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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                             ---------------------

                                   FORM 10-K

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<C>        <S>
           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
           EXCHANGE ACT OF 1934

           FOR FISCAL YEAR ENDED DECEMBER 31, 2000
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                                       OR

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<C>        <S>
           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
           SECURITIES EXCHANGE ACT OF 1934
           FOR THE TRANSITION PERIOD FROM         TO         .
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                        COMMISSION FILE NUMBER 001-13715

                           --------------------------

                              BIG CITY RADIO, INC.

             (Exact name of registrant as specified in its charter)

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                DELAWARE                                     13-3790661
    (State or other jurisdiction of               (I.R.S. Employer Identification
     incorporation or organization)                           Number)

   11 SKYLINE DRIVE, HAWTHORNE, N.Y.                           10532
(Address of principal executive offices)                     (Zip Code)
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       Registrant's telephone number, including area code: (914) 592-1071

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

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                TITLE OF EACH CLASS:                       NAME OF EACH EXCHANGE ON WHICH REGISTERED:
                --------------------                       ------------------------------------------
<S>                                                   <C>
   Class A Common Stock, par value $.01 per share                   American Stock Exchange
</TABLE>

    Securities registered pursuant to Section 12(g) of the Act: 11 1/4% Senior
Discount Notes Due 2005, Series B

                           --------------------------

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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. [  ]

    On February 27, 2001 the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the Registrant, using the closing price
of the Registrant's Class A Common Stock, as reported by the American Stock
Exchange on such date, was $23,071,100

    The number of shares of the Registrant's Class A Common Stock and Class B
Common Stock outstanding as of February 27, 2001 was 6,226,817 and 8,250,458
respectively.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Definitive Proxy Statement to be used in connection with the
Registrant's Annual Meeting of Stockholders to be held on May 11, 2001 are
incorporated by reference into Part III of this report.

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                              BIG CITY RADIO, INC.
        ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000
                               TABLE OF CONTENTS

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ITEM NO.                           DESCRIPTION                             PAGE
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                                     PART I

Item 1.    Business....................................................         3

Item 2.    Properties..................................................        18

Item 3.    Legal Proceedings...........................................        19

Item 4.    Submission of Matters to a Vote of Security Holders.........        20

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
             Stockholder Matters.......................................        20

Item 6.    Selected Financial Data.....................................        22

Item 7.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations.................................        23

Item 7A.   Quantitative and Qualitative Disclosures About Market
             Risk......................................................        31

Item 8.    Financial Statements and Supplementary Data.................        32

Item 9.    Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure..................................        58

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant..........        58

Item 11.   Executive Compensation......................................        58

Item 12.   Security Ownership of Certain Beneficial Owners and
             Management................................................        58

Item 13.   Certain Relationships and Related Transactions..............        58

                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on
             Form 8-K..................................................        58
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                                       2
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                                     PART I

ITEM 1. BUSINESS

GENERAL

    Big City Radio, Inc. ("Big City Radio" or the "Company") was formed in 1994
to acquire radio broadcast properties in or adjacent to major metropolitan
markets and utilize innovative engineering techniques and low-cost,
ratings-driven operating strategies to develop these properties into successful
metropolitan radio stations. In order to accomplish this objective, the Company
applies a variety of innovative broadcast engineering techniques to the radio
broadcast properties it acquires, including Synchronized Total Market
Coverage-TM- ("STMC-TM-"). STMC-TM- consists of acquiring two or more stations
which broadcast on the same frequency and simulcasting their signals to achieve
broad coverage of a targeted metropolitan market. In addition to STMC-TM-, the
Company intends to employ other broadcast engineering techniques to enter major
metropolitan markets at attractive valuations. These engineering techniques
include acquiring suburban radio stations and moving the station's broadcast
antenna closer to the metropolitan market ("move-ins") and acquiring high-power
stations adjacent to major metropolitan markets and focusing such stations'
broadcast signal into the metropolitan area.

    The Company's acquisition and engineering strategies enable it to provide
near seamless coverage of major metropolitan markets at a significantly lower
acquisition cost than is typically required to acquire a major market Class B
station. Class B radio stations are defined by the Federal Communications
Commission (the "FCC") as those facilities whose signal is predicted to cover a
regional urban area. The Company currently owns and operates one STMC-TM-
station combination in each of New York, Los Angeles, and Phoenix, and two
STMC-TM- station combinations in Chicago. The Company also owns and operates one
stand-alone radio station in Phoenix. New York, Los Angeles, Chicago, and
Phoenix are four of the largest radio markets in the United States in aggregate
advertising revenues.

    The Company's first targeted market was Los Angeles where the Company
operates a three-station combination, which broadcasts as Viva 107.1, featuring
a Hispanic contemporary hit radio format on the 107.1-FM frequency (the "Los
Angeles Stations"). Viva 107.1 covers approximately 90% of the Arbitron diaries
in the Los Angeles Arbitron Metro Survey Area ("MSA") as a result of an increase
in its transmission power pursuant to the FCC Power Increase (as defined herein)
which the Company implemented in the first quarter of 1998. The Company debuted
Viva 107.1 in December 1999 as its first Hispanic station, and it earned a 1.4%
share in the 12+ category as of the Fall 2000 Arbitron book. The Company
acquired the Los Angeles Stations in May 1996 for a combined purchase price
significantly lower than the reported purchase prices of Class B stations in the
Los Angeles MSA, as evidenced by reported transactions consummated since the
deregulation initiated by the passage of the Telecom Act of 1996 (the "Telecom
Act.") See "Business Strategy" below.

    The Company's four stations in the New York MSA collectively broadcast as
New CountryY107 ("Y-107 NY") on the 107.1-FM frequency (the "New York
Stations"). Y-107 NY commenced operations in December 1996 as the only country
music station covering the New York City market. Y-107 NY earned a 1.0% share in
the 12+ category as of the Fall 2000 Arbitron book. Y-107 NY currently covers
approximately 90% of the Arbitron diaries in the New York MSA as a result of an
increase in its transmission power pursuant to the FCC Power Increase and
implementation of other technical improvements, which the Company implemented
during the third quarter of 1998. The Company acquired the four New York
Stations for a combined purchase price significantly lower than the reported
purchase prices of Class B stations in the New York MSA, as evidenced by
reported transactions consummated since the passage of the Telecom Act. See
"Business Strategy" below.

    The Company owns two groups of stations in the Chicago MSA, forming its
first duopoly (the "Chicago Stations"). Two stations collectively broadcast as
Viva 103.1 on the 103.1-FM frequency. Viva

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103.1 commenced operations in January 2001, broadcasting a Hispanic contemporary
hit radio format. Throughout 2000, it operated as "The EightiesChannel." Viva
103.1 currently covers approximately 85% of the Arbitron diaries in the Chicago
MSA as a result of an increase in its transmission power pursuant to the FCC
Power Increase and implementation of other technical improvements, which the
Company implemented during the third quarter of 1999. This coverage is
anticipated to approach 90% when further engineering enhancements that would be
permitted by certain rule changes under consideration by the FCC take effect.
The Company acquired the two stations comprising FM 103.1 for a combined
purchase price which is significantly less than the reported purchase prices of
Class B stations in the Chicago MSA, as evidenced by transactions consummated
since the passage of the Telecom Act. See "Business Strategy" below.

    The second group of stations in the Chicago area currently comprises three
stations, collectively broadcasting as Energy 92.7 and 5 ("Energy92") on the
92.7 and 92.5 FM frequencies. Energy92 commenced operations in January 2001
broadcasting a contemporary dance hit radio format. Throughout 2000, it operated
as 92 KISS FM, broadcasting a contemporary hit radio format. In April 1998, the
Company signed a definitive asset purchase agreement to acquire substantially
all the assets of WDEK-FM and WLBK-AM, DeKalb, Illinois. The Company completed
the acquisition in February 1999. The Company added WDEK-FM, which broadcasts on
the 92.5 FM frequency, to the 92.7 stations. Together with the 92.7 FM frequency
stations, WDEK-FM forms Energy92 in the Chicago area. Through use of the
Company's STMC-TM- technology, WDEK-FM 92.5 was engineered to form part of the
Energy92 synchronized station group. Energy92 currently covers approximately 90%
of the Arbitron diaries in the Chicago MSA and is expected to increase its
coverage to above this as a result of further engineering enhancements, subject
to FCC approval.

    The Company operates two formats in the Phoenix MSA (the "Phoenix
Stations"). The first format is broadcast on a group comprising three stations,
KEDJ-FM on 106.3 FM, KDDJ-FM on 100.3 FM, and KBZR-FM on 106.5, all
trimulcasting the modern rock format known as "The Edge" with the Howard Stern
morning show. "The Edge" earned a 3.1% share in the 12+ category as of the Fall
2000 Arbitron book. "The Edge" currently covers approximately 95% of the
Arbitron diaries in the Phoenix MSA. KEDJ-FM and KDDJ-FM were acquired on
July 30, 1999. On September 22, 1999 the Company acquired KBZR-FM and added it
to "The Edge" station group.

    The second format in the Phoenix area is currently broadcast on KSSL-FM. It
is a Hispanic contemporary hit radio format, known as "Que Buena", on the 105.3
FM frequency. KSSL-FM commenced operations in February 2000. The Company
acquired KSSL-FM on September 28, 1999. KSSL-FM currently covers approximately
65% of the Arbitron diaries in the Phoenix MSA and will increase its coverage to
approximately 90% as a result of the planned increase in its transmission power
pursuant to the FCC Power Increase and other technical improvements, which the
Company plans to implement during 2001 pending receipt of FCC approval. The
Company has plans to effect engineering enhancements to the KBZR-FM signal.
These improvements are subject to FCC approval, but are anticipated to occur in
the year 2001. After these changes, KDDJ-FM 100.3 FM will broadcast the "Que
Buena" format, which together with the existing KSSL-FM, will form a simulcast
combo in Phoenix whose signal will cover approximately 90% of the Arbitron
diaries in the Phoenix MSA. The Company acquired the four stations in Phoenix
for a combined purchase price significantly less than the reported purchase
price of a Class C station combo in the Phoenix MSA as evidenced by 1999
transactions.

    On November 1, 1999 the Company consummated the acquisition, in an all stock
transaction, all the issued and outstanding stock of Hispanic Internet
Holdings, Inc. ("The Internet Company"), a privately held bilingual Online
Service Provider for the U.S. Hispanic and Latin American markets. The
transaction was accounted for as a purchase. The Company issued 400,000 shares
of its Class A Common Stock at a value of $4.00 per share. Under the terms of
the Agreement, an additional 600,000 shares will be issued, (i) over the next
five years contingent upon the successful achievement of certain

                                       4
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annual revenue goals, or (ii) in the event of a sale or spin-off of the Internet
company, prior to the fifth anniversary of the merger, for a valuation of at
least $10 million, or (iii) in the event of a sale of Big City Radio prior to
the fifth anniversary of the merger at a price of at least $4.00 per share. The
Company, through the acquisition of Hispanic Internet Holdings, Inc., owns
TodoAhora.com, a bilingual internet portal, which delivers a range of internet
programming to the Hispanic community including news, entertainment, finance,
culture, and e-commerce opportunities. TodoAhora.com will serve the Hispanic
community both in the U.S. and overseas.

    On November 8, 2000 the Company consummated a transaction in which the
Company acquired substantially all of the assets and properties of (i) United
Publishers of Florida, Inc., which owned and operated a Hispanic music trade
magazine, (ii) "Disco", a graphic design business and (iii) the
LatinMusicTrends.com website ((i), (ii), (iii) are collectively referred to
herein as "the acquired businesses"). This acquisition was accounted for as a
purchase. The Company paid $250,000 at closing, and a second installment of up
to $250,000 is due at the one year anniversary of the acquisition, subject to
certain operating cash flow targets of the acquired businesses in the first
twelve months following the acquisition.

    In November 2000, the Company formed Independent Radio Reps, LLC, a
wholly-owned subsidiary. This in-house agency was formed to compete for Hispanic
National radio advertising business.

    The Company is controlled by Stuart Subotnick, a general partner of
Metromedia Company, a Delaware general partnership ("Metromedia"), who, through
the beneficial ownership of 100% of the Company's Class B Common Stock, par
value $.01 per share (the "Class B Common Stock"), owns approximately 57% of the
Company's outstanding common stock, representing 93% of the voting power of the
Company's outstanding common stock (without giving effect to the exercise of any
options to acquire shares of the Company's Class A Common Stock, par value $.01
per share (the "Class A Common Stock") or the conversion of the Class B Common
Stock which is convertible into shares of Class A common Stock on a one for one
basis).

MANAGEMENT

    Mr. Stuart Subotnick, Chairman, is a founder of the Company. Mr. Subotnick
contributes his financial, strategic and operational expertise gained through
the development and operation of the numerous media and communications
businesses that he and longtime partner John W. Kluge have controlled through
Metromedia and its predecessor. Charles M. Fernandez is the President and Chief
Executive Officer of the Company. Mr. Fernandez has also served as a director of
the Company since November 1999. Previously, Mr. Fernandez served as Chairman of
Hispanic Internet Holdings, Inc. from 1998 until its merger with Big City
Radio, Inc. Mr. Fernandez served as Executive Vice President and Director of
Heftel Broadcasting Corp, up until its purchase by Clear Channel in late 1995.
In addition to Mr. Subotnick and Mr. Fernandez, the Company has numerous
experienced radio executives involved in all aspects of its operations,
including engineering, sales, marketing, programming and finance. The Company
believes that its quality management team will be instrumental in successfully
implementing its business strategy.

    The principal executive offices of the Company are located at 11 Skyline
Drive, Hawthorne, New York 10532. Its telephone number is (914) 592-1071.

STATIONS OPERATIONS

    The Company currently owns station groups in Los Angeles, New York, Chicago,
and Phoenix, four of the largest markets in the United States in terms of
aggregate radio revenues. Los Angeles and Phoenix are two of the top U.S.
Hispanic markets. Y-107 NY has reported significant increases in Arbitron
ratings and net revenue since its launch. Viva 107.1, a Hispanic contemporary
hit radio format in Los Angeles launched in December 1999, has also reported
significant Arbitron ratings growth in its

                                       5
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first year of operation. "Que Buena" commenced operations in February 2000 and
is being operated as a stand-alone signal pending implementation of the
Company's planned engineering enhancements in the Phoenix market. In
January 2001, the Company changed the format of both its Chicago station groups
in response to market competition and strategic opportunities.

LOS ANGELES

    The Los Angeles market is the second largest Arbitron market in terms of
population and the largest in terms of aggregate radio market revenues in the
United States, with 2000 revenues of $846 million. From 1996 to 2000, radio
advertising revenue in the Los Angeles MSA grew from $495 million to
$846 million, a compound annual growth rate of 14.3%. Los Angeles is the first
market in which the Company implemented STMC-TM-, with its acquisitions of three
radio stations for an aggregate purchase price of $26.8 million. Viva 107.1
initially covered approximately 75% of the Arbitron diaries in the Los Angeles
MSA and, as a result of an increase in its transmission power, which the Company
implemented in the first quarter of 1998, Viva 107.1 increased its coverage to
approximately 90%. The Company believes that this coverage is substantially
similar to the Arbitron diary coverage of many of the highest-ranked Los Angeles
Class B stations. In addition to its coverage of the Los Angeles market, Viva
107.1 covers parts of the Ventura, Orange, Riverside-San Bernardino and San
Diego markets.

    The Company believes that identifying the appropriate format in a particular
market is crucial to the station's ability to achieve meaningful penetration of
the market's listening audience and aggregate advertising revenues. After an
extensive updated research study of the Los Angeles market in 1999, the Company
launched a Hispanic contemporary hit radio format.

    The Company believes that to achieve Class B station equivalent Arbitron
coverage and broadcast quality requires extensive engineering expertise. In Los
Angeles, the Company uses several advanced techniques to achieve what the
Company believes to be substantially full coverage. In addition to the three
stations, the Company uses a booster located in the San Fernando Valley to
enhance its coverage of the market. The Company believes these engineering
solutions have resulted in significantly broader coverage than traditional
simulcasting.

NEW YORK

    The New York MSA is the largest Arbitron market in terms of population and
the second largest in terms of aggregate radio market revenues in the United
States, with 2000 revenues of $810 million. From 1996 to 2000, radio advertising
revenue in the New York MSA grew from $467 million to $810 million, a compound
annual growth rate of 14.8%. New York is the second market which the Company
entered with its acquisitions of four radio stations for an aggregate purchase
price of approximately $25 million. The Company has implemented STMC-TM- in New
York as well and believes that it has created the equivalent of a New York
Class B station. Subsequent to the implementation of the planned power increase
of the New York Stations and implementation of other technical improvements,
which the Company completed by the end of the third quarter of 1998, the
Arbitron diary coverage of Y-107 NY increased to approximately 90%. The Company
believes that this coverage is substantially similar to the Arbitron diary
coverage of many of the highest-ranked New York Class B stations.

    Y-107 NY has an exclusive format presence in New York, as the Company
believes there are no other country music stations covering substantially all of
the New York MSA. Country music is traditionally a very strong 25-54 demographic
format, which routinely generates high power ratios relative to other formats.

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CHICAGO

    The Chicago MSA is the third largest Arbitron market in terms of population
and aggregate radio market revenues in the United States with 2000 revenues of
$541 million. From 1996 to 2000, radio advertising revenue in the Chicago MSA
grew from $350 million to $541 million, a compound annual growth rate of 11.5%.
The Company has acquired five radio stations in the Chicago MSA for an aggregate
purchase price of $34.2 million. Viva 103.1 broadcast throughout the year 2000
as The EightiesChannel, an Eighties music format. Viva 103.1 began broadcasting
its contemporary Spanish music format in January 2001. Energy92 broadcast
throughout the year 2000 as 92Kiss FM, a contemporary hit radio format on two
92.7 frequencies and one 92.5 frequency. In January 2001, the Company changed
92Kiss to a contemporary dance hit format, Energy92. Subsequent to certain
technical improvements, subject to FCC approval, the Company expects both
Chicago Stations to cover approximately 90% of the Arbitron diaries in the
Chicago MSA.

PHOENIX

    The Phoenix MSA is the sixteenth largest Arbitron market in terms of
population and fifteenth in aggregate radio market revenues in the United States
with 2000 revenues of $189 million. From 1996 to 2000, radio advertising revenue
in the Phoenix MSA grew from $106 million to $189 million, a compound annual
growth rate of 15.6%. The Company has to date acquired four radio stations in
the Phoenix MSA for an aggregate purchase price of $32 million. The Edge
broadcasts its modern rock format with the Howard Stern morning show. "Que
Buena" began broadcasting its Hispanic contemporary hit radio format in
February 2000. The Company has plans to effect engineering enhancements to the
KBZR-FM signal. These improvements are subject to FCC approval, but are
anticipated to occur in the year 2001. After these changes, KDDJ-FM 100.3 FM
will cease broadcasting "The Edge" programming, but will broadcast the "Que
Buena" format. Together with KSSL-FM, it will form a simulcast combo whose
signal will cover approximately 90% of the Arbitron diaries in the Phoenix MSA.
The Company acquired the four stations in Phoenix for a combined purchase price
significantly less than the reported purchase price of a Class C station combo
in the Phoenix MSA as evidenced by 1999 transactions.

ADVERTISING SALES

    The rates a station can charge are in large part dictated by the station's
ability to attract audiences in the demographic groups targeted by its
advertisers, as measured principally by Arbitron Radio Market Reports. The
Company believes that identifying the appropriate format in a particular market
is crucial to the station's ability to achieve meaningful penetration of the
listening audience of the market. In each market entered by the Company, the
Company performs an extensive competitive analysis to select the format with the
greatest audience and revenue potential.

    The Company generates virtually all of its revenues from the sale of local
and national advertising for broadcast on its radio stations. The Company
believes that radio is one of the most efficient and cost-effective means for
advertisers to reach specific demographic groups. Advertising rates charged by
radio stations depend primarily on (i) a station's share of the audience in the
demographic groups targeted by advertisers, (ii) the number of stations in the
market competing for the same demographic groups, and (iii) the supply of and
demand for radio advertising time. Rates are generally highest during morning
and afternoon commuting hours.

