2006, the Company purchased a low power television station in
      Waco,
      Texas for $390,000 cash.





On
      November 30, 2006, the Company purchased two low power television stations
      located in southwest Florida for $1,000,000. The Company paid $700,000 cash
      and
      executed a $300,000 promissory note bearing interest at an annual rate of 6%
      and
      due in 2007.





On
      December 15, 2006, the Company purchased a low power television station in
      Jacksonville, Florida for $800,000 cash.





On
      December 31, 2006, the Company purchased a low power television station in
      Lexington, Kentucky for $500,000. A $500,000 non-interest bearing promissory
      note was executed as payment. The note is due and payable in June
      2007.




78




The
      Company’s significant transactions for the year ended December 31, 2005 were as
      follows:





On
      January 3, 2005, the Company acquired one Class A and two low power television
      stations located in Southwest Florida for $900,000. Of the purchase price,
      $800,000 was paid in 2004. The balance was paid in 2005. The Asset Purchase
      Agreement had been entered into on July 8, 2004, subject to FCC approval.





On
      April
      2, 2005, the Company agreed to be bound by an Investment and Membership Interest
      Purchase Agreement (the “Agreement”) entered into between Spinner Network
      Systems, LLC (“SNS”) and Spinner Investment Partners, LLC (“SIP”). Subsequent to
      the Agreement the Company and other members of SNS entered into an Amended
      and
      Restated Operating Agreement of SNS, whereby the Company converted its ownership
      of SNS into Class B Units representing a 20% ownership of the capital of SNS.
      In
      addition, the Company holds approximately an additional 13% interest through
      its
      membership in SIP’s Class A Units. Through the Agreement SIP has subscribed for
      up to $1,550,000 of class A Units representing up to a 65% ownership of SNS.
      Through private offerings SIP has raised $1,370,000 towards that
      goal.





On
      May
      25, 2005, the Company acquired a group of low power television licenses and
      construction permits located in Vermont and the surrounding area for $825,000.
      The Company paid $800,000 in cash toward the purchase price. In addition, the
      Company issued 2,500 shares of Class A common stock to the seller. The shares
      were issued out of shares held in treasury. The asset purchase agreement had
      been entered into on February 5, 2003, subject to FCC approval.





On
      May
      13, 2005, the Company sold a low power television station located in south
      central California for $30,000.





On
      June
      24, 2005, the Company sold a full power television station and a low power
      television station both located in the St. Louis, Missouri area for $10,000,000
      in cash. The Company received $5,000,000 in 2004 and the balance in 2005. In
      addition to the cash, the Company received from the buyer three Class A low
      power television stations located in Atlanta, Seattle and Minneapolis.





On
      August
      1, 2005, the Company purchased a low power television station in Amarillo Texas
      for $201,000 cash.





On
      September 1, 2005, the Company entered into a binding letter agreement to
      exchange certain assets located in Davenport Iowa and other consideration for
      100,000 shares of Equity Broadcasting Corporation Class A common stock. The
      assets included both tangible and intangible assets, such as equipment,
      furniture, vehicles, the Independent News Network, Inc. (“INN”) name and
      trademark and various contracts. Coincidental with the agreement the Company
      moved the production of its Spanish language newscasts from the facilities
      in
      Davenport to the corporate headquarters in Little Rock, Arkansas. Various on-air
      and production personnel relocated from Davenport to Little Rock. As a result
      of
      this transaction, approximately $2,700,000 in goodwill was disposed of in the
      non-cash exchange while $200,000 was retained on the Company’s
      books.





On
      November 23, 2005, the Company entered into an APA to sell a full power
      television station in Montgomery, Alabama, for $2,000,000 cash. The buyer paid
      $200,000 of the cash price at the date the agreement was entered into. The
      funds
      were paid to an independent escrow agent and are to be released to the Company
      at closing. As of December 31, 2005, this transaction had not closed pending
      FCC
      approval.




On
      December 7, 2005, the Company entered into an APA to sell one full power and
      three low power television stations for $20,300,000 cash. The buyer paid
      $1,000,000 of the cash price at the date the agreement was entered into. The
      funds were paid to an independent escrow agent and are to be released at closing
      according to the agreement. As of December 31, 2005, this transaction had not
      closed pending FCC approval.




79




**NOTE
      10 —** **OTHER
      INCOME (EXPENSE)**




At
      December 31, 2007, 2006 and 2005, other income (expense) consists of the
      following:





2007
            
            2006
            
            2005Other
                income
            
            $
            796,990
            
            $
            506,907
            
            $
            521,488Rental
                Income
            
            
            69,602
            
            
            291,588
            
            
            288,419Litigation
                Settlement
            
            
            -
            
            
            275,000
            
            
            1,000,000Other
                expense
            
            
            -
            
            
            -
            
            
            (700.000
            )$
            866,592
            
            $
            1,073,495
            
            $
            1,109,907




The
      nature of the other income (expense) categories is as follows:





a.  Litigation
      settlement ****** **–** The
      Company was awarded this amount in an arbitration settlement in their litigation
      with the PAX Network. These amounts represent the final settlement
      payments.





b.  Rental
      income *–* The
      Company receives rental income, primarily from space leased-out in the corporate
      office building from a non-affiliate tenant. This tenant vacated in January
      2007. The Company now uses this space for corporate purposes.




**NOTE
      11 —** **INTANGIBLE
      ASSETS AND GOODWILL**





Goodwill
      and intangible assets deemed to have indefinite lives are not amortized but
      are
      subject to annual impairment tests in accordance with SFAS No. 142, “Goodwill
      and Other Intangible Assets.” Other intangible assets continue to be amortized
      over their useful lives.





a.  Indefinite-lived
      intangibles – Under the guidance in SFAS No. 142, the Company’s broadcasting
      licenses are considered indefinite-lived intangibles. These assets are not
      subject to amortization, but will be tested for impairment at least annually.





In
      accordance with SFAS No. 142, the Company tests these indefinite-lived
      intangible assets for impairment annually by comparing their fair value to
      their
      carrying value. The Company used a fair market value appraisal to value
      broadcasting licenses, as well as a review of recent broadcasting license
      transactions from independent third parties. Based on this analysis, management
      determined that no impairment existed at December 31, 2007 or 2006. However,
      based on management’s analysis at December 31, 2005, there was one asset group
      which was determined to be impaired. This impairment resulted from the Company
      entering into a purchase agreement to sell WBMM in Montgomery for an amount
      less
      than the carrying value of the associated assets. This impairment of $1,688,721
      was recorded as a reduction in broadcasting licenses on the accompanying
      December 31, 2005 consolidated balance sheet and charged as an operating expense
      in 2005. The asset group was disposed of in 2006 (See Note 9 – Acquisitions And
      Dispositions).





b.  Goodwill
      – SFAS No. 142 requires the Company to test goodwill for impairment using a
      two-step process. The first step is a screen for potential impairment, while
      the
      second step measures the amount, if any, of the impairment. The Company
      completed the first step of the impairment test during the year with no
      impairment noted.





Goodwill
      activity for the years ended December 31, 2007 and 2006 was as
      follows:





Balance
              December 31, 2006
            
            Increases
            
            Decreases
            
            Balance
              December 31, 2007$             1,940,282
            
            
            -
            
            
            -
            
            $
            1,940,282




Balance
              December 31, 2005
            
            Increases
            
            Decreases
            
            Balance
              December 31, 2006$             1,935,717
            
            
            4,565
            
            
            -
            
            $
            1,940,282





80




The
      increased activity in 2006 relates primarily to the Company’s purchase of the
      minority interests previously held by certain shareholders of a subsidiary
      of
      the Company, H & H Properties.




**NOTE
      12 — INVESTMENT IN JOINT VENTURES**




At
      December 31, 2007 and December 31, 2006, Investment in Joint Ventures
      consists of the following:




**December
                31, 2007**
            
            **December 31,
                2006****Ownership****Percentage**
            
            **Balance**
            
            **Ownership****Percentage**
            
            **Balance**Little
                Rock TV 14, LLC
            
            
            50.0
            %
            $
            28,406
            
            
            50.0
            %
            $
            23,282Spinner
                Network Systems, LLC
            
            
            **
            
            
            407,454
            
            
            33.0
            %
            
            658,323$
            435,860
            
            
            
            
            $
            681,605







**
            –
A
                reorganization of Spinner Network Systems, LLC resulted in the reduction
                of the Company’s ownership percentage in Spinner from 33% at
                December 31, 2006 to 4% at December 31, 2007. Because the Company
                owns less than a 20% interest and exerts no influence over management
                or
                the operations of Spinner, the Company has changed from the equity
                method
                to the cost method to account for its investment in Spinner Network
                Systems, LLC. Under the cost method of accounting for investments,
                the
                Company will no longer record its proportionate share of Spinner
                income or
                loss, but will instead periodically evaluate the fair value of its
                investment in Spinner and adjust the carrying amount accordingly.
                During
                the year December 31, 2007, the Company adjusted the carrying value
                of its
                investment in Spinner by $198,368 to reflect the fair value of its
                investment. This loss in value is included in losses from affiliates
                and
                joint ventures in the consolidated statement of
                operations.




**NOTE
      13 — NOTES PAYABLE**





**Long-Term
      Debt**





Long-term
      debt as of December 31, 2007 and 2006 consisted of the
      following:


**2007**
              
              **2006****(In
                  thousands)**Senior
                  Credit Facility
              
              $
              50,317
              
              $
              46,265Merger
                  Related Party - Univision
              
              
              15,000
              
              
              -Installment
                  Notes and other debt
              
              
              10,913
              
              
              11,636Line
                  of Credit
              
              
              994
              
              
              -Capital
                  Lease Obligations
              
              
              186
              
              
              61Total
                  Debt
              
              $
              77,410
              
              $
              57,962Less:
                  Current maturities
              
              
              (68,272
              )
              
              (3,970
              )Long-term
                  debt
              
              $
              9,138
              
              $
              53,992




81


**Senior
      Credit Facility**





The
      Company is party to a Senior Credit Facility with financial institutions and
      other lenders, which provides for secured revolving and term loan facilities
      in
      varying amounts at variable interest rates, maturing in June 2010. As of
      December 31, 2007, the Company has borrowings under the Credit Facility in
      the
      aggregate amount of $50.32 million and interest rates ranging from 12.5% to
      15.8%. Also, as of December 31, 2007, the revolver component of the Credit
      Facility was fully drawn. However, an additional $7.9 million is available
      per
      the terms of the Credit Facility but was unavailable to borrow at December
      31,
      2007, due to certain collateral restrictions. The credit facility is secured
      by
      the majority of the assets of the Company. As noted below, the entire facility
      was refinanced in February 2008.





On
      February 13, 2008, the Company and its lenders entered into the Third Amended
      and Restated Credit Agreement in which the Company refinanced its previous
      credit facility. The amended $53.0 million credit facility, comprised of an
      $8.0
      million revolving credit line and term loans of $45.0 million, matures on
      February 13, 2011, was used to refinance the existing indebtedness senior credit
      facility. Outstanding principal balance under the credit facility bears interest
      at LIBOR or the alternate base rate, plus the applicable margin. The applicable
      margin is 9.5% for the LIBOR loans and 8.5% on the alternate base rate loan.
      The
      minimum LIBOR is 4.5%. The alternate base rate is (i)
      the
      greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such
      day
      plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%)
      per annum. We are required to pay an unused line fee of .5% on the unused
      portion of the credit facility. The credit facility is secured by the majority
      of the assets of the company. We are subject to new financial and operating
      covenants and restrictions based on trailing monthly and twelve month
      information. We have borrowed $50,512,500 under the new facility as of March
      11,
      2008 .
      Due to
      certain restrictions based on the value of the loan collateral, the Company
      does
      not have access to the remaining $2,487,500 at this time.




On
      March
      20, 2008, the Company entered into an amendment to its third amended and
      restated credit agreement (“Credit Agreement”) with Silver Point Finance, LLC
      and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender
      group has agreed to forbear from exercising certain of their rights and remedies
      with respect to designated defaults under the Credit Agreement through the
      earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events
      or by which certain events have failed to occur, including the Company’s failure
      to enter into agreements with respect to the sale of certain of its assets
      and
      the Company’s failure to secure approvals for, and meet other criteria with
      respect to, financing alternatives necessary to meet the Company’s immediate
      capital requirements. Pursuant to the Amendment the Lenders may exercise any
      and
      all remedies available under the Credit Agreement, including making the loan
      immediately due and payable.




**Merger
      Related - Univision**




Pursuant
      to the Merger Transaction, the Company issued a promissory note to Univision
      Television Group, Inc. as partial consideration for the exchange of their shares
      of EBC Series A preferred stock (see Note 4 — Merger Transaction). This
      promissory note in the amount of $15.0 million is payable in one year and bears
      interest of 7.0%. The promissory note is secured by two television stations,
      originally sought to be transferred under an asset purchase agreement entered
      into for the same purpose.




**Installment
      notes and other**




We
      have
      installment and other indebtedness due to financial institutions and various
      other lenders with a combined outstanding balance of $10.9 million as of
      December 31, 2007. The various indebtedness has terms which expire through
      2012
      with a weighted average interest rate of 8.86% in 2007 and 8.09% in
      2006.




**Short
        Term Borrowings**
 
 The
        Company’s total amounts outstanding under short term borrowings were $15,994,495
        and $0 at December 31, 2007 and 2006 respectively. Weighted average rates
        on all
        short term borrowings were 7.08% in 2007 and 7.5% in 2006.


82


**Line
      of Credit**





At
      December 31, 2007, the Company had a $1.0 million line of credit with an
      Arkansas bank, with interest payable monthly at 8.25%, originally due in January
      2008 and extended until April 2008 and secured by various broadcast assets
      and
      Company guarantees. The outstanding balance at December 31, 2007 and 2006 was
      $994,495 and $0, respectively.





**Capital
      Lease Obligations**





We
      have
      capitalized the future minimum lease payments of equipment under leases that
      qualify as capital leases. We had capital lease obligations of approximately
      $0.2 million as of December 31, 2007. The capital leases have terms
      which expire at various dates through 2012.





**Aggregate
      Maturities of Total Debt**





Approximate
      aggregate annual maturities of total debt (including capital lease obligations)
      are as follows (in thousands):




**2008**
            
            $
            68,272**2009**
            
            
            392**2010**
            
            
            7,073**2011**
            
            
            1,639**2012**
            
            
            34**Thereafter**
            
            
            -**Total**
            
            $
            77,410





**Debt
      Covenants and Restrictions**




The
      Company's debt obligations contain certain financial and other covenants and
      restrictions on the Company. None of these covenants or restrictions includes
      any triggers explicitly tied to the Company's credit ratings or stock price. Prior
      to
      the amendment and restatement of the credit facility in February 2008, the
      Company was subject to certain financial covenants, including among others,
      that
      the Company meet minimum revenue and EBITDA levels. At December 31, 2007, the
      Company was not in compliance with these covenants. However, after the amendment
      and restatement of the credit facility, the Company’s previous events of default
      were waived and eliminated. Furthermore, pursuant to the March 20, 2008
      Amendment to the Credit Agreement, the lender group has agreed to forbear from
      exercising certain of their rights and remedies with respect to designated
      defaults under the Credit Agreement through the earlier of (a) April 18, 2008
      and (b) the date of occurrence of certain events or by which certain events
      have
      failed to occur, including the Company’s failure to enter into agreements with
      respect to the sale of certain of its assets and the Company’s failure to secure
      approvals for, and meet other criteria with respect to, financing alternatives
      necessary to meet the Company’s immediate capital requirements. Pursuant to the
      Amendment the Lenders may exercise any and all remedies available under the
      Credit Agreement, including making the loan immediately due and
      payable.





**Interest
      Rate Risk Management**





The
      Company is not involved in any derivative financial instruments. However, we
      may
      consider certain interest rate risk strategies in the future such as interest
      rate swap arrangements or debt-for-debt exchanges.




83


**Interest
      Expense**





Interest
      expense for the years ended December 31, 2007, 2006 and 2005 consisted of
      the following (in thousands):


**2007**
              
              **2006**
              
              **2005**Interest
                  on borrowings:Senior
                  Credit Facility
              
              $
              6,489
              
              $
              6,756
              
              $
              4,326Related
                  Party - Univision
              
              
              788
              
              
              -
              
              
              -Installment
                  notes and other debt
              
              
              703
              
              
              718
              
              
              778Mortgage
                  Debt
              
              
              113
              
              
              114
              
              
              125Capital
                  lease obligations
              
              
              5
              
              
              4
              
              
              4Total
                  interest expense
              
              $
              8,098
              
              $
              7,592
              
              $
              5,233




**NOTE
      14 — STOCKHOLDERS’ EQUITY**




**Private
      Placement**




On
      June 21, 2007, the Company entered into a Unit Purchase Agreement with
      certain insiders and institutional investors (each a “Buyer” and collectively,
      the “Buyers”) in connection with a $9,000,000 private placement (the “Private
      Placement”) of an aggregate of 1,406,250 units (the “Units”), each Unit
      consisting of one share of the Company’s common stock, $0.0001 par value per
      share, and two warrants, each warrant exercisable for one share of the Company’s
      common stock at an exercise price of $5.00 per share (the “Warrants”). The
      purchase price of each Unit was $6.40. The Private Placement closed on
      June 21, 2007 (the “Private Placement Closing Date”).




Each
      Warrant issued at the closing of the Private Placement may be exercised any
      time
      on or after the Private Placement Closing date and on or prior to the close
      of
      business on September 7, 2009 (the “Termination Date”). The number of
      shares issuable upon exercise of each Warrant and the exercise price thereof
      is
      subject to adjustment from time to time in the event of stock dividends, stock
      subdivisions, stock splits and stock combinations. The Warrants can be redeemed
      at the Company’s option at a redemption price equal to $0.01 per Warrant
      provided that the last sales price of the Company’s common stock has been at
      least $8.50 per share on each of twenty trading days within any 30 trading
      day
      period ending on the third business day prior to the date on which the Company
      gives notice of redemption.




The
      Units
      and Warrants were offered and sold only to institutional and accredited
      investors in reliance on Section 4(2) of the Securities Act of 1933, as
      amended. The Units and Warrants sold in the Private Placement have not been
      registered under the Securities Act or state securities laws and may not be
      offered or sold in the United States absent registration with the Securities
      and
      Exchange Commission or an applicable exemption from the registration
      requirements. The Company agreed that if at any time during the two year period
      commencing the Private Placement Closing Date it proposes to file a registration
      statement with the Securities and Exchange Commission with respect to an
      offering of equity securities or securities exercisable or convertible into
      equity securities, the Company will give piggyback registration rights to the
      Buyers on such number of registrable shares as the Buyer may request.




The
      net
      proceeds from the Private Placement, following the payment of offering-related
      expenses, will be used by the Company to fund acquisitions and for general
      corporate purposes.




**Shares
      Issued to Retire Debt**




On
      August 21, 2007, the Company exercised its option, under the terms of a
      $500,000 note payable, to retire the note with the issuance of 115,473 shares
      of
      common stock in lieu of a cash payment. This note was previously issued in
      connection with the purchase of certain television stations.




**Merger
      Transaction and Recapitalization**




In
      connection with the Merger Transaction (see Note 4 — Merger Transaction), on
      March 29, 2007, the stockholders of the Company approved a proposal to
      amend and restate the Company’s Certificate of Incorporation. Upon approval, the
      Company (i) increased the number of authorized shares of common stock from
      50,000,000 shares to 100,000,000 shares, (ii) increased the number of
      authorized shares of preferred stock from 1,000,000 to 25,000,000,
      (iii) changed the Company’s name from “Coconut Palm Acquisition Corp.” to
“Equity Media Holdings Corporation”, and (iv) authorized the issuance of
      approximately 2,050,519 shares of the Company Series A Convertible
      Non-Voting Preferred Stock, pursuant to the Certificate of Designation.
      Additional shares of Series A Convertible Non-Voting Preferred Stock were
      authorized for accrued and unpaid dividends through the date of the completion
      of the merger, increasing the number of authorized shares of Series A
      Convertible Non-Voting Preferred Stock from 1,736,746 to 2,050,519.