    The format of a particular station limits, in part, the number of
advertisements that the station can broadcast without jeopardizing listening
levels (and the resulting ratings). The Company's stations strive to maximize
revenue by constantly managing the number of commercials available for sale and
adjusting prices based upon local market conditions. In the broadcasting
industry, radio stations often utilize trade (or barter) agreements to generate
advertising time sales in exchange for goods or services (such as travel and
lodging) instead of for cash. The Company minimizes its use of trade agreements.

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The Company determines the number of advertisements broadcast hourly so as to
maximize available revenue dollars without jeopardizing listening levels.
Although the number of advertisements broadcast during a given time period
varies, the total number of advertisements broadcast on a particular station
generally does not vary significantly from year to year. As is typical of the
radio broadcasting industry, the Company's stations respond to changing demand
for advertising inventory by varying prices rather than by varying the target
inventory level for a particular station.

    Most advertising contracts are short-term and run only for a few weeks. The
Company generates approximately 84% of its gross revenue from local advertising,
which is sold primarily by a station's sales staff. To achieve greater control
over advertising dollars, the Company's sales force focuses on establishing
direct relationships with local advertisers. The Company has engaged national
representative firms and recruited in-house staff to represent it in generating
national business in the largest national sales markets of Los Angeles, New York
City, Boston, Philadelphia, Chicago, Atlanta, Dallas, Detroit and San Francisco.

INTERNET AND PUBLISHING REVENUES

    Internet revenues are derived principally from the sale of various forms of
advertisements, including sponsorships, endorsements and product placements, and
from electronic commerce activities related to its programming on pages
delivered to users of our Internet channel. Advertising programs are generally
delivered on either an "impression" based program or a "performance" based
program. An impression based program earns revenues when an advertisement is
delivered to a user of our internet network. A performance based program earns
revenues when a user of our internet network responds to an advertisement by
linking to an advertiser's internet network. Advertising revenues are recognized
in the period in which the advertisements are delivered.

    Publishing revenues are derived principally from the sale of advertising
announcements. Furthermore, the magazine company derives revenues from contract
graphic design projects. Publishing revenues, both from advertisements and
design projects, are recognized in the period in which the advertisements are
published, or when the design project is rendered. TodoAhora.com was formally
launched on May 5, 2000. The magazine publishing business was acquired on
November 8, 2000. Total internet and publishing revenue for the year 2000 was
$75,000.

COMPETITION

RADIO BROADCASTING

    Radio broadcasting is a highly competitive business. Within their respective
markets, each of the Company's radio stations competes for audience share and
advertising revenue directly with other radio stations, as well as with other
media such as television, print media, billboards, compact discs and music
videos. Several better-capitalized companies, including Clear Channel
Communications, Inc., Infinity Broadcasting Corporation, and Hispanic
Broadcasting Corporation compete in the same geographic markets as the Company,
many of which have greater financial resources. In addition, recently the radio
industry has experienced significant consolidation which has resulted in several
radio station groups that have a large number of radio stations throughout the
United States and vastly greater financial resources and access to capital than
the Company.

    The financial success of each of the Company's radio stations depends
principally upon its share of the overall radio advertising revenue within its
geographic market, its promotion and other expenses incurred to obtain that
revenue and the economic health of the geographic market. Radio advertising
revenues are, in turn, highly dependent upon audience share. Radio station
operators are subject to the possibility of another station changing programming
formats to compete directly for listeners and advertisers or launching an
aggressive promotional campaign in support of an already existing competitive
format. If a competitor, particularly one with substantial financial resources,
were to attempt to compete in either of these fashions, the broadcast cash flow
of the Company's affected

                                       8
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station could decrease due to increased promotional and other expenses and/or
lower advertising revenues resulting from lower ratings. There can be no
assurance that any one of the Company's radio stations will be able to maintain
or increase its current audience ratings and radio advertising revenue market
share.

    The Company will also face competition from other radio stations that
attempt to replicate the engineering techniques of the Company to cover a
metropolitan area and from stations that simply simulcast on the same or first
adjacent frequencies. While simulcasting has been employed by other broadcast
radio operators in the past, the primary purpose has been to reduce programming
costs for the individual stations. The Company believes that most broadcast
radio operators that have employed simulcasting have done so on different
frequencies. The Company believes that few operators have successfully used
simulcasting to effectively cover an entire MSA.

    Radio broadcasting is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems or the introduction of a new
technology known as Digital Audio Broadcasting ("DAB"). DAB may deliver by
satellite or terrestrial means multi-channel, multi-format digital radio
services with sound quality equivalent to compact discs to nationwide and
regional audiences. The Company cannot predict the effect, if any, that any such
new technologies may have on the radio broadcasting industry.

INTERNET AND PUBLISHING

    The market for Internet and publishing products and services is highly
competitive. There are no substantial barriers to entry in these markets, and
Disco, TodoAhora.com, and LatinMusicTrends.com expect that competition will
continue to intensify. Disco magazine competes with other magazine and print
products that feature, news and information on the Latin music industry. These
include a Spanish language version of "Billboard" magazine which is produced by
a competitor with greater financial resources. LatinMusicTrends.com is designed
to complement the information provided to Latin music industry professionals and
is under development. TodoAhora.com competes with other Hispanic and bilingual
providers of online navigation, information and community services.

    TodoAhora.com believes that the principal competitive factors in its markets
are:

    - brand recognition;

    - ease of use;

    - comprehensiveness;

    - personalization;

    - independence;

    - quality and responsiveness of search results and other services;

    - the availability of high-quality, targeted content and focused value-added
      products and services;

    - access to end users; and

    - with respect to advertisers and sponsors, the number of users, duration
      and frequency of visits, and user demographics.

    Many of its existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical, marketing and
distribution resources than TodoAhora.com does.

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ACQUISITIONS

    Since its incorporation in August 1994, the Company has acquired the assets
of twenty radio stations, an internet company, and related internet and
publishing businesses. It has disposed of four stations. The following is a
summary of the acquisitions and dispositions of radio stations which the Company
has consummated since its incorporation. All of these transactions were with
non-affiliated persons.

NEW YORK

    In December 1994, the Company acquired the assets of radio station WRGX-FM
(now WYNY-FM), Briarcliff Manor, New York, from West-Land Communicators, Inc.
("West-Land") for a purchase price of $2.5 million and the issuance of a
promissory note in the amount of $1.0 million to West-Land. In April 1997, the
Company acquired the assets of radio station WWHB-FM (now WWXY-FM), Hampton
Bays, New York, from South Fork Broadcasting Corporation ("South Fork") for a
purchase price of $4.0 million. In June 1997, the Company acquired the assets of
radio station WZVU-FM (now WWZY-FM), Long Branch, New Jersey, including a radio
tower, a radio antenna and a building from K&K Radio Broadcasting L.L.C. and K&K
Tower, L.L.C. for an aggregate purchase price of $12.0 million and certain
payments under existing leases of the building facilities. K&K Radio
Broadcasting, L.L.C., K&K Tower, L.L.C. and each of their controlling members
and the general manager of WZVU-FM entered into a covenant not to compete with
the Company for a period of three years. In August 1998, the Company acquired
all of the stock of Radio New Jersey, owner of the FCC licenses of WRNJ-FM,
Belvedere, New Jersey (now WWYY-FM) and WRNJ-AM, Hackettstown, New Jersey. The
aggregate purchase price for WRNJ-FM was $5.4 million excluding
acquisition-related expenses, of which $3.0 million was paid in cash and the
remainder was satisfied by the issuance of two promissory notes. Simultaneously,
the Company sold substantially all of the assets of WRNJ-AM to one of the
existing stockholders of Radio New Jersey. Also, in December 1994, the Company
acquired the assets of radio station WRKL-AM, Pomona, New York, from Rockland
Communicators, Inc. for a purchase price of $1.0 million. The Company sold this
station in March 1999 to Polnet Communications, Ltd. for a price of
$1.6 million.

LOS ANGELES

    In May 1996, the Company acquired four radio stations in the Los Angeles
area from Douglas Broadcasting, Inc. ("Douglas"). The Company acquired the
assets of radio station KMAX-FM (now KLYY-FM), Arcadia, California, KAXX-FM (now
KVYY-FM), Ventura, California, KBAX-FM (now KSYY-FM) Fallbrook, California, and
KWIZ-FM, Santa Ana, California, for an aggregate purchase price of
$38.0 million. The Company also acquired FM Translator station K252BF, Temecula,
California, which rebroadcasts on 98.3 MHz the signal of KSYY-FM, and FM Booster
station KLYY-FM, Burbank, California, which boosts on 107.1 MHz the broadcast of
the signal of KLYY-FM. In December 1996, the Company sold radio station KWIZ-FM
to Liberman Broadcasting, Inc. for a price of $11.2 million.

CHICAGO

    In August 1997, the Company acquired the assets of radio station WVVX-FM
(now WXXY-FM), Highland Park, Illinois, from WVVX License, Inc., for a purchase
price of $9.5 million. Douglas, WVVX, Inc. and WVVX License, Inc. agreed not to
compete for a period of eighteen months. In August 1997, the Company acquired
the assets of radio station WJDK-FM (now WYXX-FM), Morris, Illinois, from DMR
Media, Inc., for a purchase price of $1.1 million. In addition, the Company
agreed not to compete with DMR Media, Inc.'s operations of radio station
WCSJ-AM, Morris, Illinois, for a period of five years. In August 1998, the
Company closed two transactions in which it acquired substantially all of the
assets of WCBR-FM (now WKIE-FM), Arlington Heights, Illinois from Darrel

                                       10
<PAGE>
Peters Productions, Inc. and WLRT-FM (now WKIF-FM), Kankakee, Illinois from
STARadio Corp. for an aggregate purchase price of $19.5 million. In
February 1999, the Company acquired substantially all of the assets of radio
stations WDEK-FM and WLBK-AM, DeKalb, Illinois, from DeKalb Radio Studios, Inc.
for a purchase price of $4.5 million. The Company added WDEK-FM, which operates
on the 92.5 FM frequency, together with two existing 92.7 FM stations in the
Chicago metropolitan area, collectively know as Energy92. The Company sold the
operating assets of WLBK-AM on April 12, 2000. No gain or loss was recorded on
this transaction.

PHOENIX

    In July 1999, the Company acquired the assets of radio stations KEDJ-FM, Sun
City, Arizona and KDDJ-FM, Globe, Arizona from New Century Arizona for a
purchase price of $22.0 million. In September 1999, the Company acquired the
assets of radio station KBZR-FM, Arizona City, Arizona from Brentlinger
Broadcasting, Inc. for a purchase price of $3.9 million. In September 1999, the
Company acquired the assets of radio station KMYL-FM (now KSSL-FM), Wickenburg,
Arizona, from Interstate Broadcasting Systems of Arizona, Inc. for a purchase
price of $5.6 million.

INTERNET AND PUBLISHING

    On November 1, 1999 the Company consummated a transaction in which the
Company acquired, in an all stock transaction, all the issued and outstanding
stock of Hispanic Internet Holdings, Inc., a privately held bilingual Online
Service Provider for the U.S. Hispanic and Latin American markets. The Company,
through the acquisition of Hispanic Internet Holdings, Inc. owns TodoAhora.com,
a bilingual Internet portal, which will deliver a full range of world wide web
programming to the Hispanic community including news, entertainment, finance,
culture, and e-commerce opportunities. TodoAhora.com will serve the Hispanic
community both in the U.S. and overseas. TodoAhora.com was formally launched on
May 5, 2000. In November 2000, the Company acquired the assets of United
Publishers of Florida, Inc., owner of Disco Magazine, and LatinMusicTrends.com
and producers of Enterese, a leading U.S. Hispanic magazine. The Company has
merged its existing Internet operations together with the United Publishers
publishing and Internet operations.

EMPLOYEES

    At December 31, 2000, the Company had approximately 179 full-time employees
and 91 part-time employees. The Company believes that its relations with its
employees are good. None of the Company's employees is represented by a labor
union.

    The Company employs several on-air personalities and generally enters into
employment agreements with certain of these personalities to protect its
interests in those relationships that it believes to be valuable. The loss of
certain of these personalities could result in a short-term loss of audience
share, but the Company does not believe that any such loss would have a material
adverse effect on the Company.

PATENTS AND TRADEMARKS

    The Company owns registered trademark rights for STMC-TM- and domestic
trademark registrations related to the business of the Company. The Company does
not believe that any of its trademarks are material to its business or
operations. The Company does not own any patents or patent applications.

FEDERAL REGULATION OF RADIO BROADCASTING

    The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the "Communications Act"). Among other
things, the FCC assigns frequency bands for broadcasting;

                                       11
<PAGE>
determines the particular frequencies, locations and power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes in ownership or control of station licenses; regulates equipment used by
stations; imposes regulations and takes other action to prevent harmful
interference between stations; adopts and implements regulations and policies
that directly or indirectly affect the ownership, management, programming,
operation and employment practices of stations; and has the power to impose
penalties for violations of its rules or the Communications Act. In
February 1996, Congress enacted the Telecom Act to amend the Communications Act.
The Telecom Act, among other measures, directed the FCC, which has since
conformed its rules, to (a) eliminate the national radio ownership limits;
(b) liberalize the local radio ownership limits as specified in the Telecom Act;
(c) issue broadcast licenses for periods of up to eight years; and
(d) eliminate the opportunity for the filing of competing applications against
broadcast license renewal applications.

    Congress, via the Balanced Budget Act of 1997, authorized the FCC to conduct
auctions for the awarding of initial broadcast licenses or construction permits
for commercial radio and television stations. To facilitate the settlement
without auctions of already pending mutually exclusive applications, Congress
directed the FCC to waive existing rules as necessary. While the Company is not
a participant in any such proceeding, this action has resulted in the awarding
of construction permits for additional radio stations, some of which might have
the potential to compete with the Company's radio stations.

LICENSE GRANTS AND RENEWALS

    The Communications Act provides that a broadcast license may be granted to
an applicant if the grant would serve the public interest, convenience and
necessity, subject to certain limitations referred to below. In making licensing
determinations, the FCC considers the legal, technical, financial and other
qualifications of the applicant, including compliance with the Communications
Act's limitations on alien ownership, compliance with various rules limiting
common ownership of broadcast, cable and newspaper properties, and the
"character" of the licensee and those persons holding "attributable" interests
in the licensee. Broadcast licenses are granted for specific periods of time
and, upon application, are renewable for additional terms. The Telecom Act
amended the Communications Act to provide that broadcast licenses be granted,
and thereafter renewed, for a term not to exceed eight years, if the FCC finds
that the public interest, convenience, and necessity would be served.

    Generally, the FCC renews broadcast licenses without a hearing. The Telecom
Act amended the Communications Act to require the FCC to grant an application
for renewal of a broadcast license if: (1) the station has served the public
interest, convenience and necessity; (2) there have been no serious violations
by the licensee of the Communications Act or the rules and regulations of the
FCC; and (3) there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC which, taken
together, would constitute a pattern of abuse. Competing applications against
broadcast license renewal applications are therefore not entertained. The
Telecom Act provided that if the FCC, after notice and an opportunity for a
hearing, decides that the requirements for renewal have not been met and that no
mitigating factors warrant lesser sanctions, it may deny a renewal application.
Only thereafter may the FCC accept applications by third parties to operate on
the frequency of the former licensee. The Communications Act continues to
authorize the filing of petitions to deny against broadcast license renewal
applications during particular periods of time following the filing of renewal
applications. Petitions to deny can be used by interested parties, including
members of the public, to raise issues concerning the qualifications of the
renewal applicant.

    The Company's Chicago Stations' broadcast licenses were renewed in 1996 and
will expire in 2003. The Los Angeles Stations' broadcast licenses were renewed
on November 25, 1997 and will expire on December 31, 2005. The New York
Stations' broadcast licenses were renewed on January 25, 1999 (in 1998 for
WWYY-FM) and will expire on June 1, 2006. The Phoenix Stations' broadcast
licenses were renewed in 1997 and 1999 and will expire on October 1, 2005. The
Company does not anticipate any material difficulty in obtaining license
renewals for full terms in the future.

                                       12
<PAGE>
LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL

    The Communications Act prohibits the assignment of an FCC license or the
transfer of control of a corporation holding such a license without the prior
approval of the FCC. Applications to the FCC for such assignments or transfers
are subject to petitions to deny by interested parties and must satisfy
requirements similar to those for renewal and new station applicants. In
reviewing assignment and transfer applications, the FCC has indicated that in
evaluating whether a proposed transaction would serve the public interest, the
FCC may consider, among other things, whether the transaction would result in
the acquiring party obtaining an excessive share of the radio advertising
revenues in a given market or would otherwise result in excessive concentration
of media ownership. The U.S. Department of Justice ("DOJ") also reviews proposed
acquisitions of radio stations. The DOJ has, in some instances, obtained consent
decrees requiring radio station divestitures in a particular market based on
allegations that acquisitions would lead to unacceptable concentration levels.

OWNERSHIP RULES

    Rules of the FCC limit the number and location of broadcast stations in
which one licensee (or any party with a control position or attributable
ownership interest therein) may have an attributable interest. The FCC, pursuant
to the Telecom Act, eliminated the previously existing "national radio ownership
rule." Consequently, there now is no limit imposed by the FCC to the number of
radio stations one party may own nationally.

    The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. Pursuant to the Telecom Act, the FCC revised
its rules to set the local radio ownership limits as follows: (a) in markets
with 45 or more commercial radio stations, a party may own up to eight
commercial radio stations, no more than five of which are in the same service
(AM or FM); (b) in markets with 30-44 commercial radio stations, a party may own
up to seven commercial radio stations, no more than four of which are in the
same service; (c) in markets with 15-29 commercial radio stations, a party may
own up to six commercial radio stations, no more than four of which are in the
same service; and (d) in markets with 14 or fewer commercial radio stations, a
party may own up to five commercial radio stations, no more than three of which
are in the same service, provided that no party may own more than 50% of the
commercial stations in the market. FCC cross-ownership rules also limit or
prohibit one party from having attributable interests in a radio station as well
as in a local television station or daily newspaper, although such restrictions
are waived by the FCC under certain circumstances. The FCC is undertaking
biennial reviews of its ownership rules, including a pending reconsideration of
how it defines the number of radio stations in a market for purposes of the
local radio ownership rule. The Company cannot predict whether the FCC will
adopt any changes in its ownership rules or, if so, what the new rules will be
or how they might affect the Company.

ATTRIBUTION RULES

    All holders of attributable interests must comply with, or obtain waivers
of, the FCC's multiple and cross-ownership rules. Under the current FCC rules,
an individual or other entity owning or having voting control of 5% or more of a
corporation's voting stock is considered to have an attributable interest in the
corporation and its stations, except that banks holding such stock in their
trust accounts, investment companies, and certain other passive interests are
not considered to have an attributable interest unless they own or have voting
control over 20% or more of such stock. An officer or director of a corporation
or any general partner of a partnership also is deemed to hold an attributable
interest in the media license. A new FCC rule--termed the "Equity-Debt Plus" or
"EDP" rule--provides for the attribution of otherwise non-attributable equity or
debt interests in a licensee. The EDP rule is triggered when a party holds
equity or debt in excess of 33% of the total assets (defined as equity plus
debt) of a licensee and such party also holds an attributable (non-EDP) interest
in another media

                                       13
<PAGE>
entity in the same market or is a major programmer supplier to another media
entity in the market. Subject to the EDP rule, the FCC does not consider holders
of non-voting stock or of minority stock interests when there is a single
majority stockholder to be attributable parties. Moreover, subject to the EDP
rule, holders of warrants, convertible debentures, options, or other non-voting
interests with rights of conversion to voting interests generally will not be
attributed such an interest unless and until such conversion is effected. When a
single shareholder holds a majority of the voting stock of a corporate licensee,
the FCC considers other shareholders, unless they are also officers or
directors, exempt from attribution. Holders of attributable interests must
comply with or obtain waivers of the FCC's multiple and cross-ownership rules.
At present, none of the attributable stockholders, officers and directors of the
Company have any other media interests besides those of the Company that
implicate the FCC's multiple ownership limits. In the event that the Company
learns of a new attributable stockholder and if such stockholder holds interests
that exceed the FCC limits on media ownership, under the Company's Amended and
Restated Certificate of Incorporation (as defined herein), the Board of
Directors of the Company has the corporate power to redeem stock of the
Company's stockholders to the extent necessary to be in compliance with FCC and
Communications Act requirements, including limits on media ownership by
attributable parties.