84




As
      a
      result of the Merger Transaction, the Company acquired 1,908,911 shares from
      stockholders who opted to convert their stock to cash and issued 26,665,830
      shares to the shareholders of EBC in exchange for their shares and other
      consideration.




**Initial
      Public Offering**




On
      September 14, 2005, the Company sold 10,000,000 units (“Units”) in an
      initial public offering (the “Offering”), and, on September 19, 2005, sold
      an additional 1,500,000 Units pursuant to the underwriters’ over-allotment
      option. Each Unit consists of one share of the Company’s common stock and two
      warrants (“Warrants”). Each Warrant entitles the holder to purchase from the
      Company one share of common stock at an exercise price of $5.00 commencing
      after
      the completion of the Merger Transaction. The Warrants will expire on
      September 7, 2009. The Warrants may be redeemed, at the Company’s option,
      with the prior consent of Morgan Joseph and Co. Inc. and EarlyBirdCapital,
      Inc.,
      the representatives of the underwriters in the Offering (the “Representatives”)
      in whole and not part, at a price of $.01 per Warrant upon 30 days notice
      after the Warrants become exercisable, only in the event that the last sale
      price of the common stock is at least $8.50 per share for any 20 trading days
      within a 30 trading day period ending on the third day prior to the date on
      which notice of redemption is given.




In
      connection with the Offering, the Company also issued for $100 an option to
      the
      Representatives to purchase up to a total of 1,000,000 units at a price of
      $7.50
      per unit. The units issuable upon the exercise of this underwriters’ unit
      purchase option are identical to those offered in the prospectus of the
      Offering, except that the exercise price of the warrants included in the
      underwriters’ unit purchase option is $6.00. This option is exercisable
      commencing upon the closing of the Merger Transaction, expires five years from
      the date of the Offering, and may be exercised on a cashless basis, at the
      holder’s option. The underwriters’ unit purchase option provides for demand and
“piggy back” registration rights.




The
      underwriters’ unit purchase option and the Warrants (including the warrants
      underlying the underwriters’ unit purchase option) will be exercisable only if
      at the time of exercise a current registration statement covering the underlying
      securities is effective or, in the opinion of counsel, not required, and if
      the
      securities are qualified for sale or exempt from qualification under the
      applicable state securities laws of the exercising holder. The Company has
      agreed to use its best efforts to maintain an effective registration statement
      during the exercise period of the unit purchase option and the Warrants;
      however, it may be unable to do so. Holders of the unit purchase option and
      the
      Warrants are not entitled to receive a net cash settlement or other settlement
      in lieu of physical settlement if the common stock underlying the Warrants,
      or
      securities underlying the unit purchase option, as applicable, are not covered
      by an effective registration statement and a current prospectus. Accordingly,
      the unit purchase option and the Warrants may expire unexercised and worthless
      if a current registration statement covering the common stock is not effective
      and the prospectus covering the common stock is not current. Consequently,
      a
      purchaser of a unit may pay the full unit price solely for the shares of common
      stock of the unit.




85




**NOTE
      15 — MANDATORILY REDEEMABLE SERIES A CONVERTIBLE NON-VOTING PREFERRED STOCK**




In
      connection with the Merger Transaction, the Company issued 2,050,519 shares
      of
      the Company’s Series A Convertible Non-Voting Preferred Stock (the
“Series A Preferred”) to a certain holder of EBC Series A preferred
      stock, in exchange for accrued and unpaid dividends up to the Merger Closing
      date. The Series A Preferred ranks senior to all outstanding shares of the
      Company’s common stock. The Series A Preferred accrues compounded dividends
      at the rate of 7% per annum of the original issue price whether or not the
      Company declares a dividend payable. In addition, if the Company declares a
      dividend on its common stock at any time, the holders of Series A Preferred
      automatically participate on an “as if” converted to common stock basis with the
      common shareholders.




The
      Series A Preferred contain liquidation provisions that rank senior to any
      and all claims of the common stockholders, such that upon the involuntary
      liquidation, dissolution, or winding up of the Company, the holders of
      Series A Preferred would be entitled to receive a liquidation amount equal
      to the amount of the original issue price plus accrued dividends. A change
      of
      control of the Company is also deemed to be an event equivalent to a
      liquidation, dissolution or winding up event under the terms of the Certificate
      of Designation for the Series A Preferred.




The
      holders of Series A Preferred may convert their shares at any time into
      shares of the common stock of the Company on a one-for-one basis. The conversion
      rate is subject to adjustment such that if the Company were to issue any share
      of common stock, except for (a) issuances pursuant to the exercise of any
      preferred stock, (b) issuances subject to a compensation plan for
      employees, directors, consultants or others approved by the board of directors
      or majority holders of the common stock of the Company, (c) stock issued
      pursuant to a declared dividend, stock split or recapitalization, (d) stock
      issued to sellers of companies acquired pursuant to board approval,
      (e) stock issued to banking institutions as compensation for financing
      received and (f) stock issued from the treasury of the Company, or any
      instrument convertible or exercisable into common stock of the Company at a
      rate
      which if added to the consideration per share of common stock received for
      any
      such purchase right is less than the current rate, the conversion rate
      automatically adjusts to that lower rate. At any time after five years after
      issuance, the Company may elect to redeem shares of Series A Preferred in
      cash. In addition, after five years after issuance and upon a majority of the
      holders of Series A Preferred voting to redeem their shares, the holders of
      Series A Preferred may require the Company to redeem their Series A
      Preferred for cash. The redemption price is equal to the original price of
      the
      Series A Preferred plus all accrued Dividends as of the date of redemption.




In
      connection with the Private Placement, the Board of Directors determined that
      the fair value of the common stock component of the June 2007 Unit Offering
      (see
      note 15 – Stockholders’ Equity) was greater than the issue prices of the Series
      A Convertible Non- Voting Preferred Stock of $5.13 per share. Additionally,
      the
      fair value of the warrants component combined with the exercise price was
      determined to be greater than the original issue price of $5.13 for the Series
      A
      preferred. Accordingly, the conversion price of the Series A Non-Voting
      Preferred Stock was not reset in accordance with the provisions of EITF 98-5
      “Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingently Adjustable Conversion Ratios” and EITF 00-27 “Application of EITF
      98-5 to Certain Convertible Instruments”.




In
      connection with the issuance of common stock to retire debt, the Board of
      Directors determined that the fair value of the stock issued had no effect
      on
      the Series A Convertible Non-voting Preferred Stock because it falls under
      the
      exception for stock issued to sellers of companies acquired pursuant to board
      approval. Accordingly, the conversion price of the Series A Non-Voting Preferred
      Stock was not reset in accordance with the provisions of EITF 98-5 “Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios” and EITF 00-27 “Application of EITF 98-5 to
      Certain Convertible Instruments”.




The
      Company evaluated the embedded conversion feature in the Series A Preferred
      and determined it did not meet the criteria for bifurcation under SFAS
      No. 133 “Accounting for Derivative Instruments and Hedging Activities”
during the three and nine months ended September 30, 2007. In addition, the
      Company accounts for the Series A Preferred in accordance with SEC
      Accounting Series Release 268 — Presentation in Financial Statements of
      Redeemable Preferred Stocks” and EITF D-98: “Classification and Measurement of
      Redeemable Securities,” and thus has classified the Series A Preferred
      outside of stockholders’ equity.




The
      Company believes that it is not probable that the holders of the Series A
      Preferred would currently elect to convert their shares to common stock because
      the current trading price of the Company’s common stock is lower than the
      conversion price. Therefore and under the guidance of EITF D-98, the carrying
      value of the Series A Preferred Stock as of December 31, 2007 is its original
      issue amount and does not include any accreted dividends or any other
      adjustment.




86




For
      the
      year ended December 31, 2007, the Company accreted dividends in the amount
      of $556,795. As of December 31, 2007 dividends payable to the Series A Preferred
      shareholders are $556,795 and included in other non current liabilities.




**Univision
      Registration Rights**




Pursuant
      to the Merger Agreement, the Company has granted to Univision certain “piggy
      back” registration rights at any time during the two year period following the
      Merger Closing. The Company shall provide Univision with written notice thereof
      at least fifteen days prior to the filing, and Univision shall provide written
      notice of the number of its registrable shares to be included in the
      registration statement within fifteen days of its receipt of the Company’s
      notice.




**NOTE
      16 — SHARES HELD IN ESCROW**




At
      the
      closing of the Merger Transaction, the Company deposited 2,100,003 shares of
      its
      Common Stock with a trust company (the “Escrow”), with each shareholder of EBC
      funding that portion thereof equal to such shareholder’s ownership of EBC Common
      Stock relative to the other shareholders contributing to the Escrow. The Escrow
      has been established for the benefit of the Company solely to satisfy any
      indemnification obligation of EBC arising pursuant to the Merger Agreement.
      The
      term of the Escrow is twelve (12) months from the date of closing of the
      Merger Transaction. On March 28, 2008, the Company filed a Notice of
      Indemnification Claim with the Escrow Agent.




**NOTE
      17 — STOCK BASED COMPENSATION PLANS**




On
      March 29, 2007, the shareholders of the Company approved the adoption of
      the 2007 Stock Incentive Plan (the “Incentive Plan”), which governs stock-based
      awards up to an aggregate of 12,274,853 shares of the Company’s common stock,
      including (i) 3,274,853 shares converted from existing EBC options assumed
      in the Merger Transaction (only 3,187,138 as of the date of the Merger
      Transaction), (ii) 2,000,000 and 250,000 shares underlying options issuable
      to Larry Morton and Gregory Fess, respectively, under employment agreements
      entered in connection with the Merger Transaction, and (iii) 6,750,000
      shares reserved for future grants. The purpose of the 2007 Stock Incentive
      Plan
      is to enable the Company to attract, retain, reward and motivate officers,
      directors, employees and consultants of the Company, its subsidiaries or
      affiliates by providing them with an opportunity to acquire or increase a
      propriety interest in the Company. The 2007 Stock Incentive Plan became
      effective upon the closing of the Merger Transaction and is administered by
      the
      Compensation Committee of the Board of Directors.




Prior
      to
      the Closing of the Merger, EBC had two stock option plans: the 2001 Equity
      Participation Plan (which was established on April 16, 2001) and the 2001
      Non-Qualified Stock Option Plan (which was established on November 15,
      2001). As of March 30, 2007, the date of the Merger, 2,180,000 options were
      outstanding under these plans. In connection with the Merger Transaction, these
      options were converted to 3,187,134 options to purchase shares of the Company
      under the 2007 Stock Incentive Plan as described herein. The 2007 Stock
      Incentive Plan superseded these plans.




As
      of
      December 31, 2007, all stock options awarded under the Incentive Plan were
      granted with exercise prices equal to the market price of the underlying stock
      as of the date of grant. Under the Incentive Plan options are exercisable after
      the period or periods specified in the applicable option agreement, but no
      option can be exercised after 10 years after the date of the grant, and all
      awards in 2007 expire no later than seven years after the date of the grant.




87




The
      following weighted-average assumptions were used in the Black-Scholes
      option-pricing model to value options granted during the years ended December
      31, 2007, 2006 and 2005:





2007
            
            2006
            
            2005Expected
                life of options (in years)
            
            
            4.39
            
            
            N/A
            
            
            10.00Expected
                volatility
            
            
            34.4
            %
            
            N/A
            
            
            32.2
            %Expected
                risk free interest rate
            
            
            4.54
            %
            
            N/A
            
            
            4.30
            %Expected
                dividend yield
            
            
            0.0
            %
            
            N/A
            
            
            0.0
            %




A
      summary
      of option activity under the Incentive Plan is as follows:




Options
            
            WeightedAverageExercise Price
            
            AggregateIntrinsic Value
            
            WeightedAverageRemainingTermOutstanding
                at January 1, 2007
            
            
            3,187,138
            
            $
            4.82Granted
            
            
            3,800,000
            
            
            4.30Forfeited
            
            
            (21,930
            )
            
            5.09Exercised
            
            
            0
            
            
            N/AExpired
            
            
            0
            
            
            N/AOutstanding
                at December 31, 2007
            
            
            6,965,208
            
            $
            4.53
            
            $
            0
            
            
            5.47Exercisable
                at December 31, 2007
            
            
            3,907,898
            
            $
            4.72
            
            $
            0
            
            
            4.77




Stock-based
      compensation expense for the year ended December 31, 2007 was $2.0 million
      as
      compared to $0 in 2006 and 2005. The total deferred tax benefit related
      thereto was $0 for the year ended December 31, 2007 compared to $0 during the
      same period in 2006 and 2005. As of December 31, 2007, there was $3.8 million
      of
      total unrecognized compensation cost related to unvested share-based
      compensation awards granted under the Incentive Plan, which does not include
      the
      effect of future grants of equity compensation, if any. Of the total $3.8
      million, we expect to recognize approximately 37.1% in 2008 and the balance
      in
      2009 through 2012. The weighted average period over which the $3.8 million
      is to
      be recognized is 2.90 years. The weighted-average grant date fair value was
      $1.5268 for options granted during 2007.




Under
      SFAS No. 123(R), options are valued at their date of grant and then expensed
      over their vesting period. The values of the Company’s options were calculated
      at the date of grant using the Black-Scholes option-pricing model. The total
      intrinsic value of options exercised during the years ended December 31, 2007,
      2006 and 2005, respectively, was $0 each year. The total fair value of options
      vested during the years ended December 31, 2007, 2006 and 2005 was $1.1 million,
      $0 and $0, respectively. The total number of options vesting during the years
      ending December 31, 2007, 2006 and 2005 was 750,000, 0 and 0, respectively.




**NOTE
      18 — INCOME TAXES**




The
      Company records deferred income taxes under applicable tax laws using rates
      for
      the years in which the taxes are expected to be paid. Deferred income taxes
      reflect the tax consequences on future years of differences between the tax
      basis of assets and liabilities and their financial reporting amounts. A
      valuation allowance is provided when it is more likely than not that some
      portion of the deferred tax assets may not be realized. The Company did not
      record an income tax provision for all periods presented due to its expected
      benefits from net operating losses being completely offset by valuation
      allowances.




The
      Company records deferred income taxes using enacted tax laws and rates for
      the
      years in which the taxes are expected to be paid. Deferred income taxes reflect
      the tax consequences on future years of differences between the tax basis of
      assets and liabilities and their financial reporting amounts. A valuation
      allowance is provided when it is more likely than not that some portion of
      the
      deferred tax assets may not be realized.




88




Income
      taxes are reflected in the consolidated statements of operations as
      follows:




2007
            
            2006
            
            2005Deferred
                Tax Provision (benefit)
            
            $
            (12,808,779
            )
            $
            (1,222,868
            )
            
            (4,220,289
            )Change
                in Valuation Allowance
            
            
            12,808,779
            
            
            1,222,868
            
            
            4,220,289$
            
            
            $
            -
            
            $
            -




A
      reconciliation between income taxes computed at the federal statutory rate
      and
      the Company’s income tax rates is as follows:




2007
            
            2006
            
            2005Federal
                income taxes at statutory rate
            
            $
            (13,418,424
            )
            $
            (1,097,557
            )
            $
            (4,323,922
            )Sate
                income taxes net of federal tax benefit
            
            
            -
            
            
            (138,486
            )
            
            (545,577
            )Change
                in valuation allowance
            
            
            12,808,779
            
            
            1,222,868
            
            
            4,220,289Other
            
            
            609,645
            
            
            13,175
            
            
            649,210$
            -
            
            $
            -




Components
      of the net deferred income tax asset (liability) at December 31, 2007 and 2006
      relate to the following:




2007
            
            2006Deferred
                Income TaxesNet
                operating loss carryforwards
            
            $
            47,545,803
            
            $
            30,114,236Allowance
                for uncollectible accounts
            
            
            568,961
            
            
            590,475Other
            
            
            4,364
            
            
            1,55648,119,128
            
            
            30,706,267Less
                valuation allowance
            
            
            (37,366,846
            )
            
            (24,558,067
            )10,752,282
            
            
            6,148,200Deferred
                income tax liabilitiesDepreciation
                and amortization
            
            
            (10,752,282
            )
            
            (6,148,200
            )Net
                deferred income taxes
            
            $
            -
            
            $
            -




At
      December 31, 2007, the Company has net operating loss carryforwards for federal
      income tax purposes, which are estimated to be approximately $124.1
      million and which
      expire from tax years 2018 to 2026. The actual amount of net operating losses
      will be determined at the time the Company’s tax returns are filed. The Company
      made no payments for income taxes for the years ended December 31, 2007, 2006
      and 2005.


The
        Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for
        Uncertainty in Income Taxes,” effective January 1, 2007. FIN 48 clarifies the
        accounting for income taxes by prescribing the minimum recognition threshold
        a
        tax position is required to meet before being recognized in the consolidated
        financial statements. FIN 48 also provides guidance on de-recognition,
        measurement, classification, interest and penalties, accounting in interim
        periods, disclosure and transition. The Company had no significant unrecognized
        tax benefits at the date of adoption or at December 31, 2007. Accordingly,
        the
        Company does not have any interest or penalties related to uncertain tax
        positions. However, if interest or penalties were to be incurred related
        to
        uncertain tax positions, such amounts would be recognized in income tax expense.
        Tax periods for all years after 2003 remain open to examination by the federal
        and state taxing jurisdictions to which it is subject.




89




**NOTE
      19 — COMMITMENT AND CONTINGENCIES**




**Stock
      options to underwriters**




In
      connection with the initial public offering (“Offering”), the Company sold to
      the Representatives an option, for $100, to purchase up to a total of 1,000,000
      units at $7.50 per Unit. The Company accounted for the fair value of the option,
      inclusive of the receipt of the $100 cash payment, as an expense of the Offering
      resulting in an increase and a charge directly to stockholders’ equity. The
      option has been valued at the date of issuance at $780,000 based upon a
      Black-Scholes valuation model, using an expected life of five years, volatility
      of 15.90% and a risk-free interest rate of 3.980%. The volatility calculation
      is
      based on the 180-day volatility of the Russell 2000 Index. An expected life
      of
      five years was taken into account for purposes of assigning a fair value to
      the
      option. The option may be exercised for cash, or on a “cashless” basis, at the
      holder’s option, such that the holder may receive a net amount of shares equal
      to the appreciated value of the option. The Units issuable upon exercise of
      this
      option are identical to the Units in the Offering, except that the Warrants
      included in the option have an exercise price of $6.00. Although the purchase
      option and its underlying securities have been registered under the Offering,
      the option grants to holders demand and “piggy back” registration rights for
      periods of five and seven years, respectively, from the date of the Offering
      with respect to the registration under the Securities Act of the securities
      directly and indirectly issuable upon exercise of the option. The Company will
      bear all fees and expenses relating to the registration of the securities,
      other
      than underwriting commissions which will be paid for by the holders themselves.
      The exercise price and number of units issuable upon exercise of the option
      may
      be adjusted in certain circumstances including in the event of a stock dividend,
      or recapitalization, reorganization, merger or consolidation. However, the
      option will not be adjusted for issuances of common stock at a price below
      its
      exercise price.




**Employment
      Agreements**




Effective
      on the date of the Merger Transaction, the Company entered into employment
      agreements with Larry Morton and Gregory Fess. The term of the employment under
      the respective agreements for each individual is three years and provides for:
      a
      base salary of $520,000 and $315,000, respectively, to be reviewed annually,
      a
      bonus compensation amount to be determined at the discretion of the Compensation
      Committee of the Company’s Board of Directors and stock options including
      initial grants of 2,000,000 and 250,000 options, respectively. The options,
      approved and granted by the Compensation Committee on May 9, 2007, have an
      exercise price equal to the fair market value of the stock in accordance with
      the 2007 Stock Incentive Plan ($4.30) and vest in four equal installments
      commencing March 30, 2007 the date of the signing of the employment
      agreements, and on each anniversary thereafter. The options are exercisable
      for
      a minimum of 5 years.




**Litigation**




In
      connection with the merger between Equity Broadcasting Corporation ("EBC")
      and
      the Company, EBC and each member of EBC’s board of directors was named in a
      lawsuit filed by an EBC shareholder in the circuit court of Pulaski County,
      Arkansas on June 14, 2006. As a result of the merger between EBC and the
      Company, pursuant to which EBC merged into the Company, the Company, which
      was
      renamed Equity Media Holdings Corporation, is a party to the lawsuit. The
      lawsuit contains both a class action component and derivative claims. The class
      action claims allege various deficiencies in EBC’s proxy used to inform its
      shareholders of the special meeting to consider the merger. These allegations
      include: (i) the failure to provide sufficient information regarding the
      fair value of EBC’s assets and the resulting fair value of EBC’s Class A
      common stock; (ii) that the interests of holders of EBC’s Class A
      common stock are improperly diluted as a result of the merger to the benefit
      of
      the holders of EBC’s Class B common stock; (iii) failure to
      sufficiently describe the further dilution that would occur post-merger upon
      exercise of the Company’s outstanding warrants; (iv) failure to provide
      pro-forma financial information; (v) failure to disclose alleged related
      party transactions; (vi) failure to provide access to audited consolidated
      financial statements during previous years; (vii) failure to provide
      shareholders with adequate time to review a fairness opinion obtained by EBC’s
      board of directors in connection with the merger; and (viii) alleged sale
      of EBC below appraised market value of its assets. The derivative components
      of
      the lawsuit allege instances of improper self-dealing, including through a
      management agreement between EBC and Arkansas Media.




In
      addition to requesting unspecified compensatory damages, the plaintiff also
      requested injunctive relief to enjoin EBC’s annual shareholder meeting and the
      vote on the merger. An injunction hearing was not held before EBC’s annual
      meeting regarding the merger so the meeting and shareholder vote proceeded
      as
      planned and EBC’s shareholders approved the merger. On August 9, 2006,
      EBC’s motion to dismiss the lawsuit was denied. On February 21, 2007, the
      plaintiff filed a “Motion to Enforce Settlement Agreement” with the court
      alleging the parties reached an oral agreement to settle the lawsuit. The
      plaintiff subsequently filed a motion to withdraw the motion to settle and
      filed
      a “Third Amended Complaint” on April 10, 2007. This motion added two
      additional plaintiffs and expanded on the issues recited in the previous
      complaints. On July 31, 2007, the plaintiff filed a “Fourth Amended
      Complaint”. This pleading added three new plaintiffs and three new defendants to
      the proceedings. The three additional defendants bear a fiduciary relationship
      to three previously named defendants. On July 31, 2007, the plaintiffs filed
      a
“Motion for Class Certification.” Although the motion has been fully briefed by
      the parties, the plaintiffs have not yet sought a hearing date on the class
      certification issue. Currently, the parties continue to engage in discovery.
      No
      court date has been set for this case.




90




Management
      believes that this lawsuit has no merit and asserts that the Company has
      negotiated in good faith to attempt to settle the lawsuit. Regardless of the
      outcome management does not expect this proceeding to have a material impact
      of
      its financial condition or results of operations in 2007 or any future period.




Although
      the Company is a party to certain other pending legal proceedings in the normal
      course of business, management believes the ultimate outcome of these matters
      will not be material to the financial condition and future operations of the
      Company. The Company maintains liability insurance against risks arising out
      of
      the normal course of its business.




**EBC
      Dissenting Shareholders**




In
      connection with the Merger Transaction (see Note 4 – Merger Transaction)
      shareholders of EBC representing 66,500 shares of EBC Class A common stock
      elected to convert their shares to cash in accordance with Arkansas law. The
      Company recorded a liability in the amount of $368,410 to convert the shares
      plus $9,970 of accrued interest based on a conversion rate of $5.54 per share
      plus interest accruing from the date of the Merger Transaction at the rate
      of
      9.78% per annum. On July 10, 2007, the dissenting shareholders were
      paid $378,380 in cash for the value of their shares including all interest
      accrued to date. Pursuant to Arkansas Code, the dissenting shareholders
      exercised their right to contest the Company’s valuation and have demanded
      payment of an additional $17.78 per share plus accrued interest at
      9.78% per annum. In accordance with Arkansas Code, the Company has
      petitioned the court for a determination of the fair value of the shares and
      believes its valuation will prevail.




**Obligations**




The
      Company is obligated under non-cancelable operating leases for office and
      station space, tower sites, and broadcast and office equipment. The Company
      is
      obligated under contracts for the rights to broadcast certain features and
      syndicated television programs.





At
      December 31, 2007, future minimum rental commitments under non-cancelable
      operating leases with initial or remaining terms in excess of one year are
      as
      follows:





2008
            
            $
            1,690,6572009
            
            
            1,387,1672010
            
            
            1,144,5862011
            
            
            833,2652012
            
            
            683,085Thereafter
            
            
            3,915,876$
            9,654,636





Total
      rent expense under operating leases for the years ended December 31, 2007,
      2006
      and 2005 was approximately $2,499,000, $2,191,000, and $1,938,000, respectively.





As
      of
      December 31, 2007, certain equipment was leased under capital equipment
      facilities. Future minimum lease payments under capital leases as of December
      31, 2007 are as follows:





2008
            
            $
            44,5462009
            
            
            41,6752010
            
            
            32,5782011
            
            
            32,7812012
            
            
            34,456Thereafter
            
            
            -$
            186,036




91




Equipment
      leased under capital equipment facilities had a cost of $375,795 and accumulated
      depreciation of $186,273 as of December 31, 2007.




**Program
      Broadcast Rights Payable**





The
      Company entered into agreements for program broadcast rights of approximately
      $3,927,570 and $2,181,000, which became available in 2007 and 2006,
      respectively. Program rights that have been contracted for (excluding barter
      agreements), but were not currently available for airing aggregated
      approximately $1,682,875 and $1,003,000 and at December 31, 2007 and 2006,
      respectively.





Future
      maturities of the Company’s program rights payables are as follows:





2008
            
            $
            2,094,7372009
            
            
            613,4002010
            
            
            361,0992011
            
            
            141,2182012
            
            
            13,000Thereafter
            
            
            11,928$
            3,235,382




**NOTE
      20 — RELATED PARTY TRANSACTIONS**




Amounts
      due (to) from affiliates and related parties at December 31, 2007 and
      December 31, 2006 consist of the following:




**December 31,2007**
            
            **December 31,****2006**Univision
                Communications, Inc.
            
            $
            (2,295,837
            )
            $
            (726,003
            )Arkansas
                Media, LLC and affiliates
            
            
            19,581
            
            
            (86,462
            )Royal
                Palm Capital Management, LLP
            
            
            (225,000
            )
            
            —Little
                Rock TV 14, LLC
            
            
            (78,626
            )
            
            (67,622
            )Actron,
                Inc.
            
            
            -
            
            
            (526,092
            )Retro
                Television Corporation, Inc
            
            
            (8,224
            )
            
            -Other
            
            
            72,364
            
            
            16,123Due
                (to) from affiliates and related parties
            
            
            (2,515,742
            )
            
            (1,390,056
            )Less
                current portion
            
            
            (2,509,480
            )
            
            (1,338,557
            )Non
                – current portion
            
            $
            (6,262
            )
            $
            (51,499
            )




Arkansas
      Media, LLC owned 75% of EBC’s Class B common shares outstanding at
      December 31, 2006 and up to the date of the closing of the Merger
      Transaction (see Note 4 — Merger Transaction). The owners of Arkansas Media, LLC
      held management and board of director positions within EBC. In addition to
      the
      transactions noted below, Arkansas Media, LLC had, at times, acted as a broker
      on behalf of the Company and others that hold rights to broadcast construction
      permits which they wish to sell. Arkansas Media, LLC also owned three television
      stations which were operated by the Company on a fee basis under a LMA’s until
      March 29, 2007 (see Note 5 — Arkansas Media Settlement Transaction).




92




The
      Company incurred expenses related to management fees and commissions in the
      amount of $1,547,581, $1,596,682 and $1,475,282 for the years ended December
      31,
      2007, 2006 and 2005, respectively, for services rendered to the Company by
      Arkansas Media, LLC and its affiliates. Additionally, the Company accrued
      expenses related to operating fees of $24,000, $96,000 and $96,000 for the
      years
      ended December 31, 2007, 2006 and 2005, respectively, under LMA’s with Arkansas
      Media, LLC Subsequent to the Arkansas Media Settlement, the Company determined
      that an additional $37,416 in fees and commissions were due to Arkansas Media,
      LLC for services performed during the three month period ended March 31,
      2007. These fees were paid in full on April 16, 2007.




The
      amount due Arkansas Media as of December 31, 2006 was paid in full as part
      of the Arkansas Media Settlement (see Note 5 — Arkansas Media Settlement
      Transaction). Actron, Inc. was due the above amount in connection with the
      Company’s purchase of Central Arkansas Payroll Company, currently a wholly-owned
      subsidiary of the Company. Larry Morton, Greg Fess and Max Hooper own
      approximately 85% of Actron, Inc. The amount due Actron, Inc. as of
      December 31, 2006 was paid in connection with the Arkansas Media Settlement
      (see Note 5 — Arkansas Media Settlement Transaction).




Other
      than the amount due Actron, Inc., these related party balances were unsecured,
      non-interest bearing and did not contain stated repayment terms.




**Management
      Services Agreement**




Upon
      the
      closing of the Merger Transaction, the Company entered into a management
      services agreement with Royal Palm Capital Management, LLP (“Royal Palm”). The
      agreement generally provides that Royal Palm will provide general management
      and
      advisory services for an initial term of three years, subject to renewal
      thereafter on an annual basis by approval of a majority of the independent
      directors serving on the Company’s Board of Directors. The services to be
      provided include, but are not limited to, establishing certain office,
      accounting and administrative procedures, helping the Company obtain financing,
      advising the Company in securities matters and future acquisitions or
      dispositions, assisting the Company in formulating risk management policies,
      coordinating public relations and investor relations efforts, and providing
      such
      other services as may be reasonably requested by the Company and agreed to
      by
      Royal Palm. Royal Palm shall receive an annual management fee of $1,500,000,
      in
      addition to the reimbursement of budgeted out-of -pocket costs and expenses
      incurred in the performance of Royal Palm’s management services. The management
      services agreement may be terminated upon the material failure of either party
      to comply with its stated duties and obligations, subject to a 30-day cure
      period.




Royal
      Palm has agreed to defer receipt of its
      management fee so long as the obligation to the lenders under the credit
      agreement remains outstanding.




Certain
      officers and directors of Royal Palm also serve as officers and directors of
      the
      Company. For this reason, Royal Palm is generally prohibited from engaging
      in
      activities competitive with the business of the Company post-closing, unless
      such restriction is waived by the Board of Directors of the Company.




Management
      fees of $1,125,000 and general and administrative expenses of $40,545 were
      incurred by the Company for the year ended December 31, 2007 for services
      rendered by Royal Palm Partners, LLC. As of December 31, 2007, the Company
      has
      recorded prepaid expenses of $100,000 representing amounts advanced to Royal
      Palm pursuant to the management services agreement.




**Univision
      Affiliation Agreement**




Univision
      owns 100% of the Company’s outstanding Series A Convertible Non-Voting
      Preferred Stock. Immediately following the closing of the Merger Transaction,
      Univision Network Limited Partnership and Telefutura revised and executed new
      Affiliation Agreements for all existing television broadcast stations
      attributable to the Company that are Univision and Telefutura affiliates. These
      new agreements contain substantially the same terms and conditions as the
      previous affiliation agreements, but were renewed for 15 year terms
      beginning at the closing of the Merger Transaction.




Univision
      also acts as the national sales agent for the Company’s Spanish-language
      television stations. The Company pays Univision a 15% commission on those sales.
      The Company also operates its Salt Lake City Univision television station,
      KUTH
      through a local marketing agreement (LMA) with Univision. The Company incurred
      expenses related to commissions in the amounts of $676,255, $312,180, and
      $150,083 for the years ended December 31, 2007, 2006 and 2005, respectively
      for
      sales made on behalf of the Company by Univision. Additionally, the Company
      accrued expenses related to operating fees of $323,338, $319,924 and $332,981
      for the years ended December 31, 2007, 2006 and 2005, respectively under the
      LMA
      with Univision.




93




**RTN
      Intellectual Property Agreement**




Prior
      to
      the Merger Transaction, the Company entered into an intellectual property
      agreement with Retro Television Network, Inc., a company controlled by Larry
      Morton, a director, former President and CEO of the Company and current
      Chairman, President and CEO of Retro Programming Services, Inc, a wholly owned
      subsidiary of the Company. Under the terms of the agreement, Retro Television
      Network, Inc. assigned 100% of the creative and intellectual rights for the
      Retro Television Network (“RTN”) to the Company in exchange for a ten
      (10) percent royalty fee to be paid solely from the revenues of non-Company
      owned stations that utilize the RTN concept and/or affiliate with RTN. The
      agreement also provides that in the event the Company was to sell its assigned
      rights in RTN to an unrelated third party, Retro Television Network, Inc.,
      at
      its option, may convert the royalty fee to a twenty (20) percent interest
      of the sales proceeds. As of December 31, 2007, royalty fees in the amount
      of
      $8,224 have been accrued, and no royalty fees were paid to Retro Television
      Network, Inc. for the years ended December 31, 2007, 2006 or 2005, respectively.




**NOTE
      21 — CONCENTRATION OF CREDIT RISK**





Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist primarily of accounts receivable and cash. Management generally
      does not require collateral to support accounts receivable. However, accounts
      receivable are comprised of a diversified customer base that results in a
      reduction in the concentrations of credit risk. In addition, the Company employs
      credit-monitoring policies that, in management’s opinion, effectively reduce any
      potential credit risk to an acceptable level. Credit losses have been within
      management’s expectations based on the Company’s credit monitoring polices and
      ongoing relationships with its customers.




Cash
      accounts at financial institutions are insured by the Federal Deposit Insurance
      Corporation up to $100,000. At December 31, 2007 and 2006 and at various times
      throughout these years, the Company maintained balances in excess of that
      federally insured limit. The accounts at the brokerage firm contain cash and
      cash equivalents, and balances are insured up to $500,000, with a limit of
      $100,000 for cash, with the Securities Investor Protection Corporation (“SIPC”).
      At December 31, 2007 and 2006 and at various times throughout these years,
      the
      Company maintained balances in excess of that insured limit.




**NOTE
      22 — EMPLOYEE BENEFIT PLAN**





The
      Company sponsors a defined contribution plan covering substantially all of
      the
      Company’s employees. The plan is qualified under Section 401(k) of the Internal
      Revenue Code. Under the provisions of the plan, eligible participating employees
      may elect to contribute up to the maximum amount of tax deferred contribution
      allowed by the Internal Revenue Code (15% of wages or $13,000, whichever is
      less). The Company matches a portion of such contributions up to a maximum
      percentage of the employees’ compensation (50% of employee contributions, not to
      exceed $1,000 per employee annually). The Company’s contributions to the plan
      for the years ended December 31, 2007, 2006 and 2005 were $35,241, $31,353,
      and
      $34,727, respectively.





**NOTE
      23 — SUBSEQUENT EVENTS**





**Refinancing
      of Credit Facility**





On
      February 13, 2008, Equity Media Holdings Corporation (“Company”) entered into a
      new credit facility with Silver Point Finance, LLC and Wells Fargo Foothill,
      Inc. This agreement refinances the existing credit facility with the same
      parties and provides Equity Media with the release of certain reserves. In
      order
      to comply with certain provisions of the new agreement, the Company agreed
      to
      pursue the sale of certain assets. Prior to the amendment and restatement of
      the
      credit facility in February 2008, the Company was subject to certain financial
      covenants, including among others, that the Company meet minimum revenue and
      EBITDA levels. At December 31, 2007, the Company was not in compliance with
      these covenants. However, after the amendment and restatement of the credit
      facility, the Company’s previous events of default were waived and eliminated. (
      See Note 13 – Notes Payable.)




94




On
      March
      20, 2008, the Company entered into an amendment (“Amendment”) to its Third
      Amended and Restated Credit Agreement (“Credit Agreement”) with Silver Point
      Finance, LLC and Wells Fargo Foothill, Inc. Under the terms of the Amendment,
      the lender group has agreed to forbear from exercising certain of their rights
      and remedies with respect to designated defaults under the Credit Agreement
      through the earlier of (a) April 18, 2008 and (b) the date of occurrence of
      certain events or by which certain events have failed to occur, including the
      Company’s failure to enter into agreements with respect to the sale of certain
      of its assets and the Company’s failure to secure approvals for, and meet other
      criteria with respect to, financing alternatives necessary to meet the Company’s
      immediate capital requirements. Pursuant to the Amendment the Lenders may
      exercise any and all remedies available under the Credit Agreement, including
      making the loan immediately due and payable.





**Changes
      in Management**




On
      January 10, 2008, the Board of Directors appointed Patrick G. Doran as Chief
      Financial Officer.





On
      February 11, 2008, the Board of Directors of Equity Media Holdings Corp.
      (“EMHC”) appointed Henry G. Luken III, the existing Chairman, to the positions
      of President and CEO of EMHC.  The Board of Directors also appointed Larry
      E. Morton, the President and CEO prior to Mr. Luken, to the positions of
      Chairman, President and CEO of Retro Programming Services, Inc., a wholly owned
      subsidiary of EMHC, and dedicate his efforts to the continued growth of the
      Retro Television Network (“RTN”).





**New
      RTN affiliates and contracts**





The
      following table shows stations that have been launched as RTN affiliates since
      December 31, 2007.





**DMA Ranking**
            
            **Station**
            
            **DMA**
            
            **Launched**70
            
            WBAY-DT2
            
            Green
                Bay
            
            1/2/0856
            
            WTEN-DT
            
            Albany
            
            1/7/088
            
            WSB-DT
            
            Atlanta
            
            1/28/0814
            
            KIRO-DT
            
            Seattle-Tacoma
            
            1/28/0867
            
            WSET-DT
            
            Roanoke-Lynchburg
            
            2/21/08114
            
            KWSD
            
            Sioux
                Falls
            
            2/28/0819
            
            WRDQ-DT
            
            Orlando
            
            3/3/08118
            
            WSFA
            
            Montgomery-Selma
            
            3/3/0835
            
            KUSG
            
            Salt
                Lake City
            
            3/17/08





Since
      December 31, 2007, RTN has signed affiliation contracts with the following
      stations in the following markets:





**Station**
            
            **DMA**WJLA-TV
            
            Washington
                DCWHTM-TV
            
            Harrisburg-Lancaster,
                PAWSET-TV
            
            Roanoke-Lynchburg,
                VAKAUN
            
            Sioux
                Falls, SDKUSG
            
            Salt
                Lake City, UT




95




**NOTE
      24 - SEGMENT DATA**





The
      Company operates its business in three primary reporting segments; the
      Television Group, Retro Television Network (RTN), and Uplink Services.
      Operations of the Television Group consist of the sale of air time for
      advertising, the production and broadcasting of news, and the broadcasting
      of
      entertainment and other programming through the Company’s television stations.
      Operations of RTN consist primarily of the combination of popular entertainment
      programs of past decades with local sports, weather and news to provide a
      customized digital feed to its affiliate television stations. Uplink Services
      operations include the provision of programming, traffic, accounting and billing
      services to Company-owned television stations and third party broadcasters
      through the Company’s centralized facility in Little Rock, Arkansas. The Company
      does not allocate corporate overhead or the eliminations of intercompany
      transactions to the primary reporting segments.