    The FCC will consider a radio station providing programming and sales on
another local radio station pursuant to a LMA (as defined herein) to have an
attributable ownership interest in the other station for purposes of the FCC's
multiple ownership rules. In particular, a radio station is not permitted to
enter into a LMA giving it the right to program more than 15% of the broadcast
time, on a weekly basis, of another local radio station which it could not own
under the FCC's local radio ownership rules.

ALIEN OWNERSHIP LIMITS

    Under the Communications Act, broadcast licenses may not be granted,
transferred or assigned to any corporation of which more than one-fifth of the
capital stock is owned of record or voted by non-U.S. citizens or foreign
governments or their representatives or by foreign corporations. Where the
corporation owning the license is controlled by another corporation, the parent
corporation cannot have more than one-fourth of the capital stock owned of
record or voted by Aliens, unless the FCC finds it in the public interest to
allow otherwise. The FCC has issued interpretations of existing law under which
the Alien ownership restrictions in slightly modified form apply to other forms
of business organizations, including general and limited partnerships. Recently,
the FCC decided that it is in the public interest to allow up to 100% indirect
Alien ownership by citizens of or corporations organized under the laws of WTO
member nations. The FCC also prohibits a licensee from continuing to control
broadcast licenses if the licensee otherwise falls under Alien influence or
control in a manner determined by the FCC to be in violation of the
Communications Act or contrary to the public interest. At present, one of the
Company's officers is known by the Company to be an Alien and no other officers,
directors or stockholders are known to be aliens. In the event that the Company
learns that Aliens own, control or vote stock in the Company in excess of the
limits set in the Communications Act and the FCC's rules, under the Amended and
Restated Certificate of Incorporation, the Board of Directors of the Company has
the corporate power to redeem stock of the Company's stockholders to the extent
necessary to be in compliance with FCC and Communications Act requirements on
alien ownership.

PROGRAMMING AND EEO REQUIREMENTS

    While the FCC has relaxed or eliminated many of its regulatory requirements
related to programming and content, radio stations are still required to
broadcast programming responsive to the problems, needs and interests of the
stations' service areas and must comply with various rules promulgated under the
Communications Act that regulate political broadcasts and advertisements,

                                       14
<PAGE>
sponsorship identifications, indecent programming and other matters. In
addition, the FCC has recently adopted EEO rules requiring broadcast licensees
to file employment data annually with the FCC and to implement outreach efforts
designed to broaden the pool of employment applicants. Failure to observe these
or other FCC rules can result in the imposition of monetary forfeitures, in the
grant of a "short" (less than full term) license term or, where there have been
serious or a pattern of violations, license revocation.

TECHNICAL AND INTERFERENCE RULES

    FCC rules specify technical and interference requirements and parameters
that govern the signal strength and coverage area of radio stations, and which,
unless waived, must be complied with in order to obtain FCC consent to modify a
station's service area or other technical operations. The FCC allots specific FM
radio frequencies and class designations to particular communities of license.
The FM class designations, which vary by geographic location, include (in order
of increasing potential coverage area) Class A, B1, C3, B, C2, C1, C0 and C.
(The C Class designations are generally not allocated to communities in the more
densely-populated regions of the United States, such as the Northeast and
California.) Each FM class has minimum and maximum power specifications and must
not cause interference to the protected service areas of other radio stations,
domestic or international, operating on the same or adjacent frequencies. Under
FCC rules, a radio station must transmit a minimum predicted signal strength to
its allocated community of license, and therefore must locate its transmitting
antenna at a site providing such coverage while also being within a specified
power and height range for that station's class designation, and at specified
minimum distances from the transmitting sites of nearby radio stations operating
on the same or adjacent frequencies. The Company must also comply with certain
technical, reporting, and notification requirements imposed by the FAA with
respect to the installation, location, lighting, and painting of the transmitter
antennas used by the Company's radio stations. The combination of these
requirements sets limits on the ability of a particular radio station to
relocate in certain directions and to increase signal coverage. Stations may
petition the FCC to change a particular station's community of license and/or
class, which changes are granted by the FCC when its service priorities are met
and conflicting re-allotment proposals, if any, are resolved. As to minimum
distance separation requirements designed to afford interference protection to
other FM stations, the FCC rarely waives such specifications. However, the FCC
permits radio stations in certain circumstances to relocate to a site not
meeting the minimum distance separation rule when the station demonstrates that
the service contours of neighboring radio stations will be protected from
interference. Because STMC-TM- uses radio stations that operate on the same or
adjacent frequencies, the STMC-TM- stations' transmitting sites must be
sufficiently distant from each other to comply with the FCC's interference
protection guidelines, unless such stations are exempt from compliance by their
grandfathered status.

FCC POWER INCREASES AND OTHER ENGINEERING ENHANCEMENTS

    In most instances, changes to the technical specifications of radio
stations, such as increases in the power (effective radiated power, or "ERP")
and subsequent increased coverage area, may be made only after application to
the FCC, and grant by the FCC of a construction permit for the modification of
the station. The FCC has granted applications for modifications of WYNY-FM,
Briarcliff Manor, New York, WWXY-FM, Hampton Bays, New York, and WWZY-FM, Long
Branch, New Jersey, KLYY, Arcadia, California, WXXY-FM, Highland Park, Illinois,
and WYXX, Morris, Illinois. Each of these stations requested increases in the
authorized power of the stations from the previous three-kilowatt ERP level to
the present six-kilowatt ERP level. These changes were implemented as a result
of the FCC adoption of a change in policy in August 1997 dealing with
grandfathered short-spaced FM radio stations. Grandfathered short-spaced
stations are those that do not meet the FCC's current requirements for distance
separation of FM radio stations operating on the same or adjacent frequencies as
the stations were authorized before the adoption of the current rules. In the
past, power

                                       15
<PAGE>
increases or relocations of such grandfathered stations often did not comply
with the FCC's technical rules, and would be authorized by the FCC only in
limited circumstances.

    Pending before the FCC is a proposed change in the current rules that would
allow certain other of the Company's stations to increase their power or move
their transmitter sites to provide improved coverage within the desired metro
area. Until the FCC adoption of such a change and the approval of the license
modifications is granted, the Company cannot be certain that the new policy will
serve to permit the increases in the Company's coverage areas.

AGREEMENTS WITH OTHER BROADCASTERS

    Over the past several years a significant number of broadcast licensees,
including the Company, have entered into cooperative agreements with other
stations in their markets. One typical example is a local marketing agreement
("LMA") between two separately or co-owned stations, whereby the licensee of one
station programs substantial portions or all of the broadcast day on the other
licensee's station, subject to ultimate editorial and other controls being
exercised by the latter licensee, and sells advertising time during such program
segments for its own account. The FCC has held that LMAs do not per se
constitute a transfer of control and are not contrary to the Communications Act
provided that the licensee of the station maintains ultimate responsibility for
and control over operations of its broadcast station. As in the case of the
Company, typically licensees enter into the LMA in anticipation of the sale of
the station, with the proposed acquirer providing programming for the station
while the parties are awaiting the necessary regulatory approvals to the
transaction.

    The FCC's rules also prohibit a radio licensee from simulcasting more than
25% of its programming on other radio stations in the same broadcast service
(i.e., AM-AM or FM-FM), whether it owns both stations or operates one or both
through a LMA, where such stations serve substantially the same geographic area
as defined by the stations' principal community contours. The Company's stations
are not subject to this limitation.

PROPOSED REGULATORY CHANGES AND RECENT DEVELOPMENTS

    The Congress and the FCC have under consideration, and may in the future
consider and adopt new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, (i) affect the operation,
programming, technical requirements, ownership and profitability of the Company
and its radio broadcast stations, (ii) result in the loss of audience share and
advertising revenues of the Company's radio broadcast stations, (iii) affect the
ability of the Company to acquire additional radio broadcast stations or finance
such acquisitions, (iv) affect cooperative agreements and/or financing
arrangements with other radio broadcast licensees, (v) affect the Company's
competitive position in relationship to other advertising media in its markets,
or (vi) affect the Company's ability to exploit its unique technical
capabilities and innovative approach to acquiring and using radio broadcast
stations. Such matters include, for example, changes to the license,
authorization and renewal process; spectrum use fees; revisions of the FCC's
equal employment opportunity rules and other matters relating to minority and
female involvement in broadcasting; proposals to change rules or policies
relating to political broadcasting; proposals to restrict or prohibit the
advertising of beer, wine and other alcoholic beverages on radio; proposals to
allow telephone companies to deliver audio and video programming to the home
through existing phone lines; changes in the FCC's multiple ownership, alien
ownership and cross-ownership policies; and proposals to limit the tax
deductibility of advertising expenses by advertisers.

    Other matters that could affect the Company include technological
innovations and developments generally affecting competition in the mass
communications industry. The FCC has licensed two entities to provide a new
technology, digital audio radio service or DARS, to deliver audio programming by
satellite. The FCC is also considering various proposals for terrestrial DARS.
DARS may provide a

                                       16
<PAGE>
medium for the delivery of multiple new audio programming formats to local and
national audiences with sound quality equivalent to compact discs. It is not
known at this time whether this technology also may be used in the future by
existing radio broadcast stations either on existing or alternate broadcasting
frequencies. The FCC currently is also considering authorizing the use of
in-band, on-channel, or IBOC technology for radio stations. IBOC technology
would permit an AM or FM station to transmit radio programming in both analog
and digital formats, or in digital only formats, using the bandwidth that the
radio station is currently licensed to use. Such IBOC operations might not be
consistent with STMC-TM- operations. It is unclear what regulations the FCC will
adopt regarding IBOC technology and what effect such regulations would have on
the Company's business or the operations of its radio stations. The FCC has
recently adopted new rules authorizing the operation of low power radio stations
within the existing FM band. Low power radio stations will operate at power
levels below that of full power FM radio stations, such as those owned by the
Company. It is not possible to predict what effect, including interference
effect, low power radio stations will have on the operations of the Company's
radio stations.

    Although the Company believes the foregoing discussion is sufficient to
provide the reader with a general understanding of all material aspects of FCC
regulations that affect the Company, it does not purport to be a complete
summary of all provisions of the Communications Act or FCC rules and policies.
Reference is made to the Communications Act, FCC rules, and the public notices
and rulings of the FCC for further information.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Certain statements in this report, including those utilizing the phrases
"will," "expects," "intends," "estimates," "contemplates," and similar phrases,
are "forward-looking" statements (as such term is defined in Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), including
statements regarding, among other items, (i) the Company's growth strategy,
(ii) the Company's intention to acquire additional radio stations and to enter
additional markets, including its ability to do so at attractive valuations,
(iii) the Company's expectation of improving the coverage areas of its radio
stations and the areas effectively served by TodoAhora.com, and (iv) the
Company's ability to successfully implement its business strategy. Certain, but
not necessarily all, of such forward-looking statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
and achievements of the Company and its subsidiaries to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, but are not limited to,
the following: (i) changes in the competitive market place, including the
introduction of new technologies or formatting changes by the Company's
competitors, (ii) changes in the regulatory framework, including the possibility
that U.S. or non-U.S. governments will increase regulation of the Internet,
(iii) changes in audience tastes, and (iv) changes in the economic conditions of
local markets. Other factors which may materially affect actual results include,
among others, the following: general economic and business conditions, industry
capacity, demographic changes, changes in political, social and economic
conditions and various other factors beyond the Company's control. The Company
does not undertake and specifically declines any obligation to publicly release
the results of any revisions which may be made to any forward-looking statements
to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.

                                       17
<PAGE>
ITEM 2. PROPERTIES

    The Company leases approximately 3,200 square feet in Hawthorne, New York,
where its corporate offices are located, and approximately 5,939 square feet in
New York, NY which is used as a temporary New York sales office. The Company has
entered into a lease for approximately 10,500 square feet in New York, NY, and
is currently constructing studios, and offices to house Y-107 NY and the
corporate offices. It is anticipated that this facility will be ready to occupy
by mid 2001, at which time the Company will vacate its studios and corporate
offices in Hawthorne and its temporary sales offices in New York.

    The type of properties required to support each of the Company's radio
stations includes offices, studios, transmitter sites, booster sites, translator
sites and antenna sites. The Company owns, leases or licenses the properties
required to operate its radio stations. The Company owns facilities for the New
York Stations in Long Branch (approximately 6,500 square feet) and for WDEK-FM
and WLBK-AM in DeKalb, Illinois (approximately 4,500 square feet). The Company
leases or licenses facilities for the Los Angeles Stations in Century City
(approximately 16,048 square feet), Arcadia, Fallbrook, Ventura (approximately
758 square feet), Temecula and Burbank. The Company leases facilities for the
New York Stations in Hampton Bays (approximately 1,260 square feet), Hawthorne,
New York, East Quogue and Westchester. The Company leases facilities for the
Chicago Stations in Chicago (approximately 18,698 square feet), Highland Park
(approximately 2,120 square feet), Arlington Heights (approximately 2,800 square
feet), Kankakee, and Morris. The Company leases facilities for the Phoenix
Stations in Phoenix (approximately 8,700 square feet), Apache Junction
(approximately 600 square feet), Casa Grande (approximately 1,200 square feet),
Globe, Arizona City and Wickenberg. The Company leases facilities for the
Internet and publishing operation in Coral Gable (approximately 12,600 square
feet). The Company considers its facilities to be suitable and of adequate sizes
for its current and intended purposes and does not anticipate any difficulties
in renewing those leases or licenses or in leasing or licensing additional
space, if required.

    The Company owns substantially all of its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and general
office equipment. The Company owns towers in Arcadia, CA, Ventura, CA, Long
Branch, NJ, Highland Park, IL, Morris, IL and DeKalb, IL. The towers, antennae
and other transmission equipment used in the Company's stations are generally in
good condition.

                                       18
<PAGE>
    The following table sets forth the location of the Company's principal
properties:

<TABLE>
<CAPTION>
LOCATION                                                         FACILITY
--------                                                         --------
<S>                                            <C>
LOS ANGELES
Arcadia, CA..................................  FM tower (3)
Fallbrook, CA................................  FM tower, studio, transmitter site (1)
Ventura, CA..................................  FM tower (3), studio, transmitter site (1)
Temecula, CA.................................  Translator site (1)
Century City, CA.............................  Studio, business offices (1)
Burbank, CA..................................  Booster site (1)

NEW YORK
Hampton Bays, NY.............................  Business offices (1)
Hawthorne, NY................................  Studio, corporate offices (1)
New York, NY.................................  Studio, business offices (1)
Long Branch, NJ..............................  FM tower, studio (2)
Westchester, NY..............................  FM tower (1)
East Quogue, NY..............................  FM tower, transmitter site (1)

CHICAGO
Highland Park, IL............................  FM tower (3), studio (1)
Morris, IL...................................  FM tower, transmitter site (2)
Arlington Heights, IL........................  Studio, FM tower (1)
Kankakee, IL.................................  Studio, antenna (1)
Chicago, IL..................................  Studio, business offices (1)
Arlington Heights, IL........................  FM tower (1)
DeKalb, IL...................................  Tower, studio, business offices (2)

PHOENIX
Globe, AZ....................................  Tower (1)
Phoenix, AZ..................................  Studio, business offices (1)
Arizona City, AZ.............................  Tower (1)
Wickenberg, AZ...............................  Tower (1)
Apache Junction, AZ..........................  Studio (1)
Casa Grande, AZ..............................  Studio (1)

FLORIDA
Coral Gable, FL..............................  Business offices (1)
</TABLE>

------------------------

(1) Leased.

(2) Owned.

(3) Tower owned by the Company while the property is leased.

ITEM 3. LEGAL PROCEEDINGS

    The Company is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, the outcome of all pending
legal proceedings, individually and in the aggregate, will not have a material
adverse effect on the Company.

                                       19
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of the Company's stockholders, through
the solicitation of proxies or otherwise, during the fourth quarter of the year
ended December 31, 2000.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's Class A Common Stock is listed and traded on the American
Stock Exchange (the "AMEX") under the symbol "YFM" since December 19, 1997.
There is no established public trading market for the Company's Class B Common
Stock. The following table sets forth the high and low sales prices per share of
the Class A Common Stock as reported by the AMEX for each quarterly periods
during the years ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                 HIGH          LOW
                                                                 ----          ---
<S>                                                           <C>          <C>
2000:
First Quarter...............................................      9 1/4        4 11/16
Second Quarter..............................................      5 3/4        3 15/16
Third Quarter...............................................     5 1/16          3 5/8
Fourth Quarter..............................................     4 7/16              1

<CAPTION>
                                                                 HIGH          LOW
                                                              ----------   -----------
<S>                                                           <C>          <C>
1999:
First Quarter...............................................      5 1/2         3 3/16
Second Quarter..............................................      4 5/8          3 3/8
Third Quarter...............................................      4 5/8          3 1/4
Fourth Quarter..............................................      5 3/8          3 3/8
</TABLE>

    On February 27, 2001, the last reported sales price for the Company's
Class A Common Stock by the AMEX was $4.450 per share. As of February 27, 2001,
there were approximately 35 registered holders of record of Class A Common
Stock, which number includes nominees for an undeterminable number of beneficial
owners, and 8 holders of Class B Common Stock.

    The Company has never declared or paid any cash dividends on its common
stock and does not expect to do so in the foreseeable future. The Company
anticipates that all future earnings, if any, generated from operations will be
retained to finance the expansion and continued development of its business. Any
future determination with respect to the payment of dividends will be within the
sole discretion of the Company's Board of Directors and will depend upon, among
other things, the Company's earnings, capital requirements, the terms of then
existing indebtedness, applicable requirements of the Delaware General
Corporations Law, general economic conditions and such other factors considered
relevant by the Company's Board of Directors. The Company's Revolving Credit
Facility (defined below) and its 11 1/4% Senior Discount Notes due 2005 (the
"Notes") also contain certain restrictions on the payment of dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

    On December 24, 1997, the Company successfully completed the initial public
offering (the "Initial Public Offering" or "IPO") of 4,600,000 shares of
Class A Common Stock at an offering price of $7.00 per share, lead managed by
Donaldson, Lufkin, & Jenrette Securities Corporation and Furman Selz LLC,
generating $28.5 million of net proceeds. In connection with the IPO, the
Company filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-1 (file no. 333-36449) for the registration of
shares of Class A Common Stock for an aggregate offering price of $46,000,000,
which registration statement was declared effective by the Commission on
December 18, 1997. The Company paid $1,960,000 ($0.49 per share) in underwriting
discounts and commissions and

                                       20
<PAGE>
approximately $1,400,000 in registration fees, NASD filing fees, AMEX listing
fees, printing, engraving, legal, accounting, Blue Sky and other fees and
expenses for the offering. The net proceeds of $28.5 million after deducting
underwriting discounts and commissions and offering expenses were used to repay
certain outstanding indebtedness of the Company under its credit agreement dated
as of May 30, 1996 with The Chase Manhattan Bank (as amended, the "Old Credit
Facility").

    On December 19, 1997, the Company's old common stock was reclassified into
Class A Common Stock and Class B Common Stock and Stuart and Anita Subotnick
(the "Principal Stockholders") contributed approximately $13.3 million of
stockholder loans to the Company (the "Equity Contribution"), and the Principal
Stockholders exchanged all their shares of Class A Common Stock for a like
number of shares of Class B Common Stock (collectively, the "Reclassification").
These transactions were effected without registration under the Securities Act
in reliance on the exemption from registration provided pursuant to
Section 3(a)(9) or Section 4(2) and Regulation D promulgated thereunder.

    The rights of holders of Class A Common Stock and Class B Common Stock are
identical, except that each share of Class A Common Stock entitles its holder to
one vote per share on all matters voted upon by the Company's stockholders,
whereas each share of Class B Common Stock entitles its holder to ten votes per
share on all matters voted upon by the Company's stockholders. In addition,
holders of Class B Common Stock vote as a separate class to elect up to 75% of
the members of the Company's Board of Directors. Each share of Class B Common
Stock is convertible at any time into one share of Class A Common Stock. The
Principal Stockholders own all of the outstanding shares of Class B Common
Stock.