Years
                Ended December 31,**2007**
            
            **2006**
            
            **2005**(in
                thousands)**Broadcast
                Revenue**Television
            
            $
            27,876
            
            $
            29,896
            
            $
            27,063Retro
                Television Network
            
            
            460
            
            
            109
            
            
            -Uplink
                Services
            
            
            586
            
            
            836
            
            
            1,050Corporate
                and eliminations
            
            
            (659
            )
            
            (446
            )
            
            (641
            )$
            28,264
            
            $
            30,395
            
            $
            27,471**Depreciation
                and amortization**Television
            
            $
            2,270
            
            $
            1,854
            
            $
            2,351Retro
                Television Network
            
            
            16
            
            
            -
            
            
            -Uplink
                Services
            
            
            1,301
            
            
            965
            
            
            876Corporate
                and eliminations
            
            
            573
            
            
            464
            
            
            426$
            4,160
            
            $
            3,283
            
            $
            3,652**Segment operating income (loss)**Television
            
            $
            (9,098
            )
            $
            (6,499
            )
            $
            (6,813
            )Retro
                Television Network
            
            
            (1,673
            )
            
            (188
            )
            
            -Uplink
                Services
            
            
            (1,412
            )
            
            (592
            )
            
            (1,008
            )Corporate
                and eliminations
            
            
            (21,659
            )
            
            (7,406
            )
            
            (6,346
            )**Consolidated**
            
            $
            (33,842
            )
            $
            (14,684
            )
            $
            (14,167
            )Impairment
                charge
            
            
            -
            
            
            200
            
            
            1,689**Operating
                income (loss)**
            
            
            (33,842
            )
            
            (14,884
            )
            
            (15,856
            )**Capital
                Expenditures**Television
            
            
            1,772
            
            
            1,647
            
            
            1,518Retro
                Television Network
            
            
            506
            
            
            -
            
            
            -Uplink
                Services
            
            
            3,663
            
            
            825
            
            
            795Corporate
                and eliminations
            
            
            1,441
            
            
            258
            
            
            76Consolidated
            
            $
            7,382
            
            $
            2,730
            
            $
            2,389**Total
                Assets**Television
            
            
            90,589
            
            
            89,233
            
            
            94,803Retro
                Television Network
            
            
            3,014
            
            
            438
            
            
            -Uplink
                Services
            
            
            10,184
            
            
            7,211
            
            
            6,521Corporate
                and eliminations
            
            
            9,946
            
            
            5,178
            
            
            10,325Assets held for sale (Television)
            
            
            9,521
            
            
            12,353
            
            
            8,509Consolidated
            
            $
            123,254
            
            $
            114,413
            
            $
            120,159




96




**NOTE
      25 —** **QUARTERLY
      RESULTS OF OPERATIONS (UNAUDITED)**




The
      following is a summary of the quarterly results of operations for the years
      ended December 31, 2007 and 2006 (in thousands, except per share
      data):


**Year
                  ended December 31, 2007:**
              
              **First**
                **Quarter**
              
              **Second**
                **Quarter**
              
              **Third**
                **Quarter**
              
              **Fourth**
                **Quarter**
              
              **Total**Broadcast
                    revenue
              
              $
              6,774
              
              $
              7,015
              
              $
              7,508
              
              $
              6,967
              
              $
              28,264Net
                  income (loss)
              
              
              (14,013
              )
              
              (9,442
              )
              
              (7,656
              )
              
              (9,631
              )
              
              (40,742
              )Net
                  loss available to common shareholders
              
              
              (26,148
              )
              
              (9,627
              )
              
              (7,841
              )
              
              (9,818
              )
              
              (53,434
              )Net
                  income (loss) available to common shareholders per share, basic
                  and
                  diluted
              
              $
              (1.02
              )
              $
              (0.25
              )
              $
              (0.19
              )
              $
              (0.23
              )
              $
              (1.46
              )




**Year
                  ended December 31, 2006:**
              
              **First**
                **Quarter**
              
              **Second**
                **Quarter**
              
              **Third**
                **Quarter**
              
              **Fourth**
                **Quarter**
              
              **Total**Net
                  revenue
              
              $
              7,274
              
              $
              8,654
              
              $
              7,148
              
              $
              7,319
              
              $
              30,395Net
                  income (loss)
              
              
              (4,559
              )
              
              (4,440
              )
              
              (5,205
              )
              
              20,318
              
              
              (3,228
              )Net
                  income (loss) per share, basic and diluted
              
              $
              (0.18
              )
              $
              (0.18
              )
              $
              (0.21
              )
              $
              0.80
              
              $
              (0.13
              )





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








97





98







99







100





101




**ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**


None.





**ITEM
      9A. CONTROLS AND PROCEDURES**




**EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES**




The
      Company’s management, under the supervision and with the participation of the
      Chief Executive Officer and the Chief Financial Officer, evaluated the
      effectiveness of the design and operation of the Company’s disclosure controls
      and procedures, as defined in Exchange Act Rule 13a-15(e), as of December 31,
      2007. Based on the evaluation and the material weaknesses noted below,
      management concluded that the disclosure controls and procedures were not
      effective as of December 31, 2007.





**MANAGEMENT'S
      ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting, as such term is defined in Exchange Act Rules 13a-15(f)
      and
      15d-15(f). The Company’s internal control system is a process designed by, or
      under the supervision of, the Company’s principal executive and principal
      financial officers, or persons performing similar functions, and effected by
      the
      Company’s board of directors, management and other personnel, to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      U.S. generally accepted accounting principles (U.S. GAAP).





The
      Company's internal control over financial reporting includes policies and
      procedures that pertain to the maintenance of records that, in reasonable
      detail, accurately and fairly reflect transactions and dispositions of assets;
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with U.S. GAAP, and
      that receipts and expenditures are being made only in accordance with the
      authorization of its management and directors; and provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use or
      disposition of the Company's assets that could have a material effect on its
      consolidated financial statements.




102




Because
      of its inherent limitations, internal control over financial reporting
      may not prevent or detect misstatements. Also, projections of any evaluation
      of
      effectiveness to future periods are subject to risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





A
      material weakness is a deficiency, or a combination of deficiencies, in internal
      control over financial reporting, such that there is a reasonable possibility
      that a material misstatement of the annual or interim financial statements
      will
      not be prevented or detected on a timely basis.





Management
      conducted an assessment of the effectiveness of the Company's internal control
      over financial reporting as of December 31, 2007 based on the framework
      published by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO), referred to as the Internal Control - Integrated Framework.
      The objective of this assessment is to determine whether the Company's internal
      control over financial reporting was effective as of December 31, 2007. As
      a
      result of management’s work, management has concluded that there was an
      ineffective control environment over the Company’s financial
      reporting.





Management
      has identified the following specific material weakness in the Company's
      internal control over financial reporting as of December 31, 2007:





(i)
            We
                did not maintain effective internal controls over the preparation,
                review,
                and approval surrounding certain account reconciliations, journal
                entries
                and accruals; including and related to analysis and evidence of management
                review.





Planned
      remediation for 2008 includes:





The
      Company recently hired a new Chief Financial Officer, established a Chief
      Accounting Officer position and added a financial analyst to the accounting
      and
      finance department. With these additions, the Company is in the process of
      establishing more robust reconciliation and review procedures.





Despite
      our assessment that our system of internal control over financial reporting
      was
      ineffective and the above disclosed material weakness, we believe that our
      consolidated financial statements contained in this Form 10-K filed with the
      SEC
      fairly present our financial position, results of operations and cash flows
      for
      all years covered thereby in all material respects. We also received an
      unqualified audit report from our independent registered public accounting
      firm
      on those consolidated financial statements.





**CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING**





There
      were no changes in the Company’s internal control over financial reporting that
      occurred during the Company’s last fiscal quarter that have materially affected,
      or are reasonably likely to affect the Company’s internal control over financial
      reporting.





**ATTESTATION
      REPORT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**





See
      Item
      8 of this Annual Report on Form 10-K for the attestation report of Moore
      Stephens Frost PLC., the Company’s independent registered public accounting
      firm, which is incorporated herein by reference.





**ITEM
      9B. OTHER INFORMATION**





None.




103




**PART
      III**




**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**





**Directors
      and Executive Officers**





The
      following tables sets forth the names, ages and offices of the present executive
      officers and directors of the Company. The periods during which such persons
      have served in such capacities are indicated in the description of business
      experience of such person below.





**Directors**





Name
                and Age
            
            
            
            Principal
                Occupation and Business ExperienceHenry
                G. Luken III,
            
            48
            
            Chairman
                of the Board of Directors since March 30, 2007. Mr. Luken has served
                as
                Chairman of Covista Communications, a publicly-held global exchange
                telephone company since 1999 and has extensive business and
                telecommunications experience. Prior to purchasing a major interest
                in
                Covista in 1999, Mr. Luken founded long distance telephone service
                re-sellers Telco Communications and Long Distance Wholesale Club
                in 1993.
                Telco was a pioneer in dial-around long distance service with Dial
                and
                Save, Inc., which grew into a successful telecommunications company
                and
                was sold to Excel Communications in 1997 for $1.2 billion. Mr. Luken
                also
                owns interests in several TV and radio stations.Larry
                E. Morton
            
            60
            
            Director
                since March 30, 2007 and served as President and CEO until February
                11,
                2008. Mr. Morton is one of the founders of Equity Broadcasting Corporation
                (“EBC”), the predecessor to Equity Media Holders Corporation (“EMHC”). Mr.
                Morton was a member of EBC’s Board of Directors from its inception in
                1998. Prior to forming EBC, Mr. Morton was the President/Manager
                of Las
                Vegas Media, LLC and Kaleidoscope Affiliates, LLC, media companies
                that
                were the predecessor entities to EBC, from 1994 to 1998. Mr.
                Morton was very involved in the creation of EMHC’s C.A.S.H.
                System, which gives the company a programming distribution method
                that
                allows for greater cable carriage and lower capital and operating
                costs at
                each station, and in the development of RTN, EMHC’s new programming
                concept that is designed to help broadcasters maximize the value
                of their
                digital broadcast spectrum.Robert
                B. Becker
            
            59
            
            Director
                since March 30, 2007. Mr. Becker was a member of EBC’s Board of Directors
                since June 30, 2000. Since its formation in September 1986, Mr. Becker
                has
                been the President of Robert B. Becker, Inc., a private consulting
                company
                specializing in business combinations, new business initiatives and
                contractual negotiations in the broadcasting, entertainment, media
                and
                communications segments. Mr. Becker recently served as the Chief
                Financial
                Officer, Treasurer, Secretary and a member of the Board of Directors
                of
                Juniper Partners Acquisition Corp., a publicly traded blank check
                company
                that has filed a Form S-4 to purchase Firestone Communications, Inc.
                Firestone is a privately owned diversified media and communications
                company. From 1989 to 1991, he served as Chief Financial Officer
                and
                Treasurer of Memry Corporation, a publicly traded company that develops
                and markets new products. From 1980 until entering the consulting
                business, Mr. Becker served as Vice President and Controller of HBO,
                and
                Director of Programming Finance of HBO from 1978 to 1980. Prior to
                this,
                he held various positions in the financial department of Time,
                Inc.Robert
                Farenhem
            
            37
            
            Director
                since March 30, 2007. Mr. Farenhem is a partner and co-founder of
                Royal
                Palm Capital Partners, a private investment firm. Mr. Farenhem serves
                as
                President of Devcon International Corp. and sits on the boards of
                Equity
                Media Holdings Corporation and American Residential Services. Mr.
                Farenhem
                was the Executive Vice President of Strategic Planning and Corporate
                Development for publicly-held Bancshares of Florida and Chief Financial
                Officer for Bank of Florida from February 2002 to April 2003. Previously,
                Mr. Farenhem was an investment banker with Banc of America Securities
                from
                October 1998 to February 2002, advising on mergers and acquisitions,
                public and private equity, leveraged buyouts, and other
                financings.Michael
                Flynn
            
            59
            
            Director
                since March 30, 2007. Mr. Flynn has served on the board of Airspan
                Networks, Inc., since 2003, a provider of broadband wireless equipment
                and
                is on the boards of iLinc, a provider of web collaboration and audio
                conferencing services as well as privately held GENBAND and Calix,
                both
                manufacturers of next generation broadband access and Voice over
                IP
                telecom equipment. He was a Director of WebEx from 2004 to 2007,
                when it
                was acquired by Cisco. Prior to his retirement in March 2004, Mr.
                Flynn
                served as Assistant to the Chief Executive Officer of Alltel Corporation.
                From April 19978 to May 2003, Mr. Flynn served as Group President
                of
                Communications of Alltel. From June 1994 to April 1997, Mr. Flynn
                served
                as President of the Telephone Group of
                Alltel.




104




Manuel
                Kadre
            
            42
            
            Director
                since March 30, 2007. Mr. Kadre is the Vice President and General
                Counsel
                of the de la Cruz Companies (Eagle Brands, Inc., Coca-Cola Puerto
                Rico
                Bottlers, Caribbean Bottlers Trinidad & Tobago, CCPRB (Jamaica) Ltd.
                And Coca-Cola St. Maarten) since 1995. In 2006 Mr. Kadre assumed
                the role
                of President of CC1 Caribbean Importers LLC, the companies’ import company
                for the Caribbean. Mr. Kadre also serves in an executive role with
                AutoNation, Inc. a publicly traded Fortune 500 company since 1997.
                Mr.
                Kadre was a member of the law firm of Murai, Wald, Biondo & Moreno
                from 1991 to 1994 and served as Judicial Law Clerk to the Honorable
                Federico Moreno, United States District Judge, Southern District
                of
                Florida from 1990 to 1991.John E. Oxendine
            
            65
            
            Director
                since March 30, 2007. Mr. Oxendine has been a lender and investor
                in the
                broadcast industry for over twenty years; primarily investing in
                minority
                owned or controlled companies. Mr. Oxendine is currently Chairman,
                President and CEO of Broadcast Capital, Inc., a Virginia corporation
                (“Broadcap”), and President and CEO of Blackstar Management, LLC, a
                Florida limited liability company which provides consulting services
                to
                the communications industry. Mr. Oxendine served as Broadcap’s President
                from 1981-1995 and has served as Board Chairman from 1999 to present,
                reassuming the positions of President and CEO in January 2004. Mr.
                Oxendine also served from 1981-1995 as President, and as Board Chairman
                from 1999 to Present, of Broadcast Capital Fund, Inc. (“BCFI”),
                incorporated in 1987, which had as its principal business the acquisition,
                ownership and operation of commercial television stations. Prior
                to
                joining Broadcap in 1981, Mr. Oxendine served as Acting Chief of
                the
                Financial Assistance Division-FSLIC of the Federal Home Loan Bank
                Board,
                and from 1974 to 1979; he was an Assistant Manager at the First National
                Bank of Chicago, with overseas assignments in London and Mexico.
                From 1972
                to 1974, Mr. Oxendine held positions with Korn Ferry Associates in
                Los
                Angeles, and from 1971 to 1972 with Fry Consultants in San Francisco.Michael
                Pierce
            
            56
            
            Director
                since March 30, 2007. Mr. Pierce is the owner of Papa John’s Pizza
                franchises operating in Arkansas, Missouri and Oklahoma since 1991
                and the
                owner of RLB Propertys LLC, a Real Estate investing and development
                company which he founded in 1990. Mr. Pierce has also served on Papa
                John’s Pizza Board of Directors from 1993 (initial IPO) until 2003 and
                served on various committees including Chairman of Audit Committee
                and is
                presently Vice Chairman of Franchise Advisory Council. Mr. Pierce
                currently serves on the Board of Baptist Health
                Hospital.





Our
      board
      of directors is divided into three classes with only one class of directors
      being elected in each year and each class serving a three-year
      term.





**Committees
      of the Board of Directors**




The
      Board
      of Directors has the following three standing Committees: The Nominating and
      Corporate Governance Committee; the Audit Committee and the Compensation
      Committee.




***Nominating
      Committee***




The
      Nominating Committee consists of Messrs. Michael T. Flynn and Manny Kadre.
      The
      Nominating Committee did not meet during 2007. The members of the committee
      are
“independent” as defined in the marketplace rules which govern NASDAQ Stock
      Market. The purpose of the Nominating Committee is to identify individuals
      qualified to serve on EMHC’s Board of Directors, recommend persons to be
      nominated by the Board of Directors for election as directors at the annual
      meeting of stockholders, recommend nominees for any committee of the Board
      of
      Directors, develop and recommend to the Board of Directors a set of corporate
      governance principles applicable to EMHC and to oversee the evaluation of the
      Board of Directors and its committees. The Nominating Committee operates under
      a
      written charter adopted by the Board of Directors in April 2007.




***Audit
      Committee Financial Expert*** **




The
      Audit
      Committee consists of Messrs. Robert B. Becker (Chairman), John E. Oxendine
      and
      Mike W. Pierce. The Audit Committee met five times during 2007. The purpose
      of
      the Audit Committee is to oversee the quality and integrity of EMHC’s
      accounting, internal auditing and financial reporting practices, to perform
      such
      other duties as may be required by the Board of Directors, and to oversee EMHC’s
      relationship with its independent registered public accounting firm. The members
      of the Audit Committee are “independent” as that term is defined in the National
      Association of Securities Dealers Listing Standards. The Board of Directors
      has
      determined that Mr. Becker is an “audit committee financial expert” in
      accordance with the applicable rules and regulations of the SEC. The Audit
      Committee operates under a written charter adopted by the Board of Directors
      in
      April 2007.




105




***Compensation
      Committee*** **




The
      Compensation Committee consists of Messrs. John E. Oxendine (Chairman), Robert
      B. Becker and Michael T. Flynn. The Compensation Committee met three times
      in
      2007.




The
      Compensation Committee makes all decisions about the compensation of the Chief
      Executive Officer and also has the authority to review and approve the
      compensation for the Company’s other executive officers. The primary objectives
      of the Compensation Committee in determining total compensation (both salary
      and
      incentives) of the Company’s executive officers, including the Chief Executive
      Officer, are (i) to enable the Company to attract and retain highly qualified
      executives by providing total compensation opportunities with a combination
      of
      elements which are at or above competitive opportunities, (ii) to tie executive
      compensation to the Company’s general performance and specific attainment of
      long-term incentive for future performance that aligns stockholder interests
      and
      executive rewards.




The
      purpose of the Compensation Committee is to establish compensation policies
      for
      Directors and executive officers of EMHC, approve employment agreements with
      executive officers of EMHC, administer EMHC’s stock option plans and approve
      grants under the plans and make recommendations regarding any other incentive
      compensation or equity-based plans. The Compensation Committee operates under
      a
      written charter adopted by the Board of Directors in April 2007.