                                       21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

    The following table presents selected financial data and should be read in
conjunction with the Company's financial statements and the related notes
thereto and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein. The selected balance sheet
data as of December 31, 1996, 1997, 1998, 1999 and 2000 and statement of
operations data for the years ended December 31, 1996, 1997, 1998, 1999 and 2000
are derived from the Company's financial statements which have been audited by
KPMG LLP, Independent Certified Public Accountants. The historical financial
results of the Company are not comparable from period to period because of the
acquisition and sale of various broadcasting properties by the Company during
the periods covered.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                    ----------------------------------------------------------
                                                    1996(1)(2)   1997(3)    1998(4)(5)   1999(6)(7)   2000(8)
                                                    ----------   --------   ----------   ----------   --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>          <C>        <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues....................................   $ 8,567     $ 11,731    $ 15,883     $ 23,296    $ 26,895
Net revenues......................................     7,944       10,460      14,202       20,604      23,841
Station operating expenses........................    12,253       12,979      17,525       23,566      26,047
Internet and publishing...........................        --           --          --           51       1,569
Corporate, general and administrative expenses....     1,201        1,745       2,527        4,371       3,845
Employment incentives.............................        --        3,863         808           --          --
Cost of abandonment of station acquisition
  agreement.......................................        --           --          --           --         550
Depreciation and amortization.....................     1,326        1,791       2,528        3,812       4,867
Operating loss....................................    (6,836)      (9,918)     (9,186)     (11,196)    (13,037)
Gain on sale of stations..........................     6,608           --          --          663          --
Interest expense..................................    (2,889)      (4,488)    (12,608)     (16,953)    (18,392)
Income tax benefit, net...........................        --        1,050       1,988           63          63
Deferred income taxes resulting from conversion to
  C corporation status............................        --       (3,350)         --           --          --
Extraordinary loss on extinguishment of debt, net
  of income taxes.................................        --         (313)       (495)          --          --
Net (loss)........................................    (3,098)     (16,918)    (17,449)     (25,808)    (31,168)
BASIC AND DILUTIVE INCOME (LOSS) PER COMMON
  SHARE:..........................................     (0.39)       (1.77)      (1.24)       (1.83)      (2.15)
</TABLE>

<TABLE>
<CAPTION>
                                                                        AS OF DECEMBER 31,
                                                       ----------------------------------------------------
                                                         1996       1997       1998       1999       2000
                                                       --------   --------   --------   --------   --------
<S>                                                    <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash.................................................  $   234    $    80    $  5,285   $  2,431   $    862
Intangibles, net.....................................   29,230     54,115      80,309    113,873    110,476
Total assets.........................................   38,963     60,108     152,082    144,511    129,846
Notes payable to stockholders........................   12,544         --          --         --         --
Long-term liabilities................................   28,200     30,142     138,227    153,094    170,917
Stockholder's equity (deficiency)....................   (3,800)    25,032       8,391    (15,935)   (46,929)
</TABLE>

--------------------------

(1) The Company acquired substantially all of the assets of the Los Angeles
    Stations and KWIZ-FM on May 30, 1996 and commenced operations of these
    stations under a LMA on March 26, 1996. The financial statements include the
    operations of these stations from commencement of the LMA period. KWIZ-FM
    was sold on December 20, 1996. No gain or loss was recognized on the sale of
    KWIZ-FM.

(2) The Company acquired WSTC-AM and WKHL-FM during 1992. The financial
    statements include the operations of these stations from their date of
    acquisition to May 30, 1996, the date on which they were sold. For the year
    ended December 31, 1996, the gain on sale of stations represents the gain on
    sale of WSTC-AM and WKHL-FM.

                                       22
<PAGE>
(3) The Company acquired substantially all of the assets of WWHB-FM on April 1,
    1997 and WZVU-FM on June 5, 1997 and commenced operations of these stations
    under a LMA during December 1996. WWHB-FM and WZVU-FM together with WRGX-FM
    form Y-107 NY. The financial statements include the operations of Y-107 NY
    since December 1996.

(4) The Company acquired all of the stock of Radio New Jersey, owner of the FCC
    licenses of WRNJ-FM, Belvedere, NJ and WRNJ-AM, Hackettstown, NJ on
    August 14, 1998. Simultaneously at the closing, the Company sold
    substantially all of the assets of WRNJ-AM to one of the existing
    stockholders of Radio New Jersey. The remaining WRNJ-FM operates on 107.1 FM
    and was added to the Company's New Country Y-107 trimulcast under a LMA,
    effective April 28, 1998. The financial statements include the operations of
    WRNJ-FM since April 1998.

(5) The Company acquired substantially all of the assets of WCBR-FM, Arlington
    Heights, Illinois and WLRT-FM, Kankakee, Illinois on August 4 and 7, 1998,
    respectively. The operations of these stations have been included in the
    consolidated statements of operations from these dates.

(6) The Company acquired substantially all of the assets of WDEK-FM and WLBK-AM
    on February 25, 1999. The financial statements include the operations of
    these stations since February 25, 1999.

(7) The Company acquired substantially all of the assets of KEDJ-FM and KDDJ-FM
    on July 31, 1999, KBZR-FM on September 22, 1999 and KMYL-FM on
    September 29, 1999. The operations of these stations have been included in
    the consolidated statements of operations from these dates.

(8) The Company acquired substantially all of the assets of United Publishers of
    Florida, Inc. on November 8, 2000. The financial statements include the
    operations of United Publishers of Florida, Inc. since November 8, 2000.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATION

    The following discussion should be read in conjunction with "Selected
Financial Data" and the other financial data appearing elsewhere in this report.
Certain information included herein contains statements that constitute
"forward-looking statements" containing certain risks and uncertainties. See
"Business--Special Note Regarding Forward-Looking Statements."

GENERAL

    The Company was incorporated in August 1994 and commenced operations on
January 1, 1995, having acquired WRGX-FM, Briarcliff Manor, New York, and
WRKL-AM, Pomona, New York (together, the "Original New York Stations"), on
December 31, 1994. On May 30, 1996 the Company merged with Q Broadcasting, Inc.
("Q") in a transaction accounted for as a combination of entities under common
control. As a result of this merger the two entities are deemed to be combined
since inception (see the Notes to Consolidated Financial Statements included
elsewhere in this report). Q owned and operated the Q stations in Stamford,
Connecticut, from July 1992 up to the date of the combination with the Company.
The Company reports on the basis of a December 31 year-end and Q reported on the
basis of a September 30 year-end. As a result, the December 31, 1996 financial
statements reflect the operations of Q on the basis of the eight-month period
ended May 30, 1996 (the date of sale of the Q stations).

    The Q stations were operated in one facility, with one sales and support
staff. Their financial performance is combined for purposes of the discussions
that follow. The Los Angeles stations, WRKL-AM, and the stand-alone operations
of WRGX-FM were operated with separate staffs and facilities; therefore their
performance is separately identified.

    Between March 26, 1996 and May 30, 1996, when the stations were acquired,
the Company operated the Los Angeles Stations and KWIZ-FM under a LMA. On
March 26, 1996 all of the existing operations of the Los Angeles Stations were
terminated, and the Company debuted Y-107 LA under a modern rock format with new
staffing and no existing advertiser base. Although it commenced

                                       23
<PAGE>
operation with no revenues, Y-107 LA revenues had surpassed all other Company
revenues combined by November 1996. During the LMA period, station operating
expenses included significant LMA fees and other reimbursed expenses to the
seller. In December 1999, the Los Angeles Stations began broadcasting as Viva
107.1 under its current format of Hispanic contemporary hit radio. The Company
sold KWIZ-FM on December 20, 1996.

    On December 5, 1996, the Company commenced operation of WWZY-FM (formerly,
WZVU-FM), Long Branch, New Jersey, under a LMA, changing its format to country
music. On that date, WYNY-FM (formerly, WRGX-FM), Briarcliff Manor, New York,
which the Company had operated as a stand-alone FM station since its acquisition
on January 1, 1995, changed format to broadcast Y-107 NY as a new country music
station with WWZY-FM. Furthermore, on December 30, 1996 the Company began
operating WWXY-FM (formerly, WWHB-FM), Hampton Bays, New York, under a LMA.
Since that date, the New York Stations have operated as Y-107 NY. Y-107 NY
retained certain advertisers and staff from all three of the previously
stand-alone stations. The Company acquired WWXY-FM and WWZY-FM on April 1, 1997
and June 5, 1997, respectively. On April 27, 1998, the Company commenced
operations of WWYY-FM (formerly WRNJ-FM) under a LMA as part of the Y-107 NY
country music station. The Company completed its acquisition of WWYY-FM on
August 14, 1998.

    On August 8, 1997 the Company acquired WXXY-FM (formerly WVVX-FM), Highland
Park, Illinois and WYXX-FM (formerly WJDK-FM) Morris, Illinois. The Company
operated WXXY-FM as a stand-alone, brokered-programming FM station and leased
WYXX-FM to a previous owner under a LMA until "FM 103.1 Chicago Heart and Soul"
commenced operation in early February 1998. In August 1999, 103.1 FM broadcast
its format of "The EightiesChannel". In January 2001, these stations began
broadcasting as Viva 103.1 under its current format of Hispanic contemporary hit
radio. On August 4 and 7, 1998, the Company completed the acquisitions of
WKIE-FM (formerly WCBR-FM) and WKIF-FM (formerly WLRT-FM) and launched its
second station group in the Chicago area. These stations commenced operation as
92 KISS FM, a contemporary hit radio format in November 1998. In February 1999,
the Company acquired WDEK-FM and WLBK-AM, DeKalb, Illinois and added WDEK-FM to
the 92 KISS FM stations. The Company sold WLBK-AM in April 2000. In
January 2001, these stations began broadcasting as Energy92 under its current
format of contemporary dance hit radio.

    On July 30, 1999, the Company completed the acquisition of KEDJ-FM, Sun
City, Arizona and KDDJ-FM, Globe, Arizona. The Company operated KEDJ-FM and
KDDJ-FM, simulcasting as The Edge with its modern rock format and Howard Stern
morning show. On September 22, 1999, the Company acquired KBZR-FM, Arizona City,
Arizona, which was added to The Edge stations to form a trimulcast. On
September 29, 1999, the Company acquired KSSL-FM (formerly KMYL-FM), Wickenberg,
Arizona. In February 2000, the Company began operating KSSL-FM as a stand-alone
radio station broadcasting its Hispanic contemporary hit radio format.

    On November 1, 1999 the Company entered into a merger and registration
rights agreement (the "Agreement") in which the Company acquired, in an all
stock transaction, all the issued and outstanding stock of Hispanic Internet
Holdings, Inc., a privately held bilingual Online Service Provider for the U.S.
Hispanic and Latin American markets. The Company, through the acquisition of
Hispanic Internet Holdings, Inc., owns TodoAhora.com, a bilingual internet
portal, which will deliver a full range of world wide web programming to the
Hispanic community including news, entertainment, finance, culture, and
e-commerce opportunities. TodoAhora.com serves the Hispanic community both in
the U.S. and overseas.

    On November 8, 2000 the Company entered into an asset purchase agreement in
which the Company acquired substantially all of the assets and properties of
United Publishers of Florida, Inc, which owned and operated a Hispanic music
trade magazine, "Disco", a graphic design business and a

                                       24
<PAGE>
LatinMusicTrends.com web site. In November 2000, the Company formed Independent
Radio Reps, LLC., a wholly-owned subsidiary. This in-house agency was formed to
compete for Hispanic National Radio advertising business.

RESULTS OF OPERATIONS

    The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, local market
competition, the relative efficiency and effectiveness of radio broadcasting
compared with other advertising media, government regulation and policies and
the Company's ability to provide popular programming. The performance of a radio
station group is customarily measured by its ability to generate broadcast cash
flow, calculated as station operating income or loss excluding depreciation and
amortization and corporate overhead. This measure, although widely used in the
broadcast industry as a measure of operating performance, is not calculated in
accordance with generally accepted accounting principles. Broadcast cash flow
should not be considered in isolation or as a substitute for operating income,
net income, cash flows from operating activities, or any other measure for
determining the Company's operating performance or liquidity calculated in
accordance with generally accepted accounting principles.

    The Company's primary source of revenue is the sale of advertising. Total
revenue is determined by the number of advertisements aired by the station and
the advertising rates that the stations are able to charge. See
"Business--Advertising Sales."

    Given the fact that the Company's strategy involves developing brand new
metropolitan area radio stations, the initial revenue base is zero and subject
to factors other than ratings and radio broadcasting seasonality. After the
start-up period, as is typical in the radio broadcasting industry, a station's
first calendar quarter generally will produce the lowest revenues for the year,
and the fourth quarter generally will produce the highest revenues for the year.
The Company's operating results in any period may be affected by the incurrence
of advertising and promotion expenses that do not produce commensurate revenues
in the period in which the expenses are incurred.

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999

    NET REVENUES in the year ended December 31, 2000 were $23,841,000 compared
with $20,604,000 for the year ended December 31, 1999, an increase of $3,237,000
or 16%. This increase was due primarily to the increase in net revenues of the
New York Stations and the Chicago Stations and the addition of the Phoenix
Stations on July 31, 1999. Partially offsetting the net revenue increase was a
decrease in net revenues at the LA Stations compared to the same period in 1999
resulting from its change in format in December 1999. The existing radio
stations' (owned for all of 2000 and 1999) net revenue growth compared with the
corresponding period in the prior year was $497,000 or 3%.

    STATION OPERATING EXPENSES excluding depreciation and amortization for the
year ended December 31, 2000 were $26,047,000 compared with $23,566,000 in the
year ended December 31, 1999, an increase of $2,481,000 or 11%. This increase
was due principally to the addition of the operations of the Phoenix Stations
and the increased costs associated with Chicago Stations' revenue growth,
partially offset by the reduction in operating expenses for the New York
Stations, LA Stations and WRKL-AM.

    INTERNET AND PUBLISHING operating expenses excluding depreciation and
amortization for the year ended December 31,2000 were $1,569,000 compared with
$51,000 in the year ended December 31, 1999, an increase of $1,518,000. The
increase was due principally to the start-up operations of TodaAhora.com since
its inception in November 1999.

    DEPRECIATION AND AMORTIZATION EXPENSES for the year ended December 31, 2000
were $4,867,000 compared with $3,812,000 for the year ended December 31, 1999,
an increase of $1,055,000 or 28%. This increase was due primarily to the
amortization of intangibles and depreciation of capital assets of

                                       25
<PAGE>
the Phoenix Stations which were acquired in July and September 1999 and Hispanic
Internet Holdings, Inc. which was acquired in November 1999.

    CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended
December 31, 2000 were $3,845,000 compared with $4,371,000 for the year ended
December 31, 1999, a decrease of $526,000 or 12%. This decrease was due
primarily to a severance payment made to the Company's prior Chief Executive
Officer in 1999, and decreased legal and professional fees in 2000.

    COST OF ABANDONMENT ON STATION ACQUISITION AGREEMENT for the year ended
December 31, 2000 was the result of the cancellation of a signed agreement
whereby the assets of radio station KLVA-FM, Casa Grande, Arizona would have
been exchanged for the assets of radio station KDDJ-FM, Globe, Arizona. On
signing of the acquisition agreement, the Company deposited $275,000 into an
escrow account in April 1999. In February 2000, the Company paid the balance in
the escrow account and an additional amount of $275,000, totaling $550,000, to
cancel the signed KLVA-FM acquisition. The decision to abandon the transaction
was made in response to a change in the engineering enhancement plan for our
Phoenix radio licenses.

    INTEREST EXPENSE for the year ended December 31, 2000 was $18,392,000
compared with $16,953,000 for the year ended December 31, 1999, an increase of
$1,439,000 or 8%. This increase reflects additional interest resulting from the
issuance of the Notes on March 17, 1998 (the "Notes Offering") and its accreted
principal amount for the year ended December 31, 2000 when compared to the
corresponding period in 1999. In the years ended December 31, 2000 and 1999, the
weighted average outstanding total debt for the Company was $162,288,000 and
$146,540,000, respectively. The weighted average rate of interest on the
outstanding debt was 11.324% and 11.323%, respectively.

    INTEREST INCOME for the year ended December 31, 2000 was $281,000 as
compared to $1,952,000 for the year ended December 31, 1999, a decrease of
$1,671,000 or 86%. This decrease was due primarily to a decline in marketable
securities balances as a result of those funds being used in operations.

    NET LOSSES for the year ended December 31, 2000 were $31,168,000 compared
with $25,808,000 for the year ended December 31, 1999, an increase of $5,360,000
or 21%. The increase in the net loss was primarily attributable to, (a) higher
station operating expenses and the start-up operations of TodoAhora.com,
(b) higher depreciation and amortization expenses and net interest expense,
resulting from the Phoenix station acquisitions in 1999, and (c) a $550,000
cancellation charge related to the KLVA-FM acquisition, and the absence of the
gain on sale of radio stations in 2000. Partially offsetting these factors, was
the increase in net revenues for the year ended December 31, 2000, compared to
the corresponding year ended December 31, 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

    NET REVENUES in the year ended December 31, 1999 were $20,604,000 compared
with $14,202,000 for the year ended December 31, 1998, an increase of $6,402,000
or 45%. This increase was due primarily to increases in the net revenues of
Y-107 NY, the Chicago stations, and the acquisition of "The Edge" in Phoenix.
These increases in revenues were partially offset by the decrease in net
revenues of $1,368,000 for WRKL-AM which was sold by the Company during the
first quarter of 1999. The existing radio stations' (owned for all of 1999 and
1998) net revenue growth compared with the corresponding period in the prior
year was $2,437,000 or 19%.

    STATION OPERATING EXPENSES excluding depreciation and amortization for the
year ended December 31, 1999 were $23,617,000 compared with $17,525,000 in the
year ended December 31, 1998, an increase of $6,092,000 or 35%. This increase
was due principally to the start-up operations of 92 KISS FM in November 1998
and "The Edge" in July 1999 and the increased station operating expenses of the
"The EightiesChannel" throughout the twelve months ended December 31, 1999,
offset by a decrease in station operating expenses at WRKL-AM of $1,531,000 for
the corresponding twelve month period in 1999 due to its sale in March 1999.

                                       26
<PAGE>
    DEPRECIATION AND AMORTIZATION EXPENSES for the year ended December 31, 1999
were $3,812,000 compared with $2,528,000 for the year ended December 31, 1998,
an increase of $1,284,000 or 51%. This increase was due primarily to the
amortization of intangibles and depreciation of capital assets of the Phoenix
Stations which were acquired in July and September 1999 and Chicago Stations
which were acquired in August 1998 and February 1999.

    CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended
December 31, 1999 were $4,371,000 compared with $2,527,000 for the year ended
December 31, 1998, an increase of $1,844,000 or 73%. This increase was due
primarily to a severance payment to the Company's prior Chief Executive Officer
and increased administrative expenses to support the growth of the company.

    INTEREST EXPENSE for the year ended December 31, 1999 was $16,953,000
compared with $12,608,000 for the year ended December 31, 1998, an increase of
$4,345,000 or 34%. This increase reflects additional interest resulting from the
issuance of the Notes on March 17, 1998 (the "Notes Offering") and its accreted
principal amount for the year ended December 31, 1999 when compared to the
corresponding period in 1998, offset by a decrease of $2,971,000 resulting from
the pay off of the long-term debt in March 1998. In the years ended
December 31, 1999 and 1998, the weighted average outstanding total debt for the
Company was $146,540,000 and $111,399,000, respectively. The weighted average
rate of interest on the outstanding debt was 11.32% and 11.31%, respectively.

    INTEREST INCOME for the year ended December 31, 1999 was $1,952,000 as
compared to $3,076,000 for the year ended December 31, 1998, a decrease of
$1,124,000 or 37%. This decrease was due primarily to a decline in marketable
securities balances as a result of those funds being used to complete radio
stations acquisitions and in operations.

    NET LOSSES for the year ended December 31, 1999 were $25,808,000 compared
with $17,449,000 for the year ended December 31, 1998, an increase of $8,359,000
or 48%. This increase was primarily attributable to higher station operating
expenses, depreciation and amortization expenses, corporate, general and
administrative expenses, and net interest expense as well as the reduction in
income tax benefit of $1,925,000. These increases were offset by a gain on sale
of station of $663,000, no extraordinary loss on extinguishment of debt, net of
income taxes of $495,000 or employment stock incentive of $808,000 and increased
net revenues for the twelve months ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

    The Company has incurred substantial net losses since inception primarily
due to broadcast cash flow deficits characteristic of the start up of its radio
stations. In addition, since the majority of its broadcast properties are in the
early stages of development, either as a result of them being recent purchases,
or as a result of them being recently reformatted, the Company expects to
generate significant net losses for the foreseeable future, as it continues to
expand its presence in major markets as well as developing its Internet portal
site.

    As a result of these factors, working capital needs have been met by
borrowings, including loans from the Principal Stockholders (which borrowings
were contributed to the capital of the Company immediately prior to the
consummation of the Initial Public Offering), under the Old Credit Facility and
the issuance of the Notes. The net proceeds of approximately of $120,808,000
from the Notes Offering were used to repay approximately $32,600,000 of the Old
Credit Facility (as hereinafter defined; see Note 8). Simultaneously with the
completion of the Note Offering, the Company obtained a revolving credit
facility (the "Revolving Credit Facility") with The Chase Manhattan Bank
("Chase") in the amount of $15.0 million. (see Note 8).

    The Company has entered into employment contracts with 17 individuals,
mainly officers and senior management that provide for minimum salaries and
incentives based upon specified levels of

                                       27
<PAGE>
performance. The minimum payments under these contracts are $1,919,000 in 2001,
$1,246,000 in 2002 and $150,000 in 2003.

    The Company has never paid cash or stock dividends. The Company will
continue to report net losses throughout the start up period for the Los
Angeles, Chicago and Phoenix Stations. Furthermore, it intends to retain future
earnings for use in its business and does not anticipate paying dividends on
shares of its common stock in the foreseeable future.

CASH FLOWS FROM OPERATING ACTIVITIES

    In each of the years ended December 31, 1998, 1999 and 2000, the Company
reported cash used in operations. In the years ended December 31, 1998 and 1999
the negative cash flow was predominantly due to the funding of start-up
operations at New York and Chicago Stations. In the year ended December 31,
2000, the negative cash flow was predominantly due to the start-up operating
losses of the LA Stations as Viva 107.1, the Que Buena Phoenix Station, and the
Hispanic Internet portal site, TodoAhora.com, as well as the operating losses of
the Chicago Stations.

CASH FLOWS FROM INVESTING ACTIVITIES

    Capital expenditures (excluding acquisitions of radio stations) were
$2,441,000, $2,941,000 and $1,584,000 in the years ended December 31, 1998, 1999
and 2000, respectively. These expenditures primarily reflect costs associated
with the FCC Power Increases and other technical improvements at the Company's
stations, the upgrade and expansion of the studio and broadcast facilities,
computer support equipment, and purchase of promotional vehicles for the new
station properties, as well as purchase of furniture and fixture and computer
equipment for the Internet and publishing operations. In the year ended 1998,
the Company purchased $125,609,000 in marketable securities with proceeds from
the Notes Offering of which $77,193,000 were sold during the year. In the year
ended 1999, the Company purchased $34,508,000 in marketable securities and sold
$75,065,000 to generate cash for the purchase of radio stations in DeKalb,
Illinois and Phoenix, Arizona and for general working capital purposes. In the
year ended 2000, the Company sold $5,964,000 in marketable securities to
generate cash for general working capital purposes. Cash paid and advanced for
the purchase of assets of radio stations and Internet and publishing businesses
were $23,244,000, $36,177,000 and $250,000 in the years ended December 31, 1998,
1999 and 2000, respectively.

CASH FLOWS FROM FINANCING ACTIVITIES

    The Company completed a private placement of $174.0 million aggregate
principal amount at maturity of Notes on March 17, 1998 (the "issue date"),
generating approximately $125.4 million of gross proceeds for the Company of
which the Company used approximately $32.6 million to repay outstanding
indebtedness under its Old Credit Facility. The Company has used the proceeds of
the Notes Offering to finance the acquisition costs of radio station properties
and intends to use the remaining proceeds for general working capital purposes.

    The Notes were issued at an original issue discount and will accrete in
value until March 15, 2001 at a rate of 11 1/4% per annum, compounded
semi-annually to an aggregate principal amount of $174.0 million. Cash interest
will not accrue on the Notes prior to March 15, 2001. Thereafter, interest on
the Notes will accrue at a rate of 11 1/4% per annum and will be payable in cash
semi-annually, commencing September 15, 2001. The Notes will mature on
March 15, 2005 but may be redeemed after March 15, 2001 at the option of the
Company, in whole or in part at a redemption price of 105.625%, 102.813% or
100.000% if redeemed during the 12-month period commencing on March 15 of 2002,
2003 and on and after 2004, respectively. In addition, up to 33 1/3% of the
original principal amount of the Notes may be redeemed at the option of the
Company prior to March 15, 2001 at a redemption price equal to 111.25% of the
accreted value of the Notes with net cash proceeds of one or more

                                       28
<PAGE>
equity offerings of the Company so long as there is a public market for the
Class A Common Stock at the time of such redemption and provided that at least
66 2/3% of the original principal amount of the Notes remains outstanding.

    Holders of the Notes have the right to require the Company to repurchase
their Notes upon a "change of control" of the Company, at a price equal to 101%
of the accreted value of the Notes if such repurchase occurs prior to March 15,
2001 or of the principal amount of such Notes if such repurchase occurs
thereafter. A "change of control" for purposes of the Notes is deemed to occur
(i) when any person other than the Principal Stockholders, the management and
their affiliates (the "Permitted Holders"), becomes the owner of more than 35%
of the total voting power of the Company's stock and the Permitted Holders own
in the aggregate a lesser percentage of such voting power and do not have the
right or ability to elect a majority of the Board of Directors, (ii) when the
Board of Directors does not consist of a majority of continuing directors,
(iii) upon the occurrence of a sale or transfer of all or substantially all of
the assets of the Company taken as a whole, or (iv) upon the adoption by the
stockholders of a plan for the liquidation or dissolution of the Company.

    Payments under the Notes are guaranteed on a senior unsecured basis by the
Company's Restricted Subsidiaries, as defined in the Indenture governing the
Notes; as of December 31, 2000, all of the Company's subsidiaries were
Restricted Subsidiaries. The Notes contain certain financial and operational
covenants and other restrictions with which the Company and its Restricted
Subsidiaries must comply, including restrictions on the incurrence of additional
indebtedness, investments, payment of dividends on and redemption of capital
stock and the redemption of certain subordinated obligations, sales of assets
and the use of proceeds therefrom, transactions with affiliates, creation and
existence of liens, the types of businesses in which the Company may operate,
asset swaps, distributions from Restricted Subsidiaries, sales of capital stock
of Restricted Subsidiaries and consolidations, mergers and transfers of all or
substantially all of the Company's assets. At December 31, 2000 the Company is
in compliance with all covenants and other restrictions under the Notes.

    On July 6, 1998, the Company completed an exchange offer for the Notes, in
which the holders of substantially all outstanding Notes exchanged their Notes
for newly-issued Notes registered under the Securities Act of 1933. The new
Notes have the same terms as the exchanged Notes, except that the new Notes are
so registered. The amount exchanged was $172,500,000 aggregate principal amount
at maturity of Notes.

    The Notes contain customary events of default including payment defaults and
default in the performance of other covenants, certain bankruptcy defaults,
judgment and cross defaults, and failure of a subsidiary guarantee to be in full
force and effect.

    In connection with the consummation of the Notes Offering, the Company
entered into a revolving credit facility (the "Revolving Credit Facility") with
The Chase Manhattan Bank ("Chase") providing for up to $15.0 million of
availability, based upon a multiple of the Company's Los Angeles and any other
Stations' cash flow as agreed to from time to time. The Revolving Credit
Facility will mature on the fifth anniversary of the issue date and amounts
outstanding under the Revolving Credit Facility will bear interest at an
applicable margin plus, at the Company's option, Chase's prime rate (in which
case the applicable margin will initially be 2.00% subject to reduction upon
obtaining performance criteria based on the Company's leverage ratio) or the
London Interbank Borrowing Rate (in which case the applicable margin will
initially be 3.00% subject to reduction upon obtaining performance criteria
based on the Company's leverage ratio). The Company's obligations under the
Revolving Credit Facility are secured by a pledge of substantially all of the
Company's and its restricted subsidiaries' assets. The Company will pay fees of
0.5 percent per annum, on the aggregate unused portion of the facility.

    The Revolving Credit Facility contains certain financial and operational
covenants and other restrictions with which the Company must comply, including,
among others, limitations on capital expenditures, limitations on the incurrence
of additional indebtedness, restrictions on sales of assets,

                                       29
<PAGE>
restrictions on the use of borrowings, limitations on paying cash dividends and
redeeming or repurchasing capital stock of the Company or the Notes, and
requirements to maintain certain minimum interest coverage ratios. The Company
is currently in compliance with all material covenants and restrictions under
the Revolving Credit Facility, with the exception that the Independent Auditors'
Report for the year ended December 31, 2000 includes a "going concern"
uncertainty paragraph (see page 33). The Company is currently seeking a new debt
facility, and as part of this negotiation plans to rectify its non-compliance
with this covenant within the thirty day period permitted by the existing
Revolving Credit Facility.

    The Revolving Credit Facility contains customary events of default,
including material misrepresentations, payment defaults and default in the
performance of other covenants, certain bankruptcy and ERISA defaults, judgment
and cross defaults, revocation of any of the Company's broadcast licenses and
change in control. The Revolving Credit Facility also provides that an event of
default will occur upon the occurrence of a "change of control" as defined in
the Revolving Credit Facility. For purposes of the Revolving Credit Facility, a
"change of control" will occur when (i) any person or group other than the
Principal Stockholders and their affiliates obtains the power to elect a
majority of the Board of Directors, (ii) the Company fails to own 100% of the
capital stock of its subsidiaries owning any of the FCC broadcast licenses, or
when (iii) the Board of Directors does not consist of a majority of continuing
directors, as defined. As of the date of this report, the Company has no binding
commitments for any transactions that would result in a "change of control".

    The Company had available approximately $2.8 million of cash and cash
equivalents and marketable securities at December 31, 2000 and has unused
borrowing capacity of $3.9 million under the Revolving Credit Facility, which
can be used for working capital purposes, including financing any such
acquisitions. On March 15, 2001, the senior discount notes commence accruing
interest at 11 1/4% per annum, which interest is payable in cash, semi-annually,
commencing September 15, 2001. The semi-annual interest payment is
$9.8 million.

    Cash on hand and amounts available under the Revolving Credit Facility are
not sufficient to support the Company's operations through December 31, 2001 and
its growth strategy. In addition, because of the Company's substantial
indebtedness, a significant portion of the Company's broadcast cash flow will be
required for debt service. These matters raise substantial doubt about the
Company's ability to continue as a going concern.

    The Company is in the process of seeking a new debt facility to finance its
operating and debt service requirements and capital expenditure programs through
December 31, 2001. There can be no assurance that any such financing will be
available or available on acceptable terms. Management believes that its
long-term liquidity needs will be satisfied through a combination of
i) achieving positive operating results and cash flows through revenue growth
and control of operating expenses and ii) the implementation and execution of
its growth strategy to acquire and build a major market broadcast group. In
order to meet its long-term financing needs, the Company is currently
considering all means available to it, including the raising of additional
equity and the restructuring of the Notes.

NEW ACCOUNTING DISCLOSURES

ACCOUNTING FOR DERIVATIVES

    In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities, was issued.
SFAS 133 established accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. The accounting for the gain or loss due to changes in
fair value of the derivative instrument depends on whether the derivative
instrument qualifies as a hedge. In June 2000, SFAS 138 was issued which
addresses a limited number of issues causing implementation difficulties for
numerous entities that have

                                       30
<PAGE>
applied SFAS 133. SFAS 133 and SFAS 138 are effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. SFAS 133 can not be applied
retroactively to financial statements of prior periods. The adoption of SFAS
No. 133 and 138 is not expected to have a material impact on the financial
position or results of operations of the Company.

REVENUE RECOGNITION

    In December 1999, the staff of the SEC issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements," which provides
guidance in applying generally accepted accounting principles to selected
revenue recognition issues. In March 2000 and June 2000, the staff of the SEC
amended SAB No. 101 to delay the required implementation date of SAB No. 101 to
the fourth quarter of fiscal years beginning after December 15, 1999. The
Company has adopted SAB No. 101 as amended. The adoption of SAB No. 101, as
amended, has not and is not expected to have a material impact on the Company's
results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company is exposed to the impact of interest rate changes and the change
in the market values of its investments.

    The Company's exposure to market rate risk for changes in interest rates
relates primarily to the Company's investment portfolio. The Company has not
used derivative financial instruments in its investment portfolio. The Company
invests its excess cash in debt instruments of the U.S. Government and its
agencies and, by policy, limits the amount of credit exposure to any one issuer.
The Company protects and preserves its invested funds by limiting default,
market and reinvestment risk.

    Investments in fixed rate interest earning instruments carry a degree of
interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates. The Company may suffer
losses in principal if forced to sell securities which have declined in market
value due to changes in interest rates.

                                       31
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                              BIG CITY RADIO, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                           <C>
BIG CITY RADIO, INC.

Report of KPMG LLP, Independent Auditors....................        33

Consolidated Balance Sheets as of December 31, 1999 and
  2000......................................................        34

Consolidated Statements of Operations for the years ended
  December 31, 1998, 1999 and 2000..........................        35

Consolidated Statements of Cash Flows for the years ended
  December 31, 1998, 1999 and 2000..........................        36

Consolidated Statement of Stockholders' Equity
  (Deficiency)..............................................        37

Notes to Consolidated Financial Statements..................        38
</TABLE>

                                       32
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
of Big City Radio, Inc.:

    We have audited the accompanying consolidated balance sheets of Big City
Radio, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for each of the years in the three-year period ended December 31,
2000. In connection with our audits of the consolidated financial statements, we
also have audited Schedule II, Valuation and Qualifying Accounts for each of the
years in the three-year period ended December 31, 2000. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Big City
Radio, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the years in the three year
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

    The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 3 to the consolidated financial statements, the
Company has suffered recurring losses from operations and has a total
stockholders' deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3. The consolidated financial statements and financial
statement schedules do not include any adjustments that might result from the
outcome of this uncertainty.

KPMG LLP

Los Angeles, California

March 29, 2001

                                       33
<PAGE>
                              BIG CITY RADIO, INC.

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1999 AND 2000

<TABLE>
<CAPTION>
                                                                  1999           2000
                                                                  ----           ----
<S>                                                           <C>            <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $  2,431,000   $    862,000
  Cash held in escrow (note 4)..............................       275,000             --
  Cash held in investment, restricted (note 5)..............     1,934,000        802,000
  Marketable securities (note 2)............................     7,859,000      1,895,000
  Accounts receivable, net of allowance of $235,000 and
    $338,000 in 1999 and 2000, respectively.................     6,090,000      4,716,000
  Interest receivable.......................................       526,000         38,000
  Prepaid expenses and other current assets.................       920,000        981,000
                                                              ------------   ------------
    Total current assets....................................    20,035,000      9,294,000
Property and equipment, net (note 6)........................     7,145,000      7,148,000
Intangibles, net (note 7)...................................   113,873,000    110,476,000
Deferred financing fees, net................................     3,399,000      2,747,000
Other assets................................................        59,000        181,000
                                                              ------------   ------------
    Total assets............................................  $144,511,000   $129,846,000
                                                              ============   ============
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $    822,000   $  1,337,000
  Accrued expenses..........................................     3,146,000      2,138,000
  Promissory notes (note 9).................................       881,000             --
  Other current liabilities.................................        93,000         36,000
                                                              ------------   ------------
    Total current liabilities...............................     4,942,000      3,511,000
                                                              ------------   ------------
Long-term liabilities:
  Senior discount notes (note 8)............................   152,596,000    170,296,000
  Other long-term liabilities...............................       498,000        621,000
Deferred income tax liabilities (note 12)...................     2,410,000      2,347,000
Stockholders' equity (deficiency) (note 13):
  Preferred stock, $.01 par value. Authorized 20,000,000
    shares; zero shares issued and outstanding in 1999 and
    2000....................................................            --             --
  Common stock, Class A, $.01 par value. Authorized
    80,000,000 shares; issued and outstanding 6,218,817
    shares and 6,226,817 shares in 1999 and 2000,
    respectively............................................        62,000         62,000
  Common stock, Class B, $.01 par value. Authorized
    20,000,000 shares; issued and outstanding 8,250,458
    shares in 1999 and 2000.................................        83,000         83,000
  Additional paid-in capital................................    29,458,000     29,492,000
  Other comprehensive loss (note 2).........................      (149,000)        (9,000)
  Accumulated deficit.......................................   (45,389,000)   (76,557,000)
                                                              ------------   ------------
                                                               (15,935,000)   (46,929,000)
                                                              ------------   ------------
    Total liabilities and stockholders' equity..............  $144,511,000   $129,846,000
                                                              ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       34
<PAGE>
                              BIG CITY RADIO, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

<TABLE>
<CAPTION>
                                                          1998           1999           2000
                                                          ----           ----           ----
<S>                                                   <C>            <C>            <C>
Gross revenues......................................  $ 15,883,000   $ 23,296,000   $ 26,895,000
Less commissions and fees...........................     1,681,000      2,692,000      3,054,000
                                                      ------------   ------------   ------------
    Net revenues....................................    14,202,000     20,604,000     23,841,000
                                                      ------------   ------------   ------------
Operating expenses:
  Station operating expenses, excluding depreciation
    and amortization................................    17,525,000     23,566,000     26,047,000
  Internet and publishing, excluding depreciation
    and amortization................................            --         51,000      1,569,000
  Corporate, general and administrative expenses....     2,527,000      4,371,000      3,845,000
  Employment stock incentives (note 13).............       808,000             --             --
  Cost of abandonment of station acquisition
    agreement.......................................            --             --        550,000
  Depreciation and amortization.....................     2,528,000      3,812,000      4,867,000
                                                      ------------   ------------   ------------
    Total operating expenses........................    23,388,000     31,800,000     36,878,000
                                                      ------------   ------------   ------------
    Operating loss..................................    (9,186,000)   (11,196,000)   (13,037,000)
Other income (expenses):
  Gain on sale of station (note 4)..................            --        663,000             --
  Interest income...................................     3,076,000      1,952,000        281,000
  Interest expense..................................   (12,608,000)   (16,953,000)   (18,392,000)
  Other, net........................................      (224,000)      (337,000)       (83,000)
                                                      ------------   ------------   ------------
    Total other (expenses)..........................    (9,756,000)   (14,675,000)   (18,194,000)
                                                      ------------   ------------   ------------
Loss before income tax benefit and extraordinary
  loss..............................................   (18,942,000)   (25,871,000)   (31,231,000)
Income tax benefit, net (notes 2 and 12)............     1,988,000         63,000         63,000
                                                      ------------   ------------   ------------
    Loss before extraordinary loss..................   (16,954,000)   (25,808,000)   (31,168,000)
Extraordinary loss on extinguishment of debt, net of
  income taxes (note 8).............................      (495,000)            --             --
                                                      ------------   ------------   ------------
    Net loss........................................   (17,449,000)   (25,808,000)   (31,168,000)
                                                      ============   ============   ============
Basic and diluted loss per share:
  Loss before extraordinary item....................        ($1.21)        ($1.83)        ($2.15)
  Extraordinary item................................         (0.03)            --             --
                                                      ------------   ------------   ------------
    Net loss........................................        ($1.24)        ($1.83)        ($2.15)
                                                      ============   ============   ============
Weighted average shares outstanding.................    14,026,000     14,136,000     14,475,000
                                                      ============   ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       35
<PAGE>
                              BIG CITY RADIO, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

<TABLE>
<CAPTION>
                                                                  1998            1999           2000
                                                                  ----            ----           ----
<S>                                                           <C>             <C>            <C>
Cash flows from operating activities:
  Net loss..................................................  $ (17,449,000)  $(25,808,000)  $(31,168,000)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization...........................      2,528,000      3,812,000      4,867,000
    Deferred income taxes (notes 2 and 12)..................     (2,100,000)       (63,000)       (63,000)
    Non cash interest.......................................     11,948,000     16,504,000     18,352,000
    Non cash change in other comprehensive loss.............             --       (149,000)       140,000
  Gain on sale of station (note 4)..........................             --       (663,000)            --
  Loss on disposal of fixed assets..........................             --         11,000             --
  Disposal of fixed assets..................................             --         33,000             --
  Employment stock incentives (note 13).....................        808,000             --         34,000
  Extraordinary loss on extinguishment of debt (note 8).....        582,000             --             --
  Changes in operating assets and liabilities, net of
    acquisitions:
    (Increase) decrease in assets:
      Accounts receivable...................................     (1,037,000)    (2,728,000)     1,374,000
      Interest receivable...................................     (1,574,000)     1,048,000        488,000
      Prepaid expenses and other current assets.............       (351,000)       (67,000)       (61,000)
      Other assets..........................................       (124,000)       110,000       (122,000)
    Increase (decrease) in liabilities:
      Accounts payable......................................       (607,000)       304,000        515,000
      Accrued expenses......................................       (197,000)     1,960,000     (1,009,000)
      Other liabilities.....................................       (185,000)       (91,000)        66,000
                                                              -------------   ------------   ------------
        Net cash used in operating activities...............     (7,758,000)    (5,787,000)    (6,587,000)
                                                              -------------   ------------   ------------
Cash flows from investing activities:
  Purchase of property and equipment........................     (2,441,000)    (2,941,000)    (1,584,000)
  Purchase of marketable securities.........................   (125,609,000)   (34,508,000)            --
  Sale of marketable securities.............................     77,193,000     75,065,000      5,964,000
  Cash paid and advanced for assets of radio stations
    acquired................................................    (23,244,000)   (36,177,000)      (250,000)
  Decrease (Increase) in cash held in restricted
    investment..............................................     (3,350,000)     1,416,000      1,132,000
  Decrease in cash held in escrow...........................             --             --        275,000
  Cash received for disposal of fixed assets................             --         58,000         10,000
  Cash received for radio station sold......................             --      1,195,000        352,000
                                                              -------------   ------------   ------------
        Net cash provided by (used in) investing
          activities........................................    (77,451,000)     4,108,000      5,899,000
                                                              -------------   ------------   ------------
Cash flows from financing activities:
  Proceeds from offering of Senior Discount Notes, net of
    discount and fees of $4,568,000.........................    120,808,000             --             --
  Drawdown on credit facility, net of fees paid of $793,000,
    $0 and $0 in 1998, 1999, and 2000, respectively.........      2,500,000             --             --
  Repayment of existing credit facility.....................    (32,600,000)            --             --
  Repayment of promissory notes.............................       (294,000)    (1,175,000)      (881,000)
                                                              -------------   ------------   ------------
        Net cash provided by (used in) financing
          activities........................................     90,414,000     (1,175,000)      (881,000)
                                                              -------------   ------------   ------------
        Change in cash and cash equivalents.................      5,205,000     (2,854,000)    (1,569,000)
Cash and cash equivalents at beginning of year..............         80,000      5,285,000      2,431,000
                                                              -------------   ------------   ------------
Cash and cash equivalents at end of year....................  $   5,285,000   $  2,431,000   $    862,000
                                                              =============   ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       36
<PAGE>
                              BIG CITY RADIO, INC.