**Additional
      Information concerning the Board of Directors**





**Compensation
      of Directors**





**2007
      DIRECTOR COMPENSATION TABLE**





The
      following table sets forth information concerning compensation to each of our
      directors (excluding the Named Executive Officer who is also a director
      disclosed in the Summary Compensation Table) during the fiscal year ended
      December 31, 2007:


**Name**
              
              **Fees Earned**
                **Or**
                **Paid in Cash**
                **($)**
              
              **Stock Awards**
                **($)**
              
              **Option Awards**
                **($)****(1)**
              
              **Non-Equity**
                **Incentive**
                **Plan**
                **Compensation**
                **($)**
              
              **Change**
                **in**
                **Pension**
                **Value**
                **and**
                **Nonqualified**
                **Deferred**
                **Compensation**
                **Earnings**
                **($)**
              
              **All**
                **Other**
                **Compensation**
                **($)****(2)**
              
              **Total**
                **($)**Henry
                  G. Luken III,
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Larry
                  Morton
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Robert
                  B. Becker
              
              
              25,750
              
              
              -
              
              
              3,612
              
              
              -
              
              
              -
              
              
              1,027
              
              
              30,389Robert
                  Farenhem
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Michael
                  Flynn
              
              
              20,500
              
              
              -
              
              
              3,612
              
              
              -
              
              
              -
              
              
              -
              
              
              24,112Manuel
                  Kadre
              
              
              15,000
              
              
              -
              
              
              3,612
              
              
              -
              
              
              -
              
              
              -
              
              
              18,612John
                  Oxendine
              
              
              24,500
              
              
              -
              
              
              3,612
              
              
              -
              
              
              -
              
              
              181
              
              
              28,293Michael
                  W. Pierce
              
              
              19,000
              
              
              -
              
              
              3,612
              
              
              -
              
              
              -
              
              
              -
              
              
              22,612







(1)
            Represents
                the amount recognized as compensation expense in the Company’s financial
                statements in accordance with SFAS No. 123(R) with respect to all
                stock options awarded to our directors. See the notes to the Company’s
                consolidated financial statements found elsewhere in this 2007 Form
                10-K
                for discussion of the assumptions made in the valuation of these
                awards.
                The amount recognized for financial statement reporting purposes
                is
                recognized ratably over the vesting term of the awards. The aggregate
                option awards outstanding for each person in the table set forth
                above as
                of December 31, 2007 are as follows, excluding Directors who are also
                Named Executive Officers and whose option awards are listed elsewhere
                in
                this Form 10-K.:




**Name**
            
            **Vested**
            
            **Unvested**Henry
                G. Luken III,
            
            
            0
            
            
            0Robert
                B. Becker
            
            
            23,930
            
            
            18,000Robert
                Farenhem
            
            
            0
            
            
            0Michael
                Flynn
            
            
            2,000
            
            
            18,000Manuel
                Kadre
            
            
            2,000
            
            
            18,000John
                Oxendine
            
            
            2,000
            
            
            18,000Michael
                W. Pierce
            
            
            2,000
            
            
            18,000





Stock
      options vest equally monthly until the award is fully vested on the fifth
      anniversary of the grant date and expire seven years from the date of
      grant.




106




(2)
            Represents
                reimbursed travel expenses incurred to attend board of directors
                meetings.




**Executive
      Officers**


**Name**
              
              **Age**
              
              **Position
                  within the Company(1)**Henry
                  G. Luken III
              
              48
              
              Chairman
                  of the Board, President & Chief Executive OfficerLarry
                  E. Morton
              
              60
              
              Chairman,
                  CEO & President of Retro Programming Services Inc.Thomas
                  M. Arnost
              
              61
              
              President
                  & CEO – Broadcasting Station GroupPatrick
                  Doran
              
              51
              
              Chief
                  Financial OfficerMark
                  Dvornik
              
              45
              
              Executive
                  Vice President – Retro Television NetworkMario
                  B. Ferrari
              
              30
              
              Chief
                  Strategic OfficerGregory
                  Fess
              
              51
              
              Senior
                  Vice President & COOGlenn
                  Charlesworth
              
              56
              
              Vice
                  President & Chief Accounting OfficerJames
                  Hearnsberger
              
              56
              
              Vice
                  President – Finance &
Administration




(1)
            
            Executive
                officers based on positions held as of March 28,
                2008





*Henry
      G Luken, III* ,
      Chairman of the Board since the March 2007 merger and President and Chief
      Executive Officer and since February 11, 2008. Mr. Luken has served as chairman
      of Covista Communications, a publicly-held global exchange telephone company,
      since 1999 and has extensive business and telecommunications experience. Prior
      to purchasing a major interest in Covista in 1999, Mr. Luken founded long
      distance telephone service re-sellers Telco Communications and Long Distance
      Wholesale Club in 1993. Telco was a pioneer in dial-around long distance service
      with Dial and Save, Inc, which grew into a successful telecommunication company
      and was sold to Excel Communications in 1997 for $1.2 billion. Most
      recently Mr. Luken moved Covista’s headquarters from Little Falls, New
      Jersey to Chattanooga, Tennessee. Mr. Luken also owns interests in several
      TV and radio stations.





*Larry
      E. Morton* ,
      Chairman, President and CEO of Retro Programming Services, Inc. served as
      President and CEO until February 11, 2008 and is one of the founders of EBC
      and
      has been a member of EBC’s board of directors since EBC’s inception in 1998.
      Prior to forming EBC, Mr. Morton was the President/ Manager of Las Vegas
      Media, LLC and Kaleidoscope Affiliates, LLC, media companies that were the
      predecessor entities to EBC, from 1994 to 1998. Mr. Morton was very
      involved in the creation of EMHC's C.A.S.H. TM System,
      which gives the company a programming distribution method that allows for
      greater cable carriage and lower capital and operating costs at each station,
      and in the development of RTN, EBC’s new programming concept that is
      designed to help broadcasters maximize the value of their digital broadcast
      spectrum. Mr. Morton is a graduate of the United States Air Force Academy,
      where he received a B.S. in Economics. He also graduated from the University
      of
      Arkansas where he received a B.S. in Accounting and a Masters in Business
      Administration.





*Thomas
      M Arnost,* President/ CEO of EBC Station Group, served as the former Co-President of
      Univision Communications, Inc. (NYSE: UVN) Station Group, where he joined the
      company in 1994 following the 1992 acquisition of Univision by A. Jerrold
      Perenchio for $550 million. Mr. Arnost served as Co-President of
      Univision Television Group, which owns and operates 62 television stations
      in
      major U.S. Hispanic markets and Puerto Rico, from 1997 to 2005, and prior
      to that as Executive Vice President of Univision Television Group from 1994
      to
      1996. He also served as Station Manager for KMEX-TV in Los Angeles, Univision’s
      flagship station, in 1994. In 2002, Mr. Arnost helped oversee the very
      successful launch of the Telefutura Station Group, which has since,
      significantly contributed to Univision’s overall revenue growth. During
      Mr. Arnost’s tenure, total station group revenue grew from under
      $120 million in 1993 to over $650 million in 2005. Previously, from
      1985 to 1993, Mr. Arnost served as General Sales Manager for Tribune
      Broadcasting Station Group, KTLA-TV in Los Angeles. Positions prior to 1985
      included: 1984, Local Sales Manager Golden West Broadcasting, KTLA-TV,
      1980-1984, National Sales Manager Golden West Broadcasting, KTLA-TV, and
      Mr. Arnost started his broadcast career at Petry Media Television, where he
      served as Account Executive from 1973 to 1979. Mr. Arnost graduated
      from the University of Arizona with a B.A. degree in Business Administration
      and
      a major in finance.




107




*Patrick
      Doran,* Chief
      Financial Officer, joined the Company on January 10, 2008 after serving as
      consultant for two months. Prior to joining the Company, Mr. Doran was retained
      on a consulting basis by Orbit Brands Corporation, a publicly held holding
      company for various diversified subsidiaries, from 2006 to 2007 to act as
      interim chief financial officer in connection with its restructuring. From
      2003
      to 2005, he served as President and chief operating officer of Malibu Beach
      Beverage Group, a specialty beverage manufacturer. From 1997 to 2006 he served
      in various executive capacities, including President and chief operating
      officer, of CTN Media Group, an owner of media and online properties targeted
      at
      young adults. In this capacity he oversaw the acquisition of CTN’s assets by MTV
      in 2002 and CTN’s subsequent wind down following the sale of such assets. Mr.
      Doran also has worked in various executive and managerial capacities in
      auditing, syndication, licensing and distribution with many leading media and
      entertainment companies, including Turner Pictures Worldwide, TBS-Syndication
      and Licensing Group, MGM/UA and Columbia Pictures.




*Mario
      B. Ferrari* Chief
      Strategic Officer, has been a director and vice president of Coconut Palm
      Acquisition Corp. since April 2005. Mr. Ferrari is a co-founder of RPCP, a
      private equity investment and management firm, where he has been a partner
      since
      July 2002. RPCP focuses on making investments in industries poised for
      consolidation and growth and partners with world class management teams in
      respective industries. Mr. Ferrari has also served as a director of
      publicly-held Devcon International Corporation, a provider of electronic
      security services, since July 2004 and as vice chairman of publicly-held Sunair
      Services Corporation, a provider of pest control and lawn care services, since
      February 2005. From June 2000 to June 2002, he was an investment banker with
      Morgan Stanley & Co. Previously, Mr. Ferrari co-founded PowerUSA,
      LLC, a retail renewable energy services company, in October 1997 and was a
      managing member until
      September 1999. Mr. Ferrari graduated from Georgetown University, where he
      received his B.S., magna cum laude, in Finance and International
      Business.




*Gregory
      Fess,* Senior
      Vice President and COO, is one of the founders of EBC and was a member of EBC’s
      board of directors since its inception in 1998. Previously, Mr. Fess was a
      member of the management committee for Las Vegas Media, LC and Kaleidoscope
      Affiliates from 1995 to 1998. He has had extensive experience in the
      acquisition, development and operations of EBC stations, including the launching
      of EBC’s Univision and Telefutura stations. Under his leadership, revenue at
      these stations has experienced significant growth over the past few years.
      Mr. Fess is a graduate of the University of Arkansas, where he received a
      B.A. in Marketing and a Masters in Business Administration. Mr. Fess
      currently serves on the Arkansas Broadcasters Association Board.





*Mark
      Dvornik* Executive Vice President of Retro Television Network, served as Executive Vice
      President and General Sales Manager for Paramount Television Group from
      September 2001 to January 2007. Previously, from 1999 to 2001, Mr. Dvornik
      served as Senior Vice President, General Sales Manager in Los Angeles with
      Paramount. During this time, Paramount assumed control of Worldvision and Rysher
      first-run and off-net sales, taking the Paramount library to over 55,000 hours
      of television. Mr. Dvornik previously served as Vice President,
      Southwestern Regional Manager from 1995 to 1998, Vice President, Southwestern
      Regional Manager from 1992 to 1995, Southwestern Division Manager from 1990
      to
      1992, Central Division Manager from 1988 to 1990 and Account Executive from
      1986
      to 1988. Mr. Dvornik joined Paramount in 1985 as a sales trainee based in
      Los Angeles. Mr. Dvornik earned a Bachelor of Arts degree in English and
      Film from the University of Florida.




*Glenn
      Charlesworth,* Vice
      President and Chief Accounting Officer has been with EBC since 2001 serving
      as
      Controller and Interim Chief Financial Officer until January 10, 2008. He
      oversees the accounting department and is responsible for financial reporting
      duties. Mr. Charlesworth has over 25 years experience in public
      accounting and has previously worked for Cytomedix, Inc, a publicly-traded
      biotechnology company, as CFO and Vice President of Finance.
      Mr. Charlesworth is a graduate of the University of Arkansas, where he
      received a B.S. in Business Administration. Mr. Charlesworth is a member of
      the American Institute of CPAs.




*James
      Hearnsberger,* Vice
      President — Administration and Finance, has been vice president of
      administration with EBC since its 1998 inception. During this time he has been
      active in all areas of the development of the company including property
      acquisition, disposition and management, finance, insurance and project
      development. Mr. Hearnsberger is a graduate of Hendrix College, where he
      received a B.S. in Economics. Mr. Hearnsberger is also a graduate of the
      University of Arkansas, where he received his Masters in Business
      Administration.




108




**Compliance
      with Section 16(a) of the Exchange Act**




Section 16(a)
      of the Securities Exchange Act requires our directors, executive officers and
      persons who are the beneficial owners of more than ten percent of our common
      stock (collectively, the “Reporting Persons”) to file reports of ownership and
      changes in ownership with the Securities and Exchange Commission and to furnish
      us with copies of these reports.





Based
      solely on copies of such forms received or written representations from certain
      Reporting Persons, we believe that, during the fiscal year ended
      December 31, 2007, all filing requirements applicable to the Reporting
      Persons were complied with.





**Code
      of Ethics**





In
      December 2005, the Board of Directors adopted a Code of Ethics that applies
      to our directors, officers and employees. A copy of our code of ethics has
      been
      attached as an exhibit to its Annual Report on Form 10-K for the year ended
      December 31, 2005. Requests for copies of our Code of Ethics should be sent
      in writing to Equity Media Holdings Corporation, #1 Shackleford Drive, Suite
      400, Little Rock, Arkansas 72211, Attention: Corporate Secretary.





**ITEM
      11. EXECUTIVE COMPENSATION**





***Compensation
      Discussion and Analysis***





**Introduction**





In
      this
      Compensation Discussion and Analysis, we provide a detailed discussion and
      analysis of our compensation program and policies and the critical factors
      that
      are considered in making compensation decisions.





Throughout
      Item 11 of this Form 10-K , the individuals who served as the Company’s Chief
      Executive Officer and Chief Financial Officer during fiscal 2007, along with
      the
      other five most highly-compensated executive officers, are collectively referred
      to as the “Named Executive Officers” (or “NEOs”).




**Overview
      and Role of Compensation Committee**





The
      Compensation Committee of the Board of Directors (the “Compensation Committee”)
      establishes compensation policies for the directors and executive officers
      of
      Company, including the Named Executive Officers. The Compensation Committee
      approves the employment agreements with the executive officers of Company,
      administers Company’s stock option plans, approves grants under such plans and
      makes recommendations regarding other incentive compensation or equity-based
      plans provided to the Named Executive Officers and other executive
      officers.





**Compensation
      Philosophy and Objectives**





Our
      objective is to compensate Company’s NEOs in the manner best designed to create
      long-term value for its stockholders. The primary objectives of our executive
      compensation program are to attract talented NEOs to manage and lead the
      Company, reward them for operating and financial performance and to encourage
      them to strive to achieve excellent operating and financial results for the
      Company and its stockholders over the longer term.  To achieve these
      objectives, we maintain a compensation structure consisting of an appropriate
      blend designed to allow us to appropriately reward performance while
      simultaneously encouraging both retention and longer term operating
      success.  These elements consist of salary, annual cash bonus, equity
      incentive compensation and other benefits.  Many of these elements
      simultaneously meet both our near-term and long-term compensation
      goals.




109




**Elements
      of Compensation**





The
      principal elements of the Company’s executive compensation consist of the
      following:





·
            Base
                Salary





·
            Annual
                Cash Bonuses





·
            Stock
                Options





·
            Health
                Benefits





·
            Severance
                Benefits and Change in Control
                Provisions




***Base
      Salary***





The
      annual base salary of many of the Company’s Named Executive Officers is
      established in an employment agreement executed with each individual (see
“Employment Agreements” in this document). The base salary is established based
      on the scope of the executive’s responsibilities. The remaining NEO is employed
      at-will. Annual salary increases for the Named Executive Officers are generally
      consistent, on a percentage basis, with those received by non-executive
      employees.





***Annual
      Cash Bonuses***





Under
      the
      terms of their employment agreements, certain NEOs are eligible to earn targeted
      annual cash bonuses. These are outlined later. The Company does not utilize
      defined formulas for bonuses paid to its executive officers, including its
      NEOs.
      The payment of cash bonuses are as outlined in employment
      agreements.





***Stock
      Options***





The
      Company believes that the granting of stock options is the most appropriate
      form
      of long-term compensation since it provides incentive to promote the long-term
      success of the Company in line with stockholders’ interest. The Company’s stock
      option plans are intended to motivate and reward the executive officers and
      to
      retain their continued services while providing long-term incentive
      opportunities including the participation in the long-term appreciation of
      our
      common stock value.





The
      number of stock options awarded to any executive officer during a given year
      is
      determined by the Compensation Committee.





During
      2007, the Compensation Committee awarded stock options to the NEOs upon the
      closing of the Merger between the Company and Equity Broadcasting Corporation
      and throughout the year based on the recommendation of the Chief Executive
      Officer and pursuant to employment agreements.





The
      Company currently maintains one equity compensation plan, the 2007 Stock
      Incentive Plan, (the “Equity Plan”), which provide for the granting of stock
      options and other stock-based awards. Awards made under the Company’s Equity
      Plan have consisted exclusively of the granting of incentive stock options
      and
      non-qualified stock options. With certain limited exceptions, stock option
      awards vest 20% per year over a five-year period, dependent on continued
      employment. The exercise price of stock options may not be less than the closing
      market price of the Company’s Class A Common Stock on the date of grant.
      Stock option awards must be exercised within seven years of the date of grant
      of
      the option, subject to earlier expiration upon termination of the individual’s
      employment. The provisions of the Equity Plan limit the number of options that
      may be granted to any one individual in a calendar year.




110




***Perquisites
      and Other Compensation***





All
      other
      compensation for the Named Executive Officers includes healthcare insurance
      premiums and group life insurance paid by the Company and 401(k) plan matching
      contributions.





***Health
      Benefits***





All
      full-time employees, including our Named Executive Officers, may participate
      in
      our health benefit program, including medical, dental and vision care coverage,
      short-term disability insurance and life insurance.





***Severance
      Benefits and Change in Control Provisions***





All
      but
      one of our Named Executive Officers have entered into employment agreements
      with
      us. The various employment agreements, among other things, provide for severance
      compensation to be paid to the executives if they are terminated upon change
      of
      control of the Company, or for reasons other than cause or if they resign for
      good reason, as defined in the agreement.





**Determination
      of 2007 Compensation**





The
      Compensation Committee reviewed compensation levels for the Named Executive
      Officers for 2007 and considered various factors, including the executive’s job
      performance. For the executive officers other than the Chief Executive Officer,
      the Compensation Committee considers the recommendations of the Chief Executive
      Officer. The Compensation Committee approved the primary components of
      compensation for each Named Executive Officer, including their annual cash
      bonus
      and grant of stock options.




***Employment
      Agreements***





The
      Company currently has an employment agreement in place with all but one of
      its
      Named Executive Officers. The following is summarized information related to
      the
      base salary, annual cash bonus and severance compensation and termination
      provisions contained in the employment agreement of each Named Executive
      Officer.





*Larry
      E. Morton*





Mr.
      Morton was employed in 2007 as President and Chief Executive Officer under
      an
      employment agreement with us. The term of the agreement expires on March 30,
      2010. Mr. Morton will serve as Vice Chairman of the Board of Directors for
      the
      two years following the expiration of his employment agreement. Under the
      agreement, effective as of March 30, 2007, Mr. Morton’s base salary was
      $520,000. In addition to his base salary, Mr. Morton was granted 2,000,000
      stock options per his employment agreement which vest 25% upon the date of
      the
      agreement and 25% on each anniversary thereafter for a period of three years.
      Mr. Morton is entitled to maximum participation of Company’s Management
      Incentive Compensation Plan. In the event of termination upon change of control
      or for reasons other than cause, or if Mr. Morton resigns for good cause,
      as defined in the agreement, Mr. Morton is eligible to receive his base
      salary for the greater of a period of twelve months or the time remaining under
      his employment agreement and Mr. Morton is eligible to receive continued
      coverage under the Company’s healthcare insurance plan in accordance with the
      continuation requirements of Consolidated Omnibus Budget Reconciliation Act
      of
      1985 (“COBRA”) for the term of the agreement with premiums paid by Company. In
      the event of death or disability, Mr. Morton is entitled to all benefits and
      compensation under the term of the agreement. In the event of death all payments
      shall be made to Mr. Morton's spouse or children.




*Gregory
        W. Fess*
 
 Mr.
        Fess
        is employed Vice President under an employment agreement with us. The term
        of
        the agreement expires on March 30, 2010. Under the agreement, effective as
        of
        March 30, 2007, Mr. Fess’ base salary was $315,000. In addition to his base
        salary, Mr. Fess was granted 250,000 stock options per his employment
        agreement which vest 25% upon the date of the agreement and 25% on each
        anniversary thereafter for a period of three years. Mr. Fess is entitled
        to
        maximum participation of Company’s Management Incentive Compensation Plan, with
        a minimum amount of not less than $500,000. In the event of termination upon
        change of control or for reasons other than cause, or if Mr. Fess resigns
        for good cause, as defined in the agreement, Mr. Fess is eligible to
        receive his base salary for the greater of a period of twelve months or the
        time
        remaining under his employment agreement and Mr. Fess is eligible to receive
        continued coverage under the Company’s healthcare insurance plan in accordance
        with the continuation requirements of Consolidated Omnibus Budget Reconciliation
        Act of 1985 (“COBRA”) for the term of the agreement with premiums paid by
        Company. In the event of death or disability, Mr. Fess is entitled to all
        benefits and compensation under the term of the agreement. In the event of
        death
        all payments shall be made to Mr. Fess’s spouse or children.




111




*Tom
        Arnost*
 
 Effective
        May 9, 2007, Mr. Arnost became the President of the broadcast station group
        under an employment agreement with us. The term of the agreement expires
        on May
        9, 2010. Under the agreement, Mr. Arnost’s base salary is $350,000. In
        addition to his base salary, Mr. Arnost is eligible in year 2007 to earn up
        to 50% of his base salary if certain goals are met. In year 2008, Mr. Arnost
        is
        eligible to earn up to 51% and 100% of his base salary if certain goals are
        met.
        For years 2009 and 2010, Mr. Arnost is eligible to earn between 51% and 100%
        of
        his base salary in bonuses upon the attainment of Company of positive net
        income
        during the applicable fiscal year. Any bonuses applicable for year 2007 and
        2010
        are to be pro-rated based upon the number of days Mr. Arnost was employed
        by
        Company during the fiscal year. Mr. Arnost was granted 750,000 stock
        options per his employment agreement which vest 25% upon the date of the
        agreement and 25% on each anniversary thereafter for a period of three years.
        In
        the event of termination upon change of control or for reasons other than
        cause,
        or if Mr. Arnost resigns for good reason, as defined in the agreement,
        Mr. Arnost is eligible to receive his base salary for the greater of a
        period of twelve months or the time remaining under his employment agreement
        and
        Mr. Arnost is eligible to receive continued coverage under the Company’s
        healthcare insurance plan in accordance with the continuation requirements
        of
        COBRA for one year with premiums paid by Company. In the event of termination
        due to Mr. Arnost’s death or disability, Company shall pay all benefits and
        compensation up until the date of termination.
  *Mr.
        Mark Dvornik*
 
 Effective
        May 9, 2007, Mr. Dvornik became the Executive Vice President of the Retro
        Television Network under an employment agreement with us. The term of the
        agreement expires on May 9, 2009. Under the agreement, Mr. Dvornik’s base
        salary is $325,000. In addition to his base salary, Mr. Dvornik may earn a
        bonus in the amount of $225,000 if certain goals are met and upon approval
        by
        the Compensation Committee. Mr. Dvornik was granted 250,000 stock options
        per his employment agreement which vest 25% upon the date of the agreement
        and
        25% on each anniversary thereafter for a period of three years. In the event
        of
        termination upon change of control or for reasons other than cause, or if
        Mr. Dvornik resigns for good reason, as defined in the agreement,
        Mr. Dvornik is eligible to receive his base salary for the greater of a
        period of twelve months or the time remaining under his employment agreement
        and
        Mr. Dvornik is eligible to receive continued coverage under the Company’s
        healthcare insurance plan in accordance with the continuation requirements
        of
        COBRA for one year with premiums paid by Company. In the event of termination
        due to Mr. Dvornik’s death or disability, Company shall pay all benefits and
        compensation up until the date of termination.




*James
      Hearnsberger*





Mr.
      Hearnsberger has an employment agreement that carried over from the predecessor
      company of Equity Broadcasting Corporation. The term of the agreement is one
      year. The agreement automatically renews unless Company gives Mr. Hearnsberger
      180 days notice. Under the agreement, Mr. Hearnsberger’s base salary is the
      greater of his salary as of the date of the agreement or any subsequent
      salaries. Upon termination due to death, Mr. Hearnsberger’s estate would receive
      all payments, compensation and benefits earned up to the date of death and
      salary for a period of six months after the date of death. Upon termination
      due
      to disability, Mr. Hearnsberger would receive all payments, compensation and
      benefits earned up to the date of termination and salary for a period of six
      months after the date of termination. In the event of termination by Mr.
      Hearnsberger for Good Reason, Company shall pay Mr. Hearnsberger all payments,
      compensation and benefits for a period of six months or through the then
      remaining term of the agreement, whichever is greater. Company may terminate
      Mr.
      Hearnsberger’s agreement at anytime upon ninety days notice, provided that
      Company shall pay Mr. Hearnsberger all payments, compensation and benefits
      for a
      period of six months or through the then remaining term of the agreement,
      whichever is greater.




112




*Lori
      Withrow*





Mrs.
      Withrow has an employment agreement that carried over from the predecessor
      company of Equity Broadcasting Corporation. The term of the agreement is one
      year. The agreement automatically renews unless Company gives Mrs. Withrow
      180
      days notice. Under the agreement, Mrs. Withrow’s base salary is the greater of
      her salary as of the date of the agreement or any subsequent salaries. Upon
      termination due to death, Mrs. Withrow’s estate would receive all payments,
      compensation and benefits earned up to the date of death and salary for a period
      of six months after the date of death. Upon termination due to disability,
      Mrs.
      Withrow would receive all payments, compensation and benefits earned up to
      the
      date of termination and salary for a period of six months after the date of
      termination. In the event of termination by Mrs. Withrow for Good Reason,
      Company shall pay Mrs. Withrow all payments, compensation and benefits for
      a
      period of six months or through the then remaining term of the agreement,
      whichever is greater. Company may terminate Mrs. Withrow’s agreement at anytime
      upon ninety days notice, provided that Company shall pay Mrs. Withrow all
      payments, compensation and benefits for a period of six months or through the
      then remaining term of the agreement, whichever is greater.




**Executive
      Compensation Tables**





*Summary
      Compensation Table*





The
      following table sets forth information that summarizes compensation for the
      fiscal year ended December 31, 2007 for our Named Executive
      Officers.








Change in PensionValue andNonqualifiedNon-Equity
            
            DeferredStock
            
            Option
            
            Incentive Plan
            
            Compensation
            
            All OtherSalary
            
            Bonus
            
            Awards
            
            Awards
            
            Compensation
            
            Earnings
            
            Compensation
            
            TotalName and Principal Position
            
            Year
            
            ($)
            
            ($)
            
            ($)
            
            ($) (1)
            
            ($)
            
            ($)
            
            ($) (2)
            
            ($)Larry
                Morton President,
              Chief
                Executive Officer and Director
            
            
            2007
            
            $
            390,000
            
            $
            -
            
            $
            -
            
            $
            1,212,861
            
            $
            -
            
            $
            -
            
            $
            30,396
            
            $
            1,633,257Glenn
                Charlesworth Chief
              Financial
                Officer
            
            
            2007
            
            
            149,654
            
            
            47,616
            
            
            -
            
            
            22,838
            
            
            -
            
            
            -
            
            
            8,918
            
            
            229,026Gregory
                Fess Chief
              Operating
                Officer and Senior Vice President
            
            
            2007
            
            
            236,250
            
            
            -
            
            
            -
            
            
            151,608
            
            
            -
            
            
            -
            
            
            19,286
            
            
            407,144James
                Hearnsberger,
              Vice
                President -
              Administration
                and Finance
            
            
            2007
            
            
            156,000
            
            
            10,000
            
            
            -
            
            
            22,838
            
            
            -
            
            
            -
            
            
            9,918
            
            
            198,756Lori
                Withrow Corporate Secretary
            
            
            2007
            
            
            132,869
            
            
            9,800
            
            
            -
            
            
            22,838
            
            
            -
            
            
            -
            
            
            10,926
            
            
            176,433Tom
                Arnost President and
              Chief
                Executive Officer - Equity Broadcasting Corporation
            
            
            2007
            
            
            226,154
            
            
            -
            
            
            -
            
            
            454,823
            
            
            -
            
            
            -
            
            
            4,410
            
            
            685,387Mark
                Dvornik Executive
              Vice
                President of Retro Television Network
            
            
            2007
            
            
            243,750
            
            
            -
            
            
            -
            
            
            67,153
            
            
            -
            
            
            -
            
            
            4,250
            
            
            315,153




(1)
            The
                Company granted stock options to the NEOs in May 2007 pursuant to
                its 2007
                Stock Incentive Plan. The amounts in this column represent the amount
                recognized as compensation expense in the Company’s financial statements
                in accordance with SFAS No. 123(R) with respect to all stock options
                awarded to our Named Executive Officers. See the notes to the Company’s
                consolidated financial statements in this Form 10-K for a discussion
                of
                the assumptions made in the valuation of these awards. The amount
                recognized for financial statement reporting purposes with respect
                to all
                stock options awarded to our Named Executive Officers is recognized
                ratably over the vesting term of the awards. The details of the stock
                option grants are set forth in the section “Compensation Discussion and
                Analysis”.





(2)
            Amounts
                in this column consist of the dollar values of perquisites consisting
                of
                automobile allowances, premiums for life, health and disability insurance
                and amounts contributed by the Company on behalf of the NEOs to our
                401(K)
                Savings Plan, and other amounts as identified in the Perquisites
                table
                below.




113




CompanyPerquisites
            
            
            
            
            
            Contributions
            
            
            
            Changeand Other
            
            
            
            
            
            to Retirement
            
            Severance
            
            in ControlPersonal
            
            Tax
            
            Insurance
            
            and
            
            Payments /
            
            Payments /Benefits
            
            Reimbursements
            
            Premiums
            
            401(k) Plans
            
            Accruals
            
            Accruals
            
            TotalName
            
            Year
            
            ($) (a)
            
            ($)
            
            ($) (b)
            
            ($)
            
            ($)
            
            ($)
            
            ($)Larry
                Morton
            
            
            2007
            
            $
            -
            
            $
            -
            
            $
            29,396
            
            $
            1,000
            
            $
            -
            
            $
            -
            
            $
            30,396Glenn
                Charlesworth
            
            
            2007
            
            
            -
            
            
            -
            
            
            8,918
            
            
            -
            
            
            -
            
            
            -
            
            
            8,918Gregory
                Fess
            
            
            2007
            
            
            -
            
            
            -
            
            
            18,286
            
            
            1,000
            
            
            -
            
            
            -
            
            
            19,286James
                Hearnsberger
            
            
            2007
            
            
            -
            
            
            -
            
            
            8,918
            
            
            1,000
            
            
            -
            
            
            -
            
            
            9,918Lori
                Withrow
            
            
            2007
            
            
            -
            
            
            -
            
            
            9,926
            
            
            1,000
            
            
            -
            
            
            -
            
            
            10,926Tom
                Arnost
            
            
            2007
            
            
            -
            
            
            -
            
            
            4,410
            
            
            -
            
            
            -
            
            
            -
            
            
            4,410Mark
                Dvornik
            
            
            2007
            
            
            -
            
            
            -
            
            
            4,250
            
            
            -
            
            
            -
            
            
            -
            
            
            4,250





(a)
            Consists
                of automobile allowance paid by the Company and the value of the
                personal
                use of automobiles


(b)
            Represents
                health care insurance premiums, disability insurance premiums, life
                insurance premiums all paid by the Company, and group life insurance
                coverage paid by the Company




*Grants
      of Plan-Based Awards*





The
      following table sets forth information concerning grants of plan-based awards
      made to each of the Named Executive Officers listed in the Summary Compensation
      Table during the fiscal year ended December 31, 2007:


Estimated Future Payouts
                Under Non-Equity Incentive
                Plan Awards
              
              Estimated Future Payouts
                Under Equity Incentive Plan
                Awards
              
              All
                Other
                Stock
                Awards:
                Number
                of
                Shares
                of Stock
              
              All Other
                Option
                Awards:
                Number of
                Securities
                Underlying
              
              Exercise or
                Base Price of
                Option
              
              Grant Date
                Fair Value of
                Stock and
                OptionGrant
              
              Threshold
              
              Target
              
              Maximum
              
              Threshold
              
              Target
              
              Maximum
              
              or Units
              
              Options
              
              Awards
              
              AwardsName
              
              Date
              
              ($)
              
              ($)
              
              ($)
              
              (#)
              
              (#)
              
              (#)
              
              (#)
              
              (#) (1)
              
              ($ / Sh)
              
              ($) (2)Larry
                  Morton
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              2,000,000
              
              $
              4.30
              
              $
              2,951,000Glenn
                  Charlesworth
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              100,000
              
              
              4.30
              
              
              177,040Gregory
                  Fess
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              250,000
              
              
              4.30
              
              
              368,875James
                  Hearnsberger
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              100,000
              
              
              4.30
              
              
              177,040Lori
                  Withrow
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              100,000
              
              
              4.30
              
              
              177,040Tom
                  Arnost
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              750,000
              
              
              4.30
              
              
              1,106,625Mark
                  Dvornik
              
              05/09/07
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              250,000
              
              
              4.30
              
              
              414,525




(1)
            The
                Company awarded options pursuant to the 2007 Stock Incentive Plan.
                The
                dollar amount recognized in 2007 for financial statement reporting
                purposes (calculated in accordance with SFAS 123(R) ) of the options
                granted to each NEO pursuant to the plan for the fiscal year ended
                December 31, 2007 is set forth in the Summary Compensation Table
                under the
                columns titled “Option Awards”.


(2)
            The
                grant date fair value of option granted n May 2007 is calculated
                in
                accordance with SFAS 123(R). The exercise price of options is determined
                by the 2007 Stock Incentive Plan pursuant to which the options were
                granted. Under that plan, the exercise price is the closing price
                on the
                trading day of the option grant.




*Outstanding
      Equity Awards at Fiscal Year-End*





The
      following table sets forth information as of December 31, 2007 concerning
      outstanding equity awards held by the Named Executive Officers listed in the
      Summary Compensation Table.




114


Option Awards
            
            Stock AwardsName
            
            Grant
              Date (1)
            
            Number of
              Securities
              Underlying
              Unexercised
              Options (#)
              Exercisable
              (2)
            
            Number of
              Securities
              Underlying
              Unexercised
              Options (#)
              Unexercisable
              (2)
            
            Equity
              Incentive Plan
              Awards:
              Number of
              Securities
              Underlying
              Unexercised
              Unearned
              Options (#)
              Unexercisable
            
            Option
              Exercise
              Price ($)
            
            Option
              Expiration
              Date
            
            Number
              of
              Shares
              or Units
              of
              Stock
              That
              Have
              Not
              Vested
              (#)
            
            Market
              Value
              of
              Shares
              or
              Units
              of
              Stock
              That
              Have
              Not
              Vested
              ($)
            
            Equity
              Incentive
              Plan
              Awards:
              Number
              of
              Unearned
              Shares,
              Units or
              Other
              Rights
              That
              Have Not
              Vested
              (#)
            
            Equity
              Incentive
              Plan
              Awards:
              Market
              or Payout
              Value of
              Unearned
              Shares,
              or Units
              or Other
              Rights
              That
              Have Not
              Vested
              ($)Larry
                Morton
            
            
            11/15/01
            
            
            730,994
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/16/03
            
            
            365,497
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/09/07
            
            
            500,000
            
            
            1,500,000
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -Glenn
                Charlesworth
            
            
            06/27/01
            
            
            19,488
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -11/15/01
            
            
            126,711
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/09/07
            
            
            -
            
            
            100,000
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -Gregory
                Fess
            
            
            11/15/01
            
            
            219,298
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/16/03
            
            
            182,749
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/09/07
            
            
            62,500
            
            
            187,500
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -James
                Hearnsberger
            
            
            06/27/01
            
            
            19,488
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -11/15/01
            
            
            163,261
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/16/03
            
            
            116,959
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/09/07
            
            
            -
            
            
            100,000
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -Lori
                Withrow
            
            
            06/27/01
            
            
            19,488
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -11/15/01
            
            
            163,261
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/16/03
            
            
            116,959
            
            
            -
            
            
            -
            
            
            5.09
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -05/09/07
            
            
            -
            
            
            100,000
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -Tom
                Arnost
            
            
            05/09/07
            
            
            187,500
            
            
            562,500
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -Mark
                Dvornik
            
            
            05/09/07
            
            
            -
            
            
            250,000
            
            
            -
            
            
            4.30
            
            
            05/09/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -





(1)
            All
                dates prior to the merger date of March 30, 2007, reflect the dates
                of the
                grants under the EBC plans in effect prior to the merger. All options
                outstanding as of the date of the merger were converted to options
                to
                purchase shares pursuant to the 2007 Stock Incentive Plan as of the
                date
                of the merger. All dates subsequent to the date of the merger reflect
                grants made by the Company pursuant to the
                Plan.


(2)
            All
                option grants to our NEOs that were converted to the 2007 Stock Incentive
                Plan from EBC plans were 100% vested as of the date of the conversion,
                March 30, 2007. The following outlines the vesting schedule for each
                option grant to each NEO made in May
                2007:





a.
            Larry
                Morton – 25% vested on the date of grant and each anniversary
                date


b.
            Glenn
                Charlesworth – Equally on first five anniversaries of the grant
                date


c.
            Gregory
                Fess – 25% vested on the date of grant and each anniversary
                date


d.
            James
                Hearnsberger – Equally on first five anniversaries of the grant
                date


e.
            Lori
                Withrow – Equally on first five anniversaries of the grant
                date


f.
            Tom
                Arnost – 25% vested on the date of the grant and each anniversary
                date


g.
            Mark
                Dvornik – Equally on firsts four anniversaries of the grant date





*Options
      Exercised and Stock Vested*





The
      following table sets forth information concerning option exercises and stock
      vested for each of the Named Executive Officers listed in the Summary
      Compensation Table during the fiscal year ended December 31, 2007:




Option Awards
                
                Stock AwardsName
                
                Number of Shares Acquired on
                  Exercise
                  (#)
                
                Value Realized on
                  Exercise
                  ($)
                
                Number of Shares Acquired on
                  Vesting
                  (#)
                
                Value Realized on
                  Vesting
                  ($)Larry
                    Morton
                
                
                -
                
                
                -
                
                
                -
                
                
                -Glenn
                    Charlesworth
                
                
                -
                
                
                -
                
                
                -
                
                
                -Gregory
                    Fess
                
                
                -
                
                
                -
                
                
                -
                
                
                -James
                    Hearnsberger
                
                
                -
                
                
                -
                
                
                -
                
                
                -Lori
                    Withrow
                
                
                -
                
                
                -
                
                
                -
                
                
                -Tom
                    Arnost
                
                
                -
                
                
                -
                
                
                -
                
                
                -Mark
                    Dvornik
                
                
                -
                
                
                -
                
                
                -
                
                
                -




115





***Post-Employment
      Compensation***





*Pension
      Benefits*





SEC
      Regulations require disclosure of information in the Annual Report, in tabular
      format, of any plans that provide for retirement payments or benefits other
      than
      defined contribution plans. We do not have any plan for our executives or
      employees that provides for payments or other benefits at, following, or in
      connection with, retirement. As a result, we have omitted presentation of this
      table.