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

                  YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

<TABLE>
<CAPTION>
                                                  COMMON STOCK        ADDITIONAL        OTHER
                                              ---------------------     PAID-IN     COMPREHENSIVE   ACCUMULATED
                                                SHARES      AMOUNT      CAPITAL         LOSS          DEFICIT         TOTAL
                                              ----------   --------   -----------   -------------   ------------   ------------
<S>                                           <C>          <C>        <C>           <C>             <C>            <C>
Balance at December 31, 1997................  13,975,520   $140,000   $27,024,000     $      --     $(2,132,000)   $ 25,032,000
Capital contribution related to employment
  incentive (note 13).......................      93,755      1,000       807,000            --              --         808,000
Net loss....................................          --         --            --            --     (17,449,000)    (17,449,000)
                                              ----------   --------   -----------     ---------     ------------   ------------
Balance at December 31, 1998................  14,069,275    141,000    27,831,000            --     (19,581,000)      8,391,000
Capital contribution related to employment
  incentive (note 13).......................          --         --        31,000            --              --          31,000
Unrealized loss on marketable securities....          --         --            --      (149,000)             --        (149,000)
Acquisition of Hispanic Internet Holdings
  (note 4)..................................     400,000      4,000     1,596,000            --              --       1,600,000
Net loss....................................          --         --            --            --     (25,808,000)    (25,808,000)
                                              ----------   --------   -----------     ---------     ------------   ------------
Balance at December 31, 1999................  14,469,275    145,000    29,458,000      (149,000)    (45,389,000)    (15,935,000)
Employee stock options......................       8,000         --        34,000            --              --          34,000
Unrealized income on marketable
  securities................................          --         --            --       140,000              --         140,000
Net loss....................................          --         --            --            --     (31,168,000)    (31,168,000)
                                              ----------   --------   -----------     ---------     ------------   ------------
Balance at December 31, 2000................  14,477,275   $145,000   $29,492,000     $  (9,000)    $(76,557,000)  $(46,929,000)
                                              ==========   ========   ===========     =========     ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       37
<PAGE>
                              BIG CITY RADIO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 2000

(1) ORGANIZATION AND BUSINESS

    Big City Radio, Inc. (formerly Odyssey Communications, Inc.) ("Big City
Radio") was incorporated in Delaware on August 2, 1994 and commenced operations
on January 1, 1995. On May 30, 1996, Big City Radio merged with Q
Broadcasting, Inc. ("Q", and together with Big City Radio, the "Company"), with
Big City Radio being the surviving company. Big City Radio and Q were owned 94%
and 100%, respectively by Stuart and Anita Subotnick (the "Principal
Stockholders"). Accordingly, the merger has been accounted for as a combination
of entities under common control. As a result, the combination of Big City Radio
and Q was effected utilizing historical costs. At the date of conversion from S
Corporation status to C Corporation status (see Note 2), the Company formed five
wholly owned subsidiaries, Big City Radio--LA, LLC; Big City Radio--NYC, LLC;
Big City Radio--CHI, LLC; WRKL Rockland Radio, LLC; and Odyssey Traveling
Billboards, Inc.

    The Company owns and operates radio broadcasting stations. As of
December 31, 2000, the Company owned three FM stations in Southern California,
KLYY-FM Arcadia, KVYY-FM Ventura and KSYY-FM Fallbrook (programmed as "Viva
107.1"). In the New York area, the Company owns four radio properties, WWXY-FM
Westchester County, New York (the "Original New York Stations"), WWZY-FM
Monmouth, New Jersey, WWVY-FM Hampton Bays, New York and WWYY-FM Hackettstown,
New Jersey. WWXY-FM, WWZY-FM, WWVY-FM, and WWYY-FM are programmed as "New
Country Y-107." In the Chicago area, the Company owns five radio properties,
WXXY-FM Highland Park, Illinois, WYXX-FM Morris, Illinois (programmed as "FM
103.1"), WKIE-FM Arlington Heights, Illinois, WKIF-FM Kankakee, Illinois, and
WDEK-FM DeKalb, Illinois (programmed as "92 KISS FM"). In the Phoenix area, the
Company owns four radio properties, KEDJ-FM Sun City, Arizona, KDDJ-FM Globe,
Arizona, KBZR-FM Arizona City, Arizona (programmed as "The Edge") and KSSL-FM
Wickenburg, Arizona (programmed as "Que Buena").

    The Company owns Hispanic Internet Holdings, Inc. which operates
TodoAhora.com, a bilingual internet portal, which delivers a full range of
internet programming to the Hispanic community including news, entertainment,
finance, culture, and e-commerce opportunities. The Company also owns United
Publishers of Florida, Inc., which publishes the Hispanic music trade magazine,
"Disco", a graphic design business and the LatinMusicTrends.com website.

    The Company has incurred substantial net losses since inception primarily
due to broadcast cash flow deficits characteristic of the start up of its radio
stations. In addition, since the majority of its broadcast properties are in the
early stages of development, either as a result of them being recent purchases,
or as a result of them being recently reformatted, the Company expects to
generate significant net losses for the foreseeable future, as it continues to
expand its presence in major markets as well as developing its Internet portal
site.

    As a result of these factors, working capital needs have been met by
borrowings, including loans from the Principal Stockholders (which borrowings
were contributed to the capital of the Company immediately prior to the
consummation of the Initial Public Offering), under the Old Credit Facility and
the issuance of the Notes. The net proceeds of approximately $120,808,000 from
the Notes Offering were used to repay approximately $32,600,000 of the Old
Credit Facility (as hereinafter defined; see Note 8). Simultaneously with the
completion of the Note Offering, the Company obtained a revolving credit
facility (the "Revolving Credit Facility") with The Chase Manhattan Bank
("Chase") in the amount of $15 million (see Note 8).

                                       38
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

    The accompanying consolidated financial statements include the accounts of
Big City Radio, Inc. and all its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

CASH EQUIVALENTS

    Cash equivalents of $526,000 with maturities less than three months were
included in cash and cash equivalents at December 31, 2000.

MARKETABLE SECURITIES

    Marketable securities at December 31, 1999 and 2000 consist of U.S.
Treasury, mortgage-backed, corporate debt securities. The Company classifies its
debt securities as available-for-sale. Securities are recorded at fair value
with the unrealized holding gain or loss, net of the related tax effect,
excluded from earnings and reported as a separate component of other
comprehensive income until realized. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific identification basis.
As of December 31, 2000, $9,000 of unrealized holding losses were recorded.
Proceeds from the sale of securities were $6.0 million in 2000. Gross realized
losses were $87,000 in 2000 and has been included in interest income, net.

    A decline in the market value of any available-for-sale security below cost
that is deemed to be other than temporary results in a charge to earnings and a
new cost basis for the security is established. Premiums and discounts are
amortized or accreted over the life of the related security as an adjustment to
yield using the effective interest method. Dividend and interest income are
recognized when earned.

PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets ranging from
5 to 7 years for transmission equipment, vehicles and furniture and office
equipment to 39 years for buildings and leasehold improvements over the lesser
of the useful life or the term of the lease.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

    The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an 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 future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value, less costs to
sell.

INTANGIBLE ASSETS

    Intangible assets include the portion of the purchase price allocable to FCC
broadcast licenses, which are amortized on a straight-line method over
40 years. Covenants not to compete, signed as part of station acquisition
agreements, are amortized over the period of the agreements, generally three
years. Goodwill resulting from the acquisition of the Hispanic Internet
Holdings, Inc. and United Publishers of Florida, Inc. are amortized over five
years.

    It is the Company's policy to account for intangible assets at the lower of
amortized cost or fair market value. As part of an ongoing review of the
valuation and amortization of intangible assets,

                                       39
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
management assesses the carrying value of the Company's intangible assets if
facts and circumstances suggest that they are impaired. If this review indicates
that the intangibles will not be recoverable as determined by a non-discounted
cash flow analysis over the remaining amortization period, the carrying value of
the Company's intangibles will be reduced to their estimated fair market value.
The Company has determined that intangibles are fairly stated at December 31,
2000.

DEFERRED FINANCING FEES

    Deferred finance costs and loan origination fees are amortized over the
period of the relevant facility.

REVENUE RECOGNITION

    Broadcasting revenue is recognized when commercials are aired. Net revenues
represent gross revenues, less direct fees and commissions paid to independent
advertising agencies.

INCOME TAXES

    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following methods and assumptions were used in estimating the fair value
disclosures for financial instruments:

    The carrying amounts reported in the balance sheets for cash, current
receivables, accounts payable and accrued expenses approximate fair value.

    The carrying value and fair value of Senior Discount Notes are
$170.3 million and $60.9 million, respectively, at December 31, 2000. Fair
values of Senior Discount Notes are based on market prices.

CONCENTRATION OF CREDIT RISK

    Financial instruments which potentially subject the Company to concentration
of credit risk consist primarily of accounts receivable. The Company believes
that concentration of credit risk with respect to accounts receivable, which are
unsecured, are limited due to the Company's ongoing relationship with its
clients. The Company estimates uncollectible accounts on a periodic basis. The
Company has not experienced significant losses relating to accounts receivable.
For periods ended December 31, 1998, 1999 and 2000, no customer accounted for
more than 10% of revenues.

                                       40
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BARTER TRANSACTIONS

    The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and a
liability are recorded at the fair market value of the goods or services
received. Barter revenue is recorded and the liability is relieved when the
commercials are broadcast, and barter expense is recorded and the assets are
relieved when the goods or services are received or used.

ADVERTISING

    The Company charges advertising costs, as incurred, to expense. Advertising
costs amounted to $1,484,000, $1,326,000 and $1,703,000 for the years ended
December 31, 1998, 1999 and 2000, respectively.

LOSS PER SHARE

    The Company calculates loss per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". Under SFAS
No. 128 basic EPS includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution from
securities that could share in the earnings of the Company. In calculating
diluted EPS, no potential shares of common stock are to be included in the
computation when a loss from continuing operations available to common
stockholders exists. The statement requires dual presentation of basic and
diluted EPS by entities with complex capital structures. Stock options issued
under the Company's 1998, 1999 and 2000 Incentive Stock Plan amounting to
924,800, 2,193,300 and 1,964,100 at December 31, 1998, 1999 and 2000,
respectively, were not included in the computation of diluted EPS because to do
so would have been antidilutive.

ACCOUNTING FOR STOCK OPTIONS

    On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS No. 123
allows entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and disclosure for employee stock option grants
made in 1995, 1996 and future years as if the fair-value-based method defined in
SFAS No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.

REPORTING COMPREHENSIVE INCOME

    In fiscal 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130").
The statement required that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. Accumulated other comprehensive income of the Company
consists solely of net unrealized gains (losses) on available for sale
investments.

                                       41
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(3) LIQUIDITY AND GOING CONCERN

    The Company has incurred substantial net losses since inception primarily
due to broadcast cash flow deficits characteristic of the start up of its radio
stations. In addition, since the majority of its broadcast properties are in the
early stages of development, either as a result of them being recent purchases,
or as a result of them being recently reformatted, the Company expects to
generate significant net losses for the foreseeable future, as it continues to
expand its presence in major markets as well as developing its Internet portal
site.

    As a result of these factors, working capital needs have been met by
borrowings, including loans from the Principal Stockholders (which borrowings
were contributed to the capital of the Company immediately prior to the
consummation of the Initial Public Offering), under the Old Credit Facility and
the issuance of the Notes. The net proceeds of approximately $120,808,000 from
the Notes Offering were used to repay approximately $32,600,000 of the Old
Credit Facility (as hereinafter defined; see Note 8). Simultaneously with the
completion of the Note Offering, the Company obtained a revolving credit
facility (the "Revolving Credit Facility") with The Chase Manhattan Bank
("Chase") in the amount of $15.0 million (see Note 8). The Company is currently
in compliance with all material covenants and restrictions under the Revolving
Credit Facility, with the exception that the Independent Auditors' Report for
the year ended December 31, 2000 includes a "going concern" uncertainty
paragraph (see page 33). The Company is currently seeking a new debt facility,
and as part of this negotiation plans to rectify its non-compliance with this
covenant within the thirty day period permitted by the existing Revolving Credit
Facility.

    The Company had available approximately $2.8 million of cash and cash
equivalents and marketable securities at December 31, 2000 and has unused
borrowing capacity of $3.9 million under the Revolving Credit Facility, which
can be used for working capital purposes, including financing any such
acquisitions. On March 15, 2001, the senior discount notes commence accruing
interest at 11 1/4% per annum, which interest is payable in cash, semi-annually,
commencing September 15, 2001. The semi-annual interest payment is $9.8 million.

    Cash on hand and amounts available under the Revolving Credit Facility are
not sufficient to support the Company's operations through December 31, 2001 and
its growth strategy. In addition, because of the Company's substantial
indebtedness, a significant portion of the Company's broadcast cash flow will be
required for debt. These matters raise substantial doubt about the Company's
ability to continue as a going concern.

    The Company is in the process of seeking a new debt facility to finance its
operating and debt service requirements and capital expenditure programs through
December 31, 2001. There can be no assurance that any such financing will be
available or available on acceptable terms.

    Management believes that its long-term liquidity needs will be satisfied
through a combination of i) achieving positive operating results and cash flows
through revenue growth and control of operating expenses and ii) the
implementation and execution of its growth strategy to acquire and build a major
market broadcast group. In order to meet its long-term financing needs, the
Company is currently considering all means available to it, including the
raising of additional equity and the restructuring of the Notes.

    The accompanying consolidated financial statements have been prepared on the
basis that the Company and its subsidiaries will be able to continue in
existence as a going concern and, accordingly, do not include any adjustments
relating to the recoverability and classification of reported assets amounts and
classification of liabilities that might result from the outcome of this
uncertainty.

                                       42
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(4) ACQUISITIONS AND DISPOSITIONS

    On November 8, 2000 the Company entered into an asset purchase agreement in
which the Company acquired substantially all of the assets and properties of
United Publishers of Florida, Inc., which owned and operated a Hispanic music
trade magazine, "Disco", a graphic design business and the LatinMusicTrends.com
website. The purchase price for the acquired business was $250,000 excluding
acquisition related expenses and was paid in cash. Under the terms of the
purchase agreement a second installment of up to $250,000 is due at the one year
anniversary of the acquisition, subject to certain operating cash flow targets
to be attained by the acquired business. Management's preliminary estimate of
the fair value of the assets acquired in this transaction, subject to further
review and appraisal is as follows:

<TABLE>
<S>                                                         <C>
Fixed assets............................................      $118,000
Goodwill................................................       132,000
</TABLE>

    On April 12, 2000, the Company sold the assets of radio station WLBK-AM,
DeKalb, Illinois for a sale price of $416,000. No gain or loss was recorded on
this transaction.

    On November 1, 1999 the Company consummated the acquisition, in an all stock
transaction, all the issued and outstanding stock of Hispanic Internet
Holdings, Inc., a privately held bilingual Online Service Provider for the U.S.
Hispanic and Latin American markets. The transaction was accounted for as a
purchase. The Company issued 400,000 shares of its Class A Common Stock with a
fair market value of $4 per share. Under the terms of the Agreement, an
additional 600,000 shares may be issued, (i) Over the next five years contingent
upon the successful achievement of certain annual revenue goals, or (ii) In the
event of a sale or spin-off of the Internet company, prior to the fifth
anniversary of the merger, for a valuation of at least $10 million, or (iii) In
the event of a sale of Big City Radio prior to the fifth anniversary of the
merger at a price of at least $4.00 per share.

    On September 28, 1999 the Company completed the acquisition of KSSL-FM
(formerly KMYL-FM), Wickenburg, Arizona. The operations of this station have
been included in the consolidated statements of operations from that date. The
purchase price for this station was $5,600,000 excluding acquisition related
expenses and was paid in cash. The fair value of the assets acquired in this
transaction exclusive of acquisition costs, subject to further review and
appraisal is as follows:

<TABLE>
<S>                                                         <C>
Building................................................     $    8,000
Fixed assets............................................         92,000
FCC broadcast license...................................      5,500,000
</TABLE>

    On September 22, 1999 the Company completed the acquisition of KBZR-FM,
Arizona City, Arizona. The operations of this station have been included in the
consolidated statements of operations from that date. The purchase price for
this station was $3,900,000 excluding acquisition related expenses and was paid
in cash. The fair value of the assets acquired in this transaction exclusive of
acquisition costs, subject to further review and appraisal is as follows:

<TABLE>
<S>                                                         <C>
Land....................................................     $   20,000
Fixed assets............................................         73,000
FCC broadcast license...................................      3,807,000
</TABLE>

    On July 30, 1999 the Company completed the acquisition of the simulcast
stations, KEDJ-FM, Sun City, Arizona and KDDJ-FM, Globe, Arizona. The operations
of these stations have been included in the consolidated statements of
operations from that date. The purchase price for these stations was $22,000,000
excluding acquisition related expenses and was paid in cash. The fair value of
the assets

                                       43
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(4) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
acquired in this transaction exclusive of acquisition costs, subject to further
review and appraisal is as follows:

<TABLE>
<S>                                                         <C>
Building................................................    $   461,000
Fixed assets............................................        227,000
FCC broadcast license...................................     21,312,000
</TABLE>

    On April 30, 1999 the Company signed an acquisition agreement whereby the
assets of radio station KLVA-FM, Casa Grande, Arizona would be exchanged for the
assets of radio station KDDJ-FM, Globe, Arizona, subject to the consummation of
its purchase which occurred on July 30, 1999. Accordingly, in April 1999 the
Company deposited into an escrow account the amount of $275,000 in good faith
consideration. In February 2000, the Company paid the balance in the escrow
account and an additional amount of $275,000, totaling $550,000, to cancel the
signed KLVA-FM acquisition.