*Non-Qualified
      Deferred Compensation*





SEC
      regulations require disclosure of information in this annual report, in tabular
      format, of any defined contribution or other plans that provide for deferral
      of
      compensation on a basis that is not tax-qualified. We do not have any plan
      that
      provides for such deferral of compensation in connection with retirement. As
      a
      result, we have omitted presentation of this table.





***Potential
      Payments upon Termination or Change in Control***





Several
      of the Named Executive Officers have entered into an employment agreement with
      the Company (see “Employment Agreements” in this document). Included in each
      employment agreement are provisions regarding termination of employment,
      including a change in control of the Company. The circumstances that would
      result in the payment of severance compensation and other benefits under the
      employment agreements are different for each Named Executive
      Officer.





As
      defined in the various employment agreements, there are three different
      circumstances that would result in the payment of severance compensation as
      follows: (1) change in control of the Company; (2) termination by the
      Company for reasons other than cause; and (3) resignation by the Named
      Executive Officer with good reason or cause.





In
      the
      event of termination for any of the above reasons, as defined in the employment
      agreements, each Named Executive Officer is eligible to receive the
      following:





*Larry
      E. Morton*


In
      the
      event of termination upon change of control or for reasons other than cause,
      or
      if Mr. Morton resigns for good cause, as defined in the agreement,
      Mr. Morton is eligible to receive his base salary for the greater of a
      period of twelve months or the time remaining under his employment agreement
      and
      Mr. Morton is eligible to receive continued coverage under the Company’s
      healthcare insurance plan in accordance with the continuation requirements
      of
      Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for the term of
      the agreement with premiums paid by Company. In the event of death or
      disability, Mr. Morton is entitled to all benefits and compensation under the
      term of the agreement. In the event of death all payments shall be made to
      Mr.
      Morton's spouse or children.





*Gregory
      W. Fess*


In
      the
      event of termination upon change of control or for reasons other than cause,
      or
      if Mr. Fess resigns for good cause, as defined in the agreement,
      Mr. Fess is eligible to receive his base salary for the greater of a period
      of twelve months or the time remaining under his employment agreement and Mr.
      Fess is eligible to receive continued coverage under the Company’s healthcare
      insurance plan in accordance with the continuation requirements of Consolidated
      Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for the term of the
      agreement with premiums paid by Company.





*Thomas
      Arnost*


In
      the
      event of termination upon change of control or for reasons other than cause,
      or
      if Mr. Arnost resigns for good reason, as defined in the agreement,
      Mr. Arnost is eligible to receive his base salary for the greater of a
      period of twelve months or the time remaining under his employment agreement
      and
      Mr. Arnost is eligible to receive continued coverage under the Company’s
      healthcare insurance plan in accordance with the continuation requirements
      of
      COBRA for one year with premiums paid by Company. In the event of termination
      due to death or disability, the company shall pay all benefits and compensation
      up until the date of termination.





*Mark
      Dvornik*


In
      the
      event of termination upon change of control or for reasons other than cause,
      or
      if Mr. Dvornik resigns for good reason, as defined in the agreement,
      Mr. Dvornik is eligible to receive his base salary for the greater of a
      period of twelve months or the time remaining under his employment agreement
      and
      Mr. Dvornik is eligible to receive continued coverage under the Company’s
      healthcare insurance plan in accordance with the continuation requirements
      of
      COBRA for one year with premiums paid by Company. In the event of termination
      due to death or disability, the company shall pay all benefits and compensation
      up until the date of termination.




116




*James
      Hearnsberger*


In
      the
      event of termination by Mr. Hearnsberger for Good Reason, Company shall pay
      Mr.
      Hearnsberger all payments, compensation and benefits for a period of six months
      or through the then remaining term of the agreement, whichever is greater.
      Company may terminate Mr. Hearnsberger’s agreement at anytime upon ninety days
      notice, provided that Company shall pay Mr. Hearnsberger all payments,
      compensation and benefits for a period of six months or through the then
      remaining term of the agreement, whichever is greater.





*Lori
      Withrow*


In
      the
      event of termination by Mrs. Withrow for Good Reason, Company shall pay Mrs.
      Withrow all payments, compensation and benefits for a period of six months
      or
      through the then remaining term of the agreement, whichever is greater. Company
      may terminate Mrs. Withrow’s agreement at anytime upon ninety days notice,
      provided that Company shall pay Mrs. Withrow all payments, compensation and
      benefits for a period of six months or through the then remaining term of the
      agreement, whichever is greater.





The
      following table sets forth potential payments to our Named Executive Officers
      under their employment agreements, for various circumstances involving the
      termination of employment of our Named Executive Officers or change in control
      of the Company, assuming a December 31, 2007 termination
      date.


Name
              
              Executive Benefits
                and Payments Upon
                Termination
              
              Death
                ($)
              
              Disability
                ($)
              
              Change in
                Control
                ($)
              
              Involuntary
                for Cause
                Termination
                ($)
              
              Involuntary
                Not for
                Cause
                Termination
                ($)
              
              Voluntary
                Termination
                With Good
                Reason
                ($)
              
              Voluntary
                Termination
                Without
                Good
                Reason
                ($)Larry
                  Morton
              
              
              Severance Payments
              
              $
              1,170,000
              
              $
              1,170,000
              
              $
              1,170,000
              
              
              -
              
              
              1,170,000
              
              
              1,170,000
              
              
              -Healthcare
                  Benefits
                Continuation
              
              
              17,762
              
              
              17,762
              
              
              17,762
              
              
              -
              
              
              17,762
              
              
              17,762
              
              
              -Glenn Charlesworth
              
              
              Severance
                  Payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Healthcare
                  Benefits
                Continuation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Gregory
                  Fess
              
              
              Severance
                  Payments
              
              
              708,750
              
              
              708,750
              
              
              708,750
              
              
              -
              
              
              708,750
              
              
              708,750
              
              
              -Healthcare Benefits
                Continuation
              
              
              23,716
              
              
              23,716
              
              
              23,716
              
              
              -
              
              
              23,716
              
              
              23,716
              
              
              -James
                  Hearnsberger
              
              
              Severance
                  Payments
              
              
              78,000
              
              
              78,000
              
              
              -
              
              
              -
              
              
              156,000
              
              
              156,000
              
              
              -Healthcare
                  Benefits
                Continuation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              7,027
              
              
              7,027
              
              
              -Lori
                  Withrow
              
              
              Severance
                  Payments
              
              
              70,000
              
              
              70,000
              
              
              -
              
              
              -
              
              
              140,000
              
              
              140,000
              
              
              -Healthcare
                  Benefits
                Continuation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              7,027
              
              
              7,027
              
              
              -Tom
                  Arnost
              
              
              Severance
                  Payments
              
              
              -
              
              
              -
              
              
              816,667
              
              
              -
              
              
              816,667
              
              
              816,667
              
              
              -Healthcare
                  Benefits
                Continuation
              
              
              -
              
              
              -
              
              
              25,473
              
              
              -
              
              
              25,473
              
              
              25,473
              
              
              -Mark
                  Dvornik
              
              
              Severance
                  Payments
              
              
              -
              
              
              -
              
              
              433,333
              
              
              -
              
              
              433,333
              
              
              433,333
              
              
              -Healthcare Benefits
                Continuation
              
              
              -
              
              
              -
              
              
              14,932
              
              
              -
              
              
              14,932
              
              
              14,932
              
              
              -


117


**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**




The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock as of March 28, 2008 by:





**•**
            
            each
                person known by us to be the beneficial owner of more than 5% of
                our
                outstanding shares of common stock;**•**
            
            each
                of our officers and directors; and**•**
            
            all
                our officers and directors as a
                group.





Unless
      otherwise indicated, we believe that all persons named in the table have sole
      voting and investment power with respect to all shares of common stock
      beneficially owned by them. The table below assumes that there are
      40.3 million shares of common stock issued and outstanding.





**Amount and**
            
            **Approximate Percentage****Nature of**
            
            **Of****Beneficial**
            
            **Outstanding Common****Name and Address of Beneficial Owner****(1)**
            
            **Ownership**
            
            **Stock****Directors
                and Officer:**Henry
                G. Luken III
            
            
            7,068,552
            (2)
            
            17.35
            %Larry
                E. Morton
            
            
            2,510,364
            (3)
            
            6.23
            %Gregory
                Fess
            
            
            1,504,082
            (4)
            
            3.73
            %Robert
                B. Becker
            
            
            19,978
            (11)
            
            0.05
            %Manuel
                Kadre
            
            
            350,000
            (10)
            
            0.86
            %Thomas
                Arnost
            
            
            -
            (12)James
                Hearnsberger
            
            
            -
            (12)Glenn
                Charlesworth
            
            
            -
            (12)Patrick
                G. Doran
            
            
            -
            (12)Michael
                Flynn
            
            
            -
            (12)John
                E. Oxendine
            
            
            -
            (12)Michael
                Pierce
            
            
            -
            (12)All
                directors and executive officers as a group (5
                individuals)
            
            
            11,452,976
            (5)
            
            27.87
            %**Beneficial
                Owners of More Than 5%:**RPCP
                Investments LLLP,
            
            
            2,500,000
            (6)(7)
            
            6.21
            %Richard
                C. Rochon,
            
            
            3,115,797
            (7)
            
            7.70
            %Paulson
                & Co. Inc.,
            
            
            9,352,382
            (8)
            
            21.12
            %John
                Paulson,
            
            
            9,352,382
            (8)
            
            21.12
            %Prentice
                Capital Management, LP
            
            
            5,451,400
            (9)
            
            12.41
            %Michael
                Zimmerman
            
            
            5,451,400
            (9)
            
            12.41
            %





(1)
            
            Unless
                otherwise indicated, the business address of each of the owners is
                One
                Shackleford Drive, Suite 400, Little Rock, Arkansas
                72211(2)
            
            These
                shares include 472,500 warrants to purchase common stock. Mr. Luken’s
                address is 641 Battery Place, Chattanooga, Tennessee 37403.(3)
            
            Shares
                are indirectly owned by Mr.Morton who serves as trustee for Sandra
                Morton
                Life Trust. Mr. Morton also owns 3,096,491 options to purchase common
                stock.(4)
            
            Shares
                are indirectly owned by Mr. Fess who serves as trustee for Judith
                A. Fess
                Life Trust.(5)
            
            Directors
                include: Mr. Luken, Mr. Morton and Mr. Becker. Executive officers:
                Mr.
                Luken, Mr. Morton and Mr. Fess.(6)
            
            RPCP
                Investments, LLLP may distribute its shares as a dividend or liquidation
                distribution to Mr. Richard Rochon, Stephen J. Ruzika, Jack I. Ruff,
                Mario
                B. Ferrari, and Robert Farenhem, RPCP Investments’ five limited partners.
                To the extent such shares are not distributed to its limited partners,
                they will be retained by RPCP Investments. Except for Mr. Rochon,
                as set
                forth in footnote 7 below, beneficial ownership of Equity Media common
                stock held by RPCP Investments is not attributed to its limited partners,
                Messrs. Ruzika, Ruff, Ferrari and Farenhem. Of the limited partners
                of
                RPCP Investments, Mr. Farenhem is a director and Mr. Ferrari is an
                executive officers of the Company. RPCP Investments address is 595
                South
                Federal Highway, Suite 500, Boca Raton, Florida
                33432




118




(7)
            
            These
                shares are held by RPCP Investments, LLLP (2,500,000) and CPAC I,
                LLLP.(452,797), RPCP Investments, Inc. is the general partner of
                both of
                these entities. Mr. Rochon is president and director and owns a 54%
                interest in RPCP Investments, Inc. As such, Mr. Rochon exercises
                voting
                and dispositive power over these shares. Mr. Rochon disclaims any
                beneficial ownership to the extent such beneficial ownership exceeds
                such
                pecuniary interest therein. These shares include 163,000 warrants
                to
                purchase common stock held by CPACW, LLLP, of which Mr. Rochon is
                also
                beneficial owner. Mr. Rochon Address is 595 South Federal Highway,
                Suite
                500, Boca Raton, Florida 33432(8)
            
            Paulson
                & Co. Inc. (“Paulson”) is an investment advisor registered under the
                Investment Advisors Act of 1940. Paulson is the investment manager
                of
                Paulson Advantage Ltd., Paulson Advantage Plus Ltd. And to Separately
                Managed Accounts. Paulson is also the controlling person of Paulson
                Advisers LLC, the managing general partner of each of Paulson Advantage
                L.P. and Paulson Advantage Plus L.P. John Paulson is the controlling
                person of Paulson. Each of Paulson and John Paulson may be deemed
                to
                indirectly beneficially own the securities directly owned by Advantage
                L.P., Advantage Plus L.P , Advantage Ltd., Advantage Plus Ltd. And
                the
                other accounts separately managed by Paulson. These shares include
                4,000,000 warrants to purchase common stock beneficially owned by
                Paulson.
                Paulson’s address is 590 Madison Avenue, New York, NY
                10022(9)
            
            Prentice
                Capital Management, LP (the “Investment Manager”) serves as investment
                manager to a number of investment funds (including Prentice Capital
                Partners, LP, Prentice Capital Partners QP, LP and Prentice Capital
                Offshore, Ltd.) and manages investments for certain entities in managed
                accounts with respect to which it has voting and dispositive authority
                over the Common Stock reported in this Form 3. Michael Zimmerman
                (“Mr.
                Zimmerman”) is responsible for the supervision and conduct of all
                investment activities of the Investment Manager, including, without
                limitation, for all investment decisions with respect to the assets
                of
                such investment funds and managed accounts. These shares include
                3,634,000
                warrants to purchase common stock beneficially owned by the Investment
                Manager and Mr. Zimmerman. The address for Investment Manager and
                Mr.
                Zimmerman is 623 fifth Ave. 32ndFloor, New York , NY, 10022.(10)
            
            The
                shares include 350,000 warrants to purchase common stock. Mr. Kadre
                holds
                20,000 options to purchase common stock.(11)
            
            Mr.
                Becker holds 56,550 options to purchase common stock.(12)
            
            These
                 individuals all hold options to purchase common stock as follows:
                Mr.
                Arnost 750,000, Mr.Hearnsberger 399,708, Mr. Charlesworth 246,199,
                Mr.
                Doran 200,000, Mr. Flynn, Mr. Oxendine and Mr. Pierce 20,000
                each.





The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock as of March 28, 2008 by our management:





**Amount and**
            
            **Approximate Percentage****Nature of**
            
            **Of****Beneficial**
            
            **Outstanding Common****Name and Address of Beneficial Owner**(1)
            
            **Ownership**
            
            **Stock**Henry
                G. Luken III (2)
            
            
            7,068,552
            
            
            17.35
            %Larry
                E. Morton(3)
            
            
            2,510,364
            
            
            6.23
            %Gregory
                Fess(4)
            
            
            1,504,082
            
            
            3.73
            %Robert
                B. Becker
            
            
            19,978
            
            
            0.05
            %





(1)
            
            Unless
                otherwise indicated, the business address of each of the owners is
                One
                Shackleford Drive, Suite 400, Little Rock, Arkansas
                72211(2)
            
            Mr.
                Luken’s address is 641 Battery Place, Chattanooga, Tennessee 37403.(3)
            
            Shares
                are indirectly owned by Mr.Morton who serves as trustee for Sandra
                Morton
                Life Trust(4)
            
            Shares
                are indirectly owned by Mr. Fess who serves as trustee for Judith
                A. Fess
                Life Trust.




**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE**





119




**Management
      Services Agreement**




Upon
      the
      closing of the Merger Transaction, the Company entered into a management
      services agreement with Royal Palm Capital Management, LLP (“Royal Palm”). The
      agreement generally provides that Royal Palm will provide general management
      and
      advisory services for an initial term of three years, subject to renewal
      thereafter on an annual basis by approval of a majority of the independent
      directors serving on the Company’s Board of Directors. The services to be
      provided include, but are not limited to, establishing certain office,
      accounting and administrative procedures, helping the Company obtain financing,
      advising the Company in securities matters and future acquisitions or
      dispositions, assisting the Company in formulating risk management policies,
      coordinating public relations and investor relations efforts, and providing
      such
      other services as may be reasonably requested by the Company and agreed to
      by
      Royal Palm. Royal Palm shall receive an annual management fee of $1,500,000,
      in
      addition to the reimbursement of budgeted out-of -pocket costs and expenses
      incurred in the performance of Royal Palm’s management services. The management
      services agreement may be terminated upon the material failure of either party
      to comply with its stated duties and obligations, subject to a 30-day cure
      period.




Royal
      Palm has agreed to defer receipt of its
      management fee so long as the obligation to lenders under the credit agreement
      remains outstanding.




Certain
      officers and directors of Royal Palm also serve as officers and directors of
      the
      Company.




**Univision
      Affiliation Agreement**




Univision
      owns 100% of the Company’s outstanding Series A Convertible Non-Voting
      Preferred Stock. Immediately following the closing of the Merger Transaction,
      Univision Network Limited Partnership and Telefutura revised and executed new
      Affiliation Agreements for all existing television broadcast stations
      attributable to the Company that are Univision and Telefutura affiliates. These
      new agreements contain substantially the same terms and conditions as the
      previous affiliation agreements, but were renewed for 15 year terms
      beginning at the closing of the Merger Transaction.




Univision
      also acts as the national sales agent for the Company’s Spanish-language
      television stations. The Company pays Univision a 15% commission on those sales.
      The Company also operates its Salt Lake City Univision television station,
      KUTH
      through a local marketing agreement (LMA) with Univision. The Company incurred
      expenses related to commissions in the amounts of $676,255, $312,180, and
      $150,083 for the years ended December 31, 2007, 2006 and 2005, respectively
      for
      sales made on behalf of the Company by Univision. Additionally, the Company
      accrued expenses related to operating fees of $323,338, $319,924 and $332,981
      for the years ended December 31, 2007, 2006 and 2005, respectively under the
      LMA
      with Univision.




**Univision
      Registration Rights**




Pursuant
      to the Merger Agreement, the Company has granted to Univision certain “piggy
      back” registration rights at any time during the two year period following the
      Merger transaction. The Company shall provide Univision with written notice
      thereof at least fifteen days prior to the filing, and Univision shall provide
      written notice of the number of its registrable shares to be included in the
      registration statement within fifteen days of its receipt of the Company’s
      notice.




**RTN
      Intellectual Property Agreement**




Prior
      to
      the Merger Transaction, the Company entered into an intellectual property
      agreement with Retro Television Network, Inc., a company controlled by Larry
      Morton, a director, former President and CEO of the Company and current
      Chairman, President and CEO of Retro Programming Services, Inc, a wholly owned
      subsidiary of the Company. Under the terms of the agreement, Retro Television
      Network, Inc. assigned 100% of the creative and intellectual rights for the
      Retro Television Network (“RTN”) to the Company in exchange for a ten
      (10) percent royalty fee to be paid solely from the revenues of non-Company
      owned stations that utilize the RTN concept and/or affiliate with RTN. The
      agreement also provides that in the event the Company was to sell its assigned
      rights in RTN to an unrelated third party, Retro Television Network, Inc.,
      at
      its option, may convert the royalty fee to a twenty (20) percent interest
      of the sales proceeds.