    On March 26, 1999 the Company sold the assets of radio station WRKL-AM, New
City, New York to Polnet Communications, LTD. for a sale price of
$1.625 million. A gain of $663,000 on the sale of the station was recognized
during the period.

    On February 25, 1999 the Company completed the acquisition of WDEK-FM and
WLBK-AM, DeKalb, Illinois. The operations of these stations have been included
in the consolidated statements of operations from that date.The purchase price
for these stations was $4,500,000, excluding acquisition related expenses, of
which $450,000 was deposited into an escrow account in April 1998 in
anticipation of this purchase.Management's preliminary estimate of the fair
value of the assets acquired in these transactions, subject to further review
and appraisal, is as follows:

<TABLE>
<CAPTION>
                                                         WDEK-FM     WLBK-AM
                                                        ----------   --------
<S>                                                     <C>          <C>
Building..............................................  $       --   $150,000
Fixed assets..........................................     165,000    141,000
FCC broadcast license.................................   3,735,000    309,000
</TABLE>

    On August 4 and 7, 1998, the Company completed the acquisitions of WKIE-FM,
Arlington Heights, Illinois (formerly WCBR-FM) and WKIF-FM (formerly WLRT-FM),
Kankakee, Illinois. The operations of these stations have been included in the
consolidated statements of operations from these dates. The purchase price for
these stations was $19,500,000 excluding acquisition related expenses, of which
$19,000,000 was paid in cash. The fair value of the WKIE-FM and WKIF-FM assets
acquired, exclusive of acquisition costs, is as follows:

<TABLE>
<CAPTION>
                                                        WKIE-FM      WKIF-FM
                                                      -----------   ----------
<S>                                                   <C>           <C>
Fixed assets........................................  $   100,000      102,000
FCC broadcast license...............................   14,400,000    4,898,000
</TABLE>

    On April 27, 1998, the Company signed an agreement to acquire all of the
stock of Radio New Jersey, owner of the FCC licenses of WWYY-FM (formerly
WRNJ-FM) and WRNJ-AM, New Jersey. Simultaneously with the execution of this
acquisition agreement, the Company agreed to sell substantially all of the
assets of WRNJ-AM to one of the existing stockholders of Radio New Jersey. These
acquisitions and sale were completed on August 14, 1998. The Company liquidated
Radio New Jersey and transferred the FCC license of WWYY-FM to its Subsidiary
Guarantor, Big City Radio-NYC, L.L.C. The aggregate purchase price for WWYY-FM
was $5,350,000 excluding acquisition related expenses, of which $3,000,000 was
paid in cash and the remainder was satisfied by the issuance

                                       44
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(4) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
of two promissory notes totaling $2,350,000, bearing interest at 8.5% per annum.
The Company managed the operations of WWYY-FM for a fee from April 27, 1998 up
to the effective date under a local marketing agreement ("LMA"). Revenue,
programming expenses and other reimbursable expenses pursuant to the LMA have
been included in the accompanying consolidated financial statements as have LMA
fees of approximately $54,000. Upon final review and appraisal, the fair value
of the WWYY-FM assets acquired in these transactions, exclusive of acquisition
costs, is determined to be as follows:

<TABLE>
<S>                                                         <C>
Fixed assets............................................     $   25,000
FCC broadcast license...................................      7,798,000
</TABLE>

    LMA fees are reflected in the accompanying consolidated financial statements
as station operating expenses.

(5) CASH HELD IN INVESTMENT, RESTRICTED

    The restricted cash balance collateralizes two letters of credit outstanding
at December 31, 2000. The letters of credit relate to the Chicago and Phoenix
office leases. According to the Chicago lease agreement, the Company agreed to
deposit the sum of $1,000,000 as security in the form of an unconditional and
irrevocable letter of credit. The amount of the letter of credit will decrease
$200,000 each year over 5 years. According to the Phoenix lease agreement, the
Company agreed to deposit the sum of $269,000 as security in the form of an
unconditional and irrevocable letter of credit. The amount of the letter of
credit will decrease $51,000 each year over 5 years.

(6) PROPERTY AND EQUIPMENT

    Property and equipment at December 31, 1999 and 2000 were as follows:

<TABLE>
<CAPTION>
                                                          1999         2000
                                                        ---------   ----------
<S>                                                     <C>         <C>
Land..................................................    347,000      245,000
Building and improvements.............................  1,611,000    1,943,000
Transmitter equipment.................................  6,044,000    6,676,000
Furniture and office equipment........................  1,340,000    1,871,000
Vehicles..............................................    466,000      623,000
                                                        ---------   ----------
                                                        9,808,000   11,358,000
Less accumulated depreciation.........................  2,663,000    4,210,000
                                                        ---------   ----------
                                                        7,145,000    7,148,000
                                                        =========   ==========
</TABLE>

                                       45
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(7) INTANGIBLES

    Intangibles at December 31, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                        1999          2000
                                                     -----------   -----------
<S>                                                  <C>           <C>
FCC broadcast licenses.............................  118,152,000   117,916,000
Covenants not to compete...........................      678,000       678,000
Goodwill...........................................    1,594,000     1,727,000
                                                     -----------   -----------
                                                     120,424,000   120,321,000
Less accumulated amortization......................    6,551,000     9,845,000
                                                     -----------   -----------
                                                     113,873,000   110,476,000
                                                     ===========   ===========
</TABLE>

(8) SENIOR DISCOUNT NOTES

OFFERING OF SENIOR DISCOUNT NOTES

    On March 17, 1998 (the "issue date"), the Company completed the Note
Offering. The $174,000,000 aggregate principal amount at maturity of Notes were
issued at a discount generating gross proceeds to the Company of approximately
$125.4 million. They mature on March 15, 2005. The Notes will accrete in value
until March 15, 2001 at a rate of 11.25% per annum, compounded semiannually, to
an aggregate principal amount of $174.0 million. Commencing on March 15, 2001,
interest on the Notes will accrue at a rate of 11.25% per annum and will be
payable semiannually in cash on March 15 and September 15 of each year,
commencing on September 15, 2001.

    Except as described below, the Company may not redeem the Notes prior to
March 15, 2002. On or after such date, the Company may redeem the Notes, in
whole or in part, at certain redemption prices together with accrued and unpaid
interest, if any, to the date of redemption. In addition, at any time on or
prior to March 15, 2001, the Company may, at its option, redeem in the aggregate
up to 33 1/3% of the original principal amount of the Notes with net cash
proceeds of one or more Equity Offerings received by the Company so long as
there is a public market for the Company's Class A Common Stock at the time of
such redemption, at a redemption price equal to 111.25% of the accreted value
thereof to be redeemed, to the date of redemption; provided that at least
66 2/3% of the original principal amount of the Notes remains outstanding
immediately after each such redemption. The Notes are not subject to any sinking
fund requirement. Upon a Change of Control (as such term is defined in the
Notes), each holder of Notes has the right to require the Company to make an
offer to purchase the Notes at a price equal to 101% of the accreted value of
such Notes prior to March 15, 2001, or 101% of the principal amount of such
Notes thereafter, together with accrued and unpaid interest, if any, to the date
of the purchase.

    The Notes are unsecured, senior obligations of the Company and rank PARI
PASSU in right of payment to all existing and future senior indebtedness of the
Company and senior to all existing and future subordinated indebtedness of the
Company. The Notes are guaranteed on a senior unsecured basis by each of the
Company's subsidiaries. The indenture does not restrict the ability of the
Company or its subsidiaries to create, acquire or capitalize subsidiaries in the
future. The Notes will be effectively subordinated to all existing and future
indebtedness of the Company's subsidiaries. Approximately $4.6 million of costs
associated with the issuance of the Notes, including the underwriters fees and
related professional fees are included in deferred financing fees and will be
amortized over the term of the Notes.

                                       46
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(8) SENIOR DISCOUNT NOTES (CONTINUED)
    Simultaneously with the consummation of the Notes, the Company entered into
the Revolving Credit Facility providing for up to $15 million of availability,
subject to certain available borrowing calculations. The Revolving Credit
Facility matures on the fifth anniversary of the issue date and amounts
outstanding under the Revolving Credit Facility bear interest at an applicable
margin plus, at the Company's option, Chase's prime rate (in which case the
applicable margin is 2.00% subject to reduction upon obtaining performance
criteria based on the Company's leverage ratio) or the London Inter-Bank
Borrowing Rate (in which case the applicable margin is 3.00% subject to
reduction upon obtaining performance criteria based on the Company's leverage
ratio). The Company's obligations under the Revolving Credit Facility are
secured by a pledge of substantially all of the Company and its subsidiaries'
assets. The Company will pay fees of .5% per annum, on the aggregate unused
portion of the facility. Upon entering into the Revolving Credit Facility, the
Company recorded a loss on extinguishment of the Old Credit Facility which
consisted of the unamortized deferred financing fees of $582,000. This expense
is reported, net of its tax effect of $87,000, as an extraordinary loss in the
consolidated statement of operations for the year ended December 31, 1998.
Interest expense on the Old Credit Facility for the year ended December 31, 1998
was $576,000.

    The Revolving Credit Facility contains certain financial and operational
covenants and other restrictions with which the Company must comply, including,
among others, limitations on capital expenditures, limitations on the incurrence
of additional indebtedness, restrictions on sale of assets, restrictions on the
use of borrowings, limitations on paying cash dividends and redeeming or
repurchasing capital stock of the Company or the Notes, and requirements to
maintain certain financial ratios, maximum total leverage, minimum interest
coverage and minimum fixed charge coverage. The Company had violated one of the
covenants (see Note 3). As of December 31, 2000 no amounts were drawn down on
the Revolving Credit Facility. However, a $259,000 letter of credit related to
the Century City office lease and a $500,000 letter of credit related to the LA
Stations power signal project were issued under the Revolving Credit Facility.

    The Revolving Credit Facility contains customary events of default,
including material misrepresentations, payment defaults and default in the
performance of other covenants, certain bankruptcy and ERISA defaults, judgment
and cross defaults and revocation of any of the Company's broadcast licenses.
The Revolving Credit Facility also provides that an event of default will occur
upon the occurrence of a "change of control." For purposes of the Revolving
Credit Facility, a change of control will occur when (i) any person or group
other than the Principal Stockholders and their affiliates obtains the power to
elect a majority of the Board of Directors, (ii) the Company fails to own 100%
of the capital stock of its subsidiaries owning any of the FCC broadcast
licenses or (iii) the Board of Directors does not consist of a majority of
continuing directors.

                                       47
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(8) SENIOR DISCOUNT NOTES (CONTINUED)

SUBSIDIARY GUARANTORS

    Pursuant to the terms of the indenture relating to the Notes (the
"Indenture"), the direct subsidiaries of Big City Radio, Inc. consisting of
Odyssey Traveling Billboards, Inc., Big City Radio-NYC, L.L.C., Big City
Radio-LA, L.L.C., Big City Radio-CHI, L.L.C., and Big City Radio-Phoenix, L.L.C.
(collectively, the Subsidiary Guarantors) have, jointly and severally, fully and
unconditionally guaranteed the obligations of Big City Radio, Inc. with respect
to the Notes.

    All of the then existing Subsidiary Guarantors except Odyssey Traveling
Billboards, Inc. (the "Station Subsidiaries"), were created in December 1997 as
special purpose Delaware limited liability companies formed at the request of
the lenders under the Credit Facility for the sole purpose of facilitating the
Credit Facility by holding the Company's Federal Communications Commission
("FCC") radio licenses. The operating agreements for the Station subsidiaries
limit the activities of these companies to holding the FCC radio
licenses.Odyssey Traveling Billboards, Inc. ("Odyssey") owns and operates
certain vehicles used to advertise for the Company's radio stations. Because the
Station Subsidiaries have entered into assignment and use agreements with the
Company whereby the Company manages and directs the day-to-day operations of the
radio stations, pays all expenses and capital costs incurred in operating the
radio stations, and retains all advertising and other receipts collected in
operating the radio stations, the Station Subsidiaries have no income or
expenses other than the amortization of the FCC licenses. Odyssey is similarly a
special purpose corporation with no income and only expenses.

    The covenants in the Notes, the Indenture and the Revolving Credit Facility
do not restrict the ability of the Station Subsidiaries to make cash
distributions to the Company.

    Set forth below is certain summarized financial information for the
Subsidiary Guarantors, as of December 31, 1999 and 2000 and for the year ended,
December 31, 1999 and 2000 on an "as if pooling" basis given the common control
relationship of Big City Radio, Inc. and the Subsidiary Guarantors.

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                   ---------------------------
                                                       1999           2000
                                                   ------------   ------------
<S>                                                <C>            <C>
Current assets...................................            --             --
Noncurrent assets................................  $112,331,000   $109,126,000
Current liabilities..............................            --             --
Noncurrent liabilities...........................            --             --
</TABLE>

<TABLE>
<CAPTION>
                                                            FOR THE YEAR
                                                         ENDED DECEMBER 31,
                                                    ----------------------------
                                                       1999              2000
                                                    -----------       ----------
<S>                                                 <C>               <C>
Net sales.........................................           --               --
Costs and expenses................................           --               --
Depreciation and amortization.....................  $ 2,499,000        2,969,000
Net loss..........................................   (2,499,000)      (2,969,000)
</TABLE>

    The summarized financial information for the Subsidiary Guarantors has been
prepared from the books and records maintained by the Subsidiary Guarantors and
the Company. The summarized financial information may not necessarily be
indicative of the results of operations or financial position had the Subsidiary
Guarantors operated as independent entities.

                                       48
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(9) PROMISSORY NOTES

    In August 1998, the Company acquired all of the stock of Radio New Jersey,
owner of the FCC licenses of WWYY-FM and WRNJ-AM. The aggregate purchase price
was $5.4 million excluding acquisition-related expenses, of which $3.0 million
was paid in cash and the remainder was satisfied by the issuance of two
promissory notes.

    The principal amount of these Notes are due and payable in eight equal
consecutive quarterly installments of $147,000 each, commencing on November 1,
1998, together with interest in arrears on the unpaid principal balance at an
annual rate equal to 8.5%. In August 2000, the Company repaid all amounts
outstanding on these promissory notes.

    The principal amount and interest paid on these promissory notes during 2000
was $881,000 and $25,000, respectively. The principal amount and interest paid
on these promissory notes during 1999 was $1,175,000 and $137,000, respectively.

(10) COMMITMENTS AND CONTINGENCIES

LEASES

    The Company leases studio and office space, transmitter tower sites and
office equipment under operating leases. Future minimum rental commitments for
the remainder of the operating leases are as follows:

<TABLE>
<S>                                              <C>
2001...........................................  $ 2,226,000
2002...........................................    1,940,000
2003...........................................    1,834,000
2004...........................................    1,103,000
2005...........................................      669,000
Thereafter.....................................    2,461,000
                                                 -----------
                                                 $10,233,000
                                                 ===========
</TABLE>

    Rent expense for the years ended December 31, 1998, 1999 and 2000 was
approximately $651,000, $1,382,000 and $1,960,000, respectively.

EMPLOYMENT CONTRACTS

    The Company has entered into various employment contracts with 17
individuals comprised of mainly officers and senior management that provide for
minimum salaries and incentives based upon specified levels of performance. The
minimum payments under these contracts are as follows:

<TABLE>
<S>                                                         <C>
2001....................................................      $1,919,000
2002....................................................       1,246,000
2003....................................................         150,000
                                                              ----------
                                                              $3,315,000
                                                              ==========
</TABLE>

                                       49
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(10) COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONTINGENT LIABILITIES

    The Company has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes that the
probable resolution of such contingencies will not materially affect the
financial position, results of operations, or liquidity of the Company.

(11) SUPPLEMENTARY INFORMATION--STATEMENT OF CASH FLOWS

    The Company acquired vehicles during the years ended December 31, 1998, 1999
and 2000 through issuance of notes payable amounting to $39,000, $0, and
$50,000, respectively.

    Barter transactions resulted in sales of $1,560,000, $841,000 and $1,107,000
and related expenses of $1,514,000, $947,000 and $1,061,000 for the years ended
December 31, 1998, 1999 and 2000, respectively.

    Cash paid for interest during the years ended December 31, 1998, 1999 and
2000 amounted to $931,000, $137,000 and $40,000, respectively.

(12) INCOME TAXES

    Income tax expense for the year ended December 31, 1998, 1999 and 2000 is
comprised of the following:

<TABLE>
<CAPTION>
                                                                 1998         1999       2000
                                                              -----------   --------   --------
<S>                                                           <C>           <C>        <C>
Deferred tax benefit........................................   (2,013,000)  (63,000)   (63,000)
Tax benefit resulting from extraordinary loss...............      (87,000)       --         --
Other.......................................................       25,000        --         --
                                                              -----------   -------    -------
                                                              $(2,075,000)  (63,000)   (63,000)
                                                              ===========   =======    =======
</TABLE>

    The provision for income taxes differs from the amount computed by applying
the statutory Federal income tax rate in 1998, 1999 and 2000 due to the
following:

<TABLE>
<CAPTION>
                                                            1998          1999          2000
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Federal income taxes at the statutory rate.............  $(6,833,000)   (9,055,000)  (10,899,000)
State income taxes net of any amount of Federal income
  tax benefit..........................................     (939,000)   (1,322,000)   (1,523,000)
Extraordinary loss.....................................      (87,000)           --            --
Valuation Allowance....................................    5,571,000    10,279,000    12,327,000
Other..................................................      213,000        35,000        32,000
                                                         -----------   -----------   -----------
                                                         $(2,075,000)      (63,000)      (63,000)
                                                         ===========   ===========   ===========
</TABLE>

                                       50
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(12) INCOME TAXES (CONTINUED)
    The components of deferred taxes at December 31, 1998, 1999 and 2000 are as
follows:

<TABLE>
<CAPTION>
                                                            1998          1999          2000
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Deferred tax assets:
  Net operating loss...................................  $ 6,030,000    10,077,000    16,794,000
  Other................................................      222,000       206,000       240,000
  Book interest expense/Tax OID 11.25% Senior Notes....    4,902,000    11,950,000    19,823,000
                                                         -----------   -----------   -----------
                                                          11,154,000    22,233,000    36,857,000
                                                         -----------   -----------   -----------
Deferred tax liabilities:
  Deferred gain........................................   (2,771,000)   (2,831,000)   (2,679,000)
  Book/Tax basis difference from WRNJ-FM stock
    purchase...........................................   (2,473,000)   (2,410,000)   (2,348,000)
  Depreciation and amortization........................   (2,307,000)   (2,490,000)   (4,129,000)
  Other................................................     (505,000)   (1,062,000)   (1,871,000)
                                                         -----------   -----------   -----------
                                                          (8,056,000)   (8,793,000)  (11,027,000)
                                                         -----------   -----------   -----------
Sub-Total before valuation allowance...................    3,098,000    13,440,000    25,830,000
Valuation Allowance....................................   (5,571,000)  (15,850,000)  (28,177,000)
                                                         -----------   -----------   -----------
Net deferred tax asset (liability).....................  $(2,473,000)   (2,410,000)   (2,347,000)
                                                         ===========   ===========   ===========
</TABLE>

    The Company has approximately $41,751,000 of net operating loss
carryforwards for Federal income tax purposes. These NOLs begin to expire in
2017.

    In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. At December 31, 2000, based on projections for future taxable income
over the periods in which the level of deferred tax assets are deductible,
management believes that it is unlikely that the Company will realize the
benefits of all these deductible differences. Accordingly, a valuation allowance
of $28,177,000 has been provided for the deferred tax assets for the year ended
December 31, 2000.

(13) CAPITAL STOCK AND RELATED TRANSACTIONS

    DESCRIPTION OF CAPITAL STOCK--The authorized capital stock of the Company
consists of 120,000,000 shares of capital stock, par value $.01 per share, of
which 80,000,000 shares are designated as Class A Common Stock and 20,000,000
shares are designated as Class B Common Stock.At December 31, 2000, 6,226,817
shares of Class A Common Stock were issued and outstanding and 8,250,458 shares
of Class B Common Stock were issued and outstanding. In addition, 8,250,458
shares of Class A Common Stock are reserved for issuance upon conversion of the
Class B Common Stock. Immediately prior to the consummation of the Offering,
there was one holder of Class A Common Stock and two holders of Class B Common
Stock.