As
      of
      December 31, 2007, royalty fees in the amount of $8,224 have been accrued,
      and
      no royalty fees were paid to Retro Television Network, Inc. for the years ended
      December 31, 2007, 2006 or 2005, respectively.




120




**Family
      Relationship Between Corporate Officers.**




Lori
      Withrow, the Corporate Secretary, is the daughter of Larry Morton, a director,
      former President and CEO of the Company and current Chairman, President and
      CEO
      of Retro Programming Services, Inc, a wholly owned subsidiary of the Company




**Arkansas
      Media**




Until
      the
      Merger Transaction, Arkansas Media owned 75% of EBC’s Class B common shares
      outstanding. The owners of Arkansas Media held management and board of director
      positions within EBC. Arkansas Media had provided management services to EBC
      under the terms of a management agreement. An aspect of the merger of EBC with
      the Company was a settlement between Arkansas Media and the Company whereby
      the
      management agreement with Arkansas Media was terminated effective March 30,
      2007, the date of the merger. As consideration for terminating the agreement,
      EBC paid Arkansas Media $3.2 million, issued 640,000 shares of the EBC’s
      pre-merger Class A common stock valued
      at $4,800,000 ,
      purchased three low power television stations for $1.3 million, purchased
      an office building and land for $0.3 million and retired a note payable to
      a
      company affiliated with Arkansas Media for $0.5 million.




The
      three
      owners of Arkansas Media, Mr. Larry Morton, Mr. Gregory Fess and Mr. Max Hooper
      also entered into either employment or consulting agreements with the Company
      for periods of one to three years, effective the date of the Merger Transaction.





**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND SERVICES**





The
      following is a summary of fees paid to our principal accountant for services
      provided.





**Audit
      Fees** , **Audit-Related Fees** & **Other
      Fees**





The
      firm
      of Moore Stephens Frost, PLC acts as our principal accountant. The aggregate
      fees, including expenses, billed for professional services incurred by the
      Company and rendered by Moore Stephens Frost, PLC in fiscal years 2007 and
      2006
      for the various services were:





Fiscal Year EndedType of Fees
            
            December 31, 2007
            
            December 31, 2006Audit
                Fees (1)
            
            $
            216,975
            
            $
            153,175Tax
                Fees (2)
            
            
            35,919
            
            
            35,056All
                Other Fees (3)
            
            
            19,864
            
            
            24,672Total
            
            $
            272,758
            
            $
            212,902





(1)
            “Audit
                Fees” are fees billed by Moore Stephens Frost, PLC for professional
                services for the audit of our consolidated financial statements included
                in this Form 10-K and review of our financial statements included
                in our
                Quarterly Reports on Form 10-Q, or for services normally provided
                by
                auditors in connection with statutory and regulatory filings or
                engagements.


(2)
            “Tax
                Fees” are fees billed by Moore Stephens Frost, PLC for tax compliance,
                tax
                advice and tax planning


(3)
            “All
                Other Fees” are fees billed by Moore Stephens Frost, PLC for any
                professional service not included in the first two
                categories.





**Board
      Approval**





The
      Audit
      Committee has established policies and procedures for the approval and
      pre-approval of audit and tax services.




121




**ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**





(a)
            
            Documents
                filed as part of this report:(1)
            
            Financial
                Statements


See
      “Item 8. Financial Statements and Supplementary Data” for Financial
      Statements included with this Annual Report on Form 10-K.




(2)
            
            Financial
                Statement Schedules




None.


(3)
              
              Exhibits. **Exhibit
                      No.**
                  
                  **Description**2.1
                  
                  
                  Agreement
                      and Plan of Merger, dated April 7, 2006, by and among the Registrant,
                      Equity Broadcasting Corporation and certain shareholders of
                      Equity
                      Broadcasting Corporation (incorporated by reference to Form 8-K filed
                      on April 13, 2006)2.2
                  
                  
                  First
                      Amendment to Agreement and Plan of Merger, dated May 5, 2006, between
                      the Registrant and Equity Broadcasting Corporation and Major
                      EBC
                      Shareholders (see Exhibit 10.16)2.3
                  
                  
                  Form
                      of Second Amendment to Agreement and Plan of Merger, dated
                      as of
                      September 14, 2006, between the Registrant, Equity Broadcasting
                      Corporation and Major EBC Shareholders (incorporated by reference
                      to
                      Form 8-K filed on September 20, 2006)3.1
                  
                  
                  Certificate
                      of Incorporation (incorporated by reference to the exhibits
                      of the same
                      number filed with the Registrant’s Registration Statement on Form S-1
                      or amendments thereto (File No. 333-125105))3.2
                  
                  
                  Bylaws
                      (incorporated by reference to the exhibits of the same number
                      filed with
                      the Registrant’s Registration Statement on Form S-1 or amendments
                      thereto (File No. 333-125105))3.3
                  
                  
                  Amended
                      and Restated Certificate of Incorporation dated March 30, 2007.
                      Incorporated by reference from the Registrant’s Current Report on Form 8-K
                      filed on April 5, 2007.3.4
                  
                  
                  Certificate
                      of Designation for the Series A Convertible Non-Voting Preferred
                      Stock dated March 30, 2007. Incorporated by reference from the
                      Registrant’s Current Report on Form 8-K filed on April 5,
                      2007.3.5
                  
                  
                  Amended
                      and Restated Bylaws of Equity Media Holdings Corporation. Incorporated
                      by
                      reference from the Registrant’s Current Report on Form 8-K filed on
                      April 5, 2007.4.1
                  
                  
                  Specimen
                      Unit Certificate.Incorporated
                      by reference to the exhibits of the same number filed with
                      the
                      Registrant’s Registration Statement on Form S-1 or amendments thereto
                      (File No. 333-125105).4.2
                  
                  
                  Specimen
                      Common Stock Certificate.Incorporated
                      by reference to the exhibits of the same number filed with
                      the
                      Registrant’s Registration Statement on Form S-1 or amendments thereto
                      (File No. 333-125105).4.3
                  
                  
                  Specimen
                      Warrant Certificates.Incorporated
                      by reference to the exhibits of the same number filed with
                      the
                      Registrant’s Registration Statement on Form S-1 or amendments thereto
                      (File No. 333-125105).4.4
                  
                  
                  Form
                      of Unit Purchase Option granted to Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc., David Nussbaum and Steven Levine.Incorporated
                      by reference to the exhibits of the same number filed with
                      the
                      Registrant’s Registration Statement on Form S-1 or amendments thereto
                      (File No. 333-125105).
  122
  4.5
                  
                  
                  Form
                      of Warrant Agreement between Continental Stock Transfer & Trust
                      Company and the Registrant.Incorporated
                      by reference to the exhibits of the same number filed with
                      the
                      Registrant’s Registration Statement on Form S-1 or amendments thereto
                      (File No. 333-125105).4.6
                  
                  
                  Warrant
                      Clarification Agreement, dated August 17, 2006, between Continental
                      Stock Transfer & Trust Company and the Registrant. Incorporated by
                      reference from the Registrant’s Quarterly Report on Form 10-Q for the
                      quarter ended June 30, 2006 and filed on August 18,
                      2006.4.7
                  
                  
                  Amended
                      and Restated Warrant Clarification Agreement, dated January 17, 2007,
                      between Continental Stock Transfer & Trust Company and the Registrant
                      Incorporated by reference from the Registrant’s Current Report on Form 8-K
                      filed on January 23, 2007.4.8
                  
                  
                  Unit
                      Purchase Option Clarification Agreement, dated January 17, 2007,
                      among the Registrant, Morgan Joseph & Co. Inc., EarlyBirdCapital,
                      Inc., David Nussbaum and Steven Levine. Incorporated by reference
                      from the
                      Registrant’s Current Report on Form 8-K filed on January 23,
                      2007.10.1
                  
                  
                  Letter
                      Agreement among the Registrant, Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc. and RPCP Investments, LLLP (incorporated
                      by
                      reference to the exhibits of the same number filed with the
                      Registrant’s
                      Registration Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.2
                  
                  
                  Letter
                      Agreement among the Registrant, Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc. and Richard C. Rochon (incorporated
                      by reference to
                      the exhibits of the same number filed with the Registrant’s Registration
                      Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.3
                  
                  
                  Letter
                      Agreement among the Registrant, Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc. and Stephen J. Ruzika (incorporated
                      by reference to
                      the exhibits of the same number filed with the Registrant’s Registration
                      Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.4
                  
                  
                  Letter
                      Agreement among the Registrant, Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc. and Jack I. Ruff (incorporated by reference
                      to the
                      exhibits of the same number filed with the Registrant’s Registration
                      Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.5
                  
                  
                  Letter
                      Agreement among the Registrant, Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc. and Mario B. Ferrari (incorporated by
                      reference to
                      the exhibits of the same number filed with the Registrant’s Registration
                      Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.6
                  
                  
                  Letter
                      Agreement among the Registrant, Morgan Joseph & Co. Inc.,
                      EarlyBirdCapital, Inc. and Robert C. Farenhem (incorporated
                      by reference
                      to the exhibits of the same number filed with the Registrant’s
                      Registration Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.7
                  
                  
                  Form
                      of Investment Management Trust Agreement between Continental
                      Stock
                      Transfer & Trust Company and the Registrant (incorporated by reference
                      to the exhibits of the same number filed with the Registrant’s
                      Registration Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.8
                  
                  
                  Form
                      of Stock Escrow Agreement between the Registrant, Continental
                      Stock
                      Transfer & Trust Company and Existing Stockholder (incorporated by
                      reference to the exhibits of the same number filed with the
                      Registrant’s
                      Registration Statement on Form S-1 or amendments thereto (File No.
                      333-125105))10.9
                  
                  
                  Promissory
                      Note, dated as of May 10, 2005, issued to Royal Palm Capital
                      Management, LLLP (incorporated by reference to the exhibits
                      of the same
                      number filed with the Registrant’s Registration Statement on Form S-1
                      or amendments thereto (File No. 333-125105))10.10
                  
                  
                  Form
                      of Registration Rights Agreement among the Registrant and the
                      Investors
                      (incorporated by reference to the exhibits of the same number
                      filed with
                      the Registrant’s Registration Statement on Form S-1 or amendments
                      thereto (File No. 333-125105))
  123
  10.11
                  
                  
                  Warrant
                      Purchase Agreement dated May 18, 2005 among Morgan Joseph & Co.
                      Inc. and each of Richard C. Rochon, Stephen J. Ruzika, Jack
                      I. Ruff, Mario
                      B.Ferrari
                      and Robert C. Farenhem (incorporated by reference to the exhibits
                      of the
                      same number filed with the Registrant’s Registration Statement on
                      Form S-1 or amendments thereto (File
                      No. 333-125105))10.12
                  
                  
                  Form
                      of Letter Agreement between Royal Palm Capital Management,
                      LLLP and
                      Registrant regarding administrative support (incorporated by
                      reference to
                      the exhibits of the same number filed with the Registrant’s Registration
                      Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.13
                  
                  
                  Letter
                      agreement dated August 2, 2005, from each of RPCP Investments, LLLP,
                      Richard C. Rochon, Stephen J. Ruzika, Jack I. Ruff, Mario B.
                      Ferrari and
                      Robert C. Farenhem to the Registrant (incorporated by reference
                      to the
                      exhibits of the same number filed with the Registrant’s Registration
                      Statement on Form S-1 or amendments thereto (File
                      No. 333-125105))10.15
                  
                  
                  Form
                      of Voting Agreement and Proxy by and between the Registrant
                      and certain
                      shareholders of Equity Broadcasting Corporation (incorporated
                      by reference
                      to Current Report on Form 8-K dated April 7, 2006 and filed on
                      April 13, 2006)10.16
                  
                  
                  First
                      Amendment to Agreement and Plan of Merger, dated May 5, 2006, between
                      the Registrant, Equity Broadcasting Corporation and Major EBC
                      Shareholders
                      (incorporated by reference to Quarterly Report on Form 10-Q for the
                      quarter ended June 30, 2006 and filed on August 18,
                      2006)10.17
                  
                  
                  Engagement
                      Letter, dated March 3, 2006, between Morgan Joseph & Co. Inc. and
                      the Registrant (incorporated by reference to Quarterly Report
                      on
                      Form 10-Q for the quarter ended June 30, 2006 and filed on
                      August 18, 2006)10.18
                  
                  
                  Agreement
                      to File Schedules, dated November 29, 2006 by the Registrant
                      (incorporated by reference to Amendment No. 1 to Form S-4 filed
                      on December 1, 2006)10.19
                  
                  
                  Form
                      of Management Services Agreement by and between the Registrant
                      and Royal
                      Palm Capital Management, LLLP (attached hereto as Annex G to
                      Form S-4
                      filed on March 15, 2007 incorporated by
                      reference).10.20
                  
                  
                  Asset
                      Purchase Agreement, dated as of April 7, 2006, by and among Logan 12,
                      Inc., Prime Broadcasting, Inc. and Equity Broadcasing Corporation
                      (incorporated by reference to Amendment No. 5 to Form S-4 filed
                      on March 16, 2007)10.21
                  
                  
                  Second
                      Amended and Restated Credit Agreement, dated as of June 29,
                      2004, by and
                      among Equity Broadcasting Corporation, its Subsidiaries, and
                      such other
                      Equity Broadcasting Corporation affiliates, as borrowers, and
                      SPCP Group,
                      LLC, SPCP Group III LLC, Wells Fargo Foothill, Inc., and other
                      lenders
                      from time to time parties hereto, Silver Point Finance, LLC,
                      as
                      administrative agent, and Wells Fargo Foothill, Inc, as collateral
                      agent
                      (incorporated by reference to Amendment No. 5 to Form S-4 filed
                      on March 16, 2007)10.22
                  
                  
                  First
                      Amendment to Second Amended and Restated Credit Agreement,
                      dated
                      June 29, 2004 (incorporated by reference to Amendment No. 5 to
                      Form S-4 filed on March 16, 2007)10.23
                  
                  
                  Second
                      Amendment to Second Amended and Restated Credit Agreement,
                      dated
                      July 25, 2005 (incorporated by reference to Amendment No. 5 to
                      Form S-4 filed on March 16, 2007)10.24
                  
                  
                  Third
                      Amendment to Second Amended and Restated Credit Agreement,
                      dated
                      December 23, 2005 (incorporated by reference to Amendment No. 5
                      to Form S-4 filed on March 16,
                      2007)
  124
  10.25
                  
                  
                  Fourth
                      Amendment to Second Amended and Restated Credit Agreement,
                      dated
                      March 31, 2006 (incorporated by reference to Amendment No. 5 to
                      Form S-4 filed on March 16, 2007)10.26
                  
                  
                  Fifth
                      Amendment to Second Amended and Restated Credit Agreement,
                      dated December,
                      2006 (incorporated by reference to Amendment No. 5 to Form S-4
                      filed on March 16, 2007)10.27
                  
                  
                  Employment
                      Agreement, dated March 30, 2007, by and between the Company and Larry
                      E. Morton. Incorporated by reference from the Registrant’s Current Report
                      on Form 8-K filed on April 5, 2007.10.28
                  
                  
                  Employment
                      Agreement, dated March 30, 2007, by and between the Company and
                      Gregory Fess. Incorporated by reference from the Registrant’s Current
                      Report on Form 8-K filed on April 5, 2007.10.29
                  
                  
                  Consultant
                      Agreement, dated March 30, 2007, by and between the Company and
                      Hooper Holdings, Inc. Incorporated by reference from the Registrant’s
                      Current Report on Form 8-K filed on April 5, 2007.10.30
                  
                  
                  Unit
                      Purchase Agreement dated June 21, 2007 by and among the Company,
                      and the
                      investors listed on the Schedule of Buyers attached thereto.
                      Incorporated
                      by reference from the Registrant’s Current Report on Form 8-K filed on
                      June 27, 2007.10.31
                  
                  
                  Asset
                      Purchase Agreement, by and between EBC Buffalo, Inc. and Renard
                      Communications Corp., dated August 6, 2007, effective August 15,
                      2007. Incorporated by reference from the Registrant’s Current Report on
                      Form 8-K filed on August 21, 2007.10.32
                  
                  
                  Consent
                      to Asset Purchase Agreement by Wells Fargo Foothill, Inc.,
                      as Collateral
                      Agent and a Lender, and by the Lenders listed on the signature
                      page
                      thereto, dated August 15, 2007. Incorporated by reference from
                      the
                      Registrant’s Current Report on Form 8-K filed on August 21,
                      2007.10.33
                  
                  
                  Third
                      Amended and Restated Credit Agreement dated February 13, 2008
                      and related
                      schedules.10.34
                  
                  
                  Letter
                      Agreement to the Third Amended and Restated Credit Agreement
                      dated
                      February 13, 200810.35
                  
                  
                  First
                      Amendment to Third Amended and Restated Credit Agreement and
                      Forbearance
                      Agreement dated March 19, 2008 and related schedules.10.36
                  
                  
                  Letter
                      Agreement to First Amendment to Third Amended and Restated
                      Credit
                      Agreement dated March 19, 200821
                  
                  
                  List
                      of Subsidiaries of Equity Broadcasting Corporation.Incorporated by reference to Amendment No. 4 to Form S-4 filed
                      on March 15, 2007.31.1
                  
                  
                  Certification
                      by Henry G. Luken III, Chief Executive Officer, pursuant to
                      Section 302 of the Sarbanes-Oxley Act of 2002.31.2
                  
                  
                  Certification
                      by Patrick Doran, Chief Financial Officer, pursuant to Section 302 of
                      the Sarbanes-Oxley Act of 2002.32.1
                  
                  
                  Certification
                      by Henry G. Luken III, Chief Executive Officer, pursuant to
                      Section 906 of the Sarbanes-Oxley Act of 2002.32.2
                  
                  
                  Certification
                      by Patrick Doran, Chief Financial Officer, pursuant to Section 906 of
                      the Sarbanes-Oxley Act of
                      2002.





125




**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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.




EQUITY
                MEDIA HOLDINGS CORP.By:
            
            /s/
                HENRY G. LUKEN, III***Chief
                Executive Officer and Chairman of******the
                Board of Directors***Date
            
            March 31,
                2008





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.





**Signature**
            
            **Title**
            
            **Date**/s/
                Henry G. Luken III
            
            Chief
                Executive Officer and
            
            March 31,
                2008**Henry
                G. Luken III**
            
            Chairman  of
                the Board of Directors (Principal Executive Officer)/s/
                Patrick Doran
            
            Chief
                Financial Officer (Principal
            
            March 31,
                2008**Patrick
                Doran**
            
            Financial
                Officer)/s/
                Glenn Charlesworth
            
            Vice
                President and Chief
            
            March 31,
                2008**Glenn
                Charlesworth**
            
            Accounting
                Officer/s/Larry
                Morton****
            
            Director
            
            March
                31, 2008**Larry
                Morton**/s/
                Robert B. Becker
            
            Director
            
            March 31,
                2008**Robert
                B. Becker**/s/
                Robert Farenhem
            
            Director
            
            March 31,
                2008**Robert
                Farenhem**/s/
                Michael Flynn
            
            Director
            
            March 31,
                2008**Michael
                Flynn**/s/
                Manuel Kadre
            
            Director
            
            March 31,
                2008**Manuel
                Kadre**/s/John Oxendine
            
            Director
            
            March 31,
                2008**John
                Oxendine**/s/Michael W. Pierce
            
            Director
            
            March 31,
                2008**Michael
                W. Pierce**




126




**Exhibit Index**




31.1
            
            Certification
                byHenry G. Luken III,
                Chief Executive Officer, pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                byPatrick
                Doran,
                Chief Financial Officer, pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                byHenry
                G. Luken III,
                Chief Executive Officer, pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            
            Certification
                byPatrick
                Doran,
                Chief Financial Officer, pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




127