                                       51
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(13) CAPITAL STOCK AND RELATED TRANSACTIONS (CONTINUED)
    The shares of Class A Common Stock and Class B Common Stock are identical in
all respects, except for voting rights and certain conversion rights and
transfer restrictions in respect to the shares of the Class B Common Stock.

    The holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to ten votes per share. Holders of
all classes of Common Stock vote together as a single class on all matters
presented to the stockholders for their vote or approval except for the election
and removal of directors as described below and as otherwise required by
applicable law. With respect to the election of directors, the Company's Amended
and Restated Certificate of Incorporation provides that holders of Class B
Common Stock vote as a separate class to elect up to 75% of the members of the
Company's Board of Directors. Stockholders have no cumulative voting rights.

    EMPLOYMENT INCENTIVE--On June 18, 1998, the Company issued 93,755 shares of
Class A Common Stock to the then Chief Executive Officer an as employment
incentive, as required by an agreement executed prior to the Offering. The
consolidated statement of operations for the year ended December 31, 1998
reflect a charge of $808,000 relating to the award. The charge represents the
fair market value of the stock and it has been reflected as a capital
contribution in the accompanying consolidated financial statements.

(14) STOCK OPTION PLANS

    Under the Company's 1997, 1998 and 1999 Incentive Stock Plan (the "Incentive
Stock Plan"), as amended in November 1999, 700,000, 311,500 and 2,500,000
shares, respectively of the Company's Class A Common Stock are reserved for
issuance. The types of awards that may be granted pursuant to the Incentive
Stock Plan include (i) incentive stock options ("ISOs") and (ii) nonqualified
stock options ("NQSOs" and together with ISOs, "Stock Options" and "Awards").
Stock Option grants will consist of the maximum number of ISOs that may be
granted to a particular grantee under applicable law with the balance of the
Stock Options being NQSOs. Incentive stock options granted under both Plans are
exercisable for a period of up to ten years. The following is a summary of the
material features of the Incentive Stock Plan.

    Subject to certain exceptions set forth in the 1997 Incentive Stock Plan, up
to 700,000 shares of the Class A Common Stock may be the subject of Awards under
the 1997 Incentive Stock Plan. Up to 100,000 shares of Class A Common Stock are
available with respect to Awards granted to any one grantee. Shares of Class A
Common Stock granted under the 1997 Incentive Stock Plan may either be
authorized but unissued shares of Class A Common Stock not reserved for any
other purpose or shares of Class A Common Stock held in or acquired for the
treasury of the Company.

    On January 16, 1998, the Company granted options to purchase an aggregate of
2,500 shares of Class A Common Stock to a certain director of the Company, at an
exercise price of $7.125 per share. On April 8, 1998, the Board of Directors
approved the Big City Radio, Inc. 1998 Incentive Stock Plan (the "1998 Incentive
Stock Plan"). Subject to certain adjustments set forth in the 1998 Incentive
Stock Plan, up to 300,000 shares of the Class A Common Stock may be the subject
of Awards under the 1998 Incentive Stock Plan. Up to 100,000 shares of Class A
Common Stock are available with respect to Awards granted to any one
grantee.Shares of Class A Common Stock subject to Awards granted under

                                       52
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(14) STOCK OPTION PLANS (CONTINUED)
the 1998 Incentive Stock Plan may either be authorized but unissued shares of
Class A Common Stock not reserved for any other purpose or shares of Class A
Common Stock held in or acquired for the treasury of the Company.

    Shares of Class A Common Stock subject to an Award which terminates
unexercised may again be subject to an Award under the 1998 Incentive Stock
Plan. In addition, shares of Class A Common Stock surrendered to the Company in
payment of the exercise price of applicable taxes upon exercise of an Award may
also be used thereafter for additional Awards.

    On July 6, 1998, the Board of Directors granted stock options to purchase an
aggregate of 311,500 shares of Class A Common Stock under the 1998 Incentive
Stock Plan to certain employees and officers of the Company, at an exercise
price of the then market value of $7.8125 per share. On July 22, 1998, the
Company granted stock options to purchase an aggregate of 33,000 shares of
Class A Common Stock to certain employees of the Company at an exercise price of
$7.8125 per share. On November 30, 1998, the Board of Directors granted stock
options to purchase an aggregate of 47,500 shares of Class A Common Stock under
the 1998 Incentive Stock Plan to certain employees of the Company, at an
exercise price of the then market value of $4.375 per share. The majority of
these awards vest over a four-year period, with the first 20% vesting
immediately at the date of the grant and the remainder vesting 20% per annum,
thereafter.

    On January 28, 1999, the Board of Directors granted stock options to
purchase an aggregate of 75,000 shares of Class A Common Stock under the 1999
Incentive Stock Plan to certain employees and officers of the Company, at an
exercise price of the then market value of $3.4375 per share. On March 11, 1999,
the Company granted stock options to purchase an aggregate of 25,000 shares of
Class A Common Stock to certain employees of the Company at an exercise price of
$4.313 per share. On July 19, 1999, the Board of Directors granted stock options
to purchase an aggregate of 6,500 shares of Class A Common Stock under the 1999
Incentive Stock Plan to certain employees of the Company, at an exercise price
of the then market value of $3.625 per share. On August 20, 1999, the Board of
Directors granted stock options to purchase an aggregate of 10,000 shares of
Class A Common Stock under the 1999 Incentive Stock Plan to certain employees
and officers of the Company, at an exercise price of the then market value of
$4.0625 per share. On October 20, 1999, the Board of Directors granted stock
options to purchase an aggregate of 151,000 shares of Class A Common Stock under
the 1999 Incentive Stock Plan to certain employees and officers of the Company,
at an exercise price of the then market value of $3.4375 per share. The majority
of these awards vest over a four-year period, with the first 20% vesting
immediately at the date of the grant and the remainder vesting 20% per annum,
thereafter. At November 1, 1999, there were only 222,500 shares of common stock
available for the grant of options under its 1999 Incentive Stock Plan. After
examining the overall employee compensation, the Board of Directors concluded
that additional shares of common stock be made available for the grant of
options under the plan. Accordingly, the Board approved an amendment to the 1999
Incentive Stock Plan to increase the total number of shares of common stock that
may be issued pursuant to options granted under the plan to 2,500,000 and to
increase the aggregate number of shares of Class A Common Stock that may be
issued to any one optionee under the plan from 100,000 to 1,000,000.

    On November 1, 1999, the Board of Directors granted stock options to
purchase an aggregate of 770,000 shares of Class A Common Stock under the
amended 1999 Incentive Stock Plan to certain

                                       53
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(14) STOCK OPTION PLANS (CONTINUED)
employees and officers of the Company and certain other directors and advisors
of the Company, at an exercise price of the then market value of $3.5625 per
share. Also on November 1, 1999, the Board of Directors granted stock options to
purchase an aggregate of 250,000 shares of Class A Common Stock under the
amended 1999 Incentive Stock Plan to the new Chief Executive Officer of the
Company, at an exercise price of $4.00 per share. On November 22, 1999, the
Board of Directors granted stock options to purchase an aggregate of 25,000
shares of Class A Common Stock under the amended 1999 Incentive Stock Plan to a
key employee of the Company, at an exercise price of $5 per share. The majority
of these awards vest over a four-year period, with the first 20% vesting
immediately at the date of the grant and the remainder vesting 20% per annum,
thereafter.

    On September 6, 2000, the Board of Directors granted stock options to
purchase an aggregate of 25,000 shares of Class A Common Stock under the amended
1999 Incentive Stock Plan to a key employee of the Company, at an exercise price
of the then market value of $4.00 per share. On October 19, 2000, the Board of
Directors granted stock options to purchase an aggregate of 20,000 shares of
Class A Common Stock under the amended 1999 Incentive Stock Plan to a key
employee of the Company, at an exercise price of the then market value of $3.375
per share. On November 20, 2000, the Board of Directors granted stock options to
purchase an aggregate of 100,000 shares of Class A Common Stock under the
amended 1999 Incentive Stock Plan to a key employee of the Company, at an
exercise price of the then market value of $2.875 per share. The majority of
these awards vest over a four-year period, with the first 20% vesting
immediately at the date of the grant and the remainder vesting 20% per annum,
thereafter.

    Summary information pertaining to the plan for the year ended December 31,
2000 is as follow:

<TABLE>
<CAPTION>
                                                                               WEIGHTED
                                       NUMBER OF       EXERCISE PRICE          AVERAGE
                                        SHARES           PER SHARE          EXERCISE PRICE
                                       ---------       --------------       --------------
<S>                                    <C>         <C>                      <C>
Outstanding at beginning of year.....  2,193,300   $       3.4375--7.8125        $5.00
Granted..............................    145,000             2.875 --4.00         3.14
Exercised............................      8,000            3.5625--4.375         4.17
Cancelled............................    366,200           3.4375--7.8125         6.02
Outstanding at end of year...........  1,964,100           2.875 --7.8125         4.67
Exercisable at end of year...........  1,133,400           2.875 --7.8125         4.87
Available for grant at end of year...  1,535,900                                    --
</TABLE>

    At December 31, 2000, the weighted average remaining contractual life of all
outstanding options was 8.34 years.

                                       54
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(14) STOCK OPTION PLANS (CONTINUED)
    The following table summarizes information concerning currently outstanding
and exercisable stock options as of December 31, 2000:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING AT          OPTIONS EXERCISABLE
                             DECEMBER 31, 2000             AT DECEMBER 31, 2000
                        ----------------------------   ----------------------------
                                        WEIGHTED-                       WEIGHTED
      RANGE OF            NUMBER         AVERAGE         NUMBER         AVERAGE
   EXERCISE PRICES      OUTSTANDING   EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
---------------------   -----------   --------------   -----------   --------------
<S>                     <C>           <C>              <C>           <C>
     2.875--4.00         1,336,600         3.59           720,900         3.70
     4.375--6.00           127,500         5.77           111,500         5.89
    7.00 --7.8125          500,000         7.29           301,000         7.27
                         ---------                      ---------
                         1,964,100         4.67         1,133,400         4.87
                         =========                      =========
</TABLE>

    Summary information pertaining to the plan for the year ended December 31,
1999 is as follows:

<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                       NUMBER OF      EXERCISE PRICE          AVERAGE
                                        SHARES           PER SHARE         EXERCISE PRICE
                                       ---------   ---------------------   --------------
<S>                                    <C>         <C>                     <C>
Outstanding at beginning of year.....    924,800   $      4.375 --7.8125        $7.00
Granted..............................  1,312,500            3.4375--5.00         3.67
Exercised............................         --                      --           --
Cancelled............................     44,000          4.375 --7.8125         7.42
Outstanding at end of year...........  2,193,300          3.4375--7.8125         5.00
Exercisable at end of year...........  1,001,550          3.4375--7.8125         5.15
Available for grant at end of year...  1,306,700                      --           --
</TABLE>

    At December 31, 1999, the weighted average remaining contractual life of all
outstanding options was 9.14 years.

    Summary information pertaining to the plan for the year ended December 31,
1998 is as follows:

<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                        NUMBER OF      EXERCISE PRICE         AVERAGE
                                         SHARES          PER SHARE         EXERCISE PRICE
                                        ---------   --------------------   --------------
<S>                                     <C>         <C>                    <C>
Outstanding at beginning of year......   572,500    $        6.00 --7.00        $6.74
Granted...............................   391,500           4.375--7.8125         7.39
Exercised.............................        --                      --           --
Cancelled.............................    39,200           7.00 --7.8125         7.19
Outstanding at end of year............   924,800           4.375--7.8125         7.00
Exercisable at end of year............   322,300           4.375--7.8125         6.62
Available for grant at end of year....    75,200                                   --
</TABLE>

    At December 31, 1998, the weighted average remaining contractual life of all
outstanding options was 9.21 years.

    The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Option No. 25, "Accounting for
Stock Issued to Employees," and related

                                       55
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(14) STOCK OPTION PLANS (CONTINUED)
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 in accounting for its Plan, and accordingly, no
compensation cost has been recognized for its stock options granted at fair
market value in the consolidated financial statements. Compensation cost will be
recorded for options granted below fair market value.

    In 1998, 1999 and 2000, had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net loss would have been increased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                          1998           1999           2000
                                      ------------   ------------   ------------
<S>                                   <C>            <C>            <C>
Net income (loss):
  As reported.......................  $(17,449,000)  $(25,808,000)  $(31,168,000)
  Pro forma.........................   (18,379,000)   (27,825,000)   (32,869,000)
Earnings (loss) per share:
  As reported.......................         (1.24)         (1.83)         (2.15)
  Pro forma.........................         (1.31)         (1.97)         (2.27)
</TABLE>

    At December 31, 1998, 1999, and 2000 the per share weighted average fair
value of stock options granted was$4.98, $2.41 and $1.99, respectively, on the
date of grant using the modified Black-Scholes option-pricing model with the
following weighted average assumptions: expected dividend yield of 0%, risk-free
interest rate of 5.57%, expected volatility of 50% and an expected life of
10 years for options granted in 1998; expected dividend yield of 0%, risk-free
interest rate of 5.85%, expected volatility of 50% and an expected life of
10 years for options granted in 1999; expected dividend yield of 0%, risk-free
interest rate of 4.93%, expected volatility of 50% and an expected life of
10 years for options granted in 2000.

                                       56
<PAGE>
                              BIG CITY RADIO, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1999 AND 2000

(15) UNAUDITED QUARTERLY RESULTS

    The following tables contain selected unaudited consolidated statement of
operations for each quarter of fiscal years 2000 and 1999.

<TABLE>
<CAPTION>
                                                       FISCAL YEAR 2000
                                           -----------------------------------------
                                             4TH        3RD        2ND        1ST
                                           QUARTER    QUARTER    QUARTER    QUARTER
                                           --------   --------   --------   --------
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>        <C>        <C>        <C>
Net revenues.............................  $ 5,506    $ 6,874    $ 6,815    $ 4,646
Operating loss...........................   (3,411)    (2,440)    (2,862)    (4,324)
Net loss.................................   (8,199)    (6,982)    (7,331)    (8,656)
Loss per common share:
  Basic and diluted......................  $ (0.57)   $ (0.48)   $ (0.51)   $ (0.60)
Weighted average shares outstanding:
  Basic and diluted......................   14,477     14,477     14,475     14,469
</TABLE>

<TABLE>
<CAPTION>
                                                       FISCAL YEAR 1999
                                           -----------------------------------------
                                             4TH        3RD        2ND        1ST
                                           QUARTER    QUARTER    QUARTER    QUARTER
                                           --------   --------   --------   --------
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>        <C>        <C>        <C>
Net revenues.............................  $ 6,536    $ 6,615    $ 4,092    $ 3,361
Operating loss...........................   (3,255)    (1,449)    (2,934)    (3,558)
Net loss.................................   (7,356)    (5,697)    (6,540)    (6,215)
Loss per common share:
  Basic and diluted......................  $ (0.51)   $ (0.40)   $ (0.46)   $ (0.44)
Weighted average shares outstanding:
  Basic and diluted......................   14,334     14,069     14,069     14,069
</TABLE>

                                       57
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    Not Applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual Meeting
of Stockholders to be held on May 11, 2001.

ITEM 11. EXECUTIVE COMPENSATION

    The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual Meeting
of Stockholders to be held on May 11, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual Meeting
of Stockholders to be held on May 11, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual Meeting
of Stockholders to be held on May 11, 2001.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a) Financial Statement, Financial Statement Schedules and Exhibits

1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Report of KPMG LLP, Independent Auditors....................     33
Consolidated Balance Sheets as of December 31, 1999 and
  2000......................................................     34
Consolidated Statements of Operations for the years ended
  December 31, 1998, 1999 and 2000..........................     35
Consolidated Statements of Cash Flows for the years ended
  December 31, 1998, 1999 and 2000..........................     36
Consolidated Statement of Stockholders' Equity
  (Deficiency)..............................................     37
Notes to Consolidated Financial Statements..................     38
</TABLE>

2. FINANCIAL STATEMENT SCHEDULES

    Schedule II--Valuation and Qualifying Accounts

                                       58
<PAGE>
3. EXHIBITS

    All Exhibits listed below are filed with this Annual Report on Form 10-K
unless specifically stated to be incorporated by reference to other documents
previously filed with the Securities and Exchange Commission.

<TABLE>
<CAPTION>
EXHIBIT NO.                               DESCRIPTION OF EXHIBITS
---------------------                     -----------------------
<C>                     <S>
     3.1                Form of Amended and Restated Certificate of Incorporation of
                        Big City Radio, Inc. (incorporated by reference to Exhibit
                        3.1 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).

     3.2                Form of Amended and Restated Bylaws of Big City Radio, Inc.
                        (incorporated by reference to Exhibit 3.2 to the Company's
                        Registration Statement on Form S-1 (File No. 333-36449)).

     4.1                Specimen Class A Common Stock Certificate of Big City Radio,
                        Inc. (incorporated by reference to Exhibit 4.1 to the
                        Company's Registration Statement on Form S-1 (File No.
                        333-36449)).

     4.2                Indenture, dated as of March 17, 1998, among the Company,
                        the Subsidiary Guarantors named therein and First Trust
                        National Association as Trustee (incorporated by reference
                        to Exhibit 4.2 to the Company's Annual Report on Form 10-K
                        for the fiscal year ended December 31, 1997).

     4.3                Form of 11 1/4% Senior Discount Note due 2005 (incorporated
                        by reference to Exhibit 4.3 to the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 1998).

    10.1                Big City Radio, Inc. 1997 Incentive Stock Plan (incorporated
                        by reference to Exhibit 10.1 to the Company's Registration
                        Statement on Form S-1 (File No. 333-36449)).

    10.2                Big City Radio, Inc. 1998 Incentive Stock Plan (incorporated
                        by reference to Appendix A to the Company's Proxy Statement
                        for the May 12, 1998 Annual Meeting (File No. 001-13715)).

    10.3                Employment Agreement, between Big City Radio, Inc. and
                        Michael Kakoyiannis (incorporated by reference to Exhibit
                        10.2 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).

    10.4                Form of Employment Agreement, between Big City Radio, Inc.
                        and Paul R. Thomson (incorporated by reference to Exhibit
                        10.3 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).

    10.5                Form of Employment Agreement, between Big City Radio, Inc.
                        and Steven G. Blatter (incorporated by reference to Exhibit
                        10.4 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).

    10.6                Form of Employment Agreement, between Big City Radio, Inc.
                        and Alan D. Kirschner (incorporated by reference to Exhibit
                        10.5 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).

    10.7                Agreement and Plan of Merger, dated May 20, 1996, between Q
                        Broadcasting, Inc. and Odyssey Communications, Inc.
                        (incorporated by reference to Exhibit 10.6 to the Company's
                        Registration Statement on Form S-1 (File No. 333-36449)).

    10.8                Amended and Restated Credit Agreement between Big City
                        Radio, Inc. and The Chase Manhattan Bank (incorporated by
                        reference to Exhibit 10.7 to the Company's Registration
                        Statement on Form S-1 (File No. 333-36449)).

    10.9                Form of Registration Rights Agreement between Big City
                        Radio, Inc. and Michael Kakoyiannis (incorporated by
                        reference to Exhibit 10.8 to the Company's Registration
                        Statement on Form S-1 (File No. 333-36449)).

    10.10               Form of Registration Rights Agreement between Big City
                        Radio, Inc., Stuart Subotnick and
</TABLE>

                                       59
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                               DESCRIPTION OF EXHIBITS
---------------------                     -----------------------
<C>                     <S>
                        Anita Subotnick (incorporated by reference to Exhibit 10.9
                        to the Company's Registration Statement on Form S-1 (File
                        No. 333-36449)).

    10.11               Second Amended and Restated Credit Agreement, dated as of
                        March 17, 1998, among the Company, the Subsidiary Guarantors
                        named therein, the lenders named therein and The Chase
                        Manhattan Bank (incorporated by reference to Exhibit 10.10
                        to the Company's Annual Report on Form 10-K for the fiscal
                        year ended December 31, 1997).

    10.12               Purchase Agreement, dated March 12, 1998, among the Company,
                        the Subsidiary Guarantors named therein and Chase
                        Securities, Inc., Donaldson, Lufkin & Jenrette Securities
                        Corporation, BT Alex Brown Incorporated and ING Barings
                        (U.S.) Securities, Inc. as initial purchasers (incorporated
                        by reference to Exhibit 10.11 to the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 1997).

    10.13               Exchange and Registration Rights Agreement, dated as of
                        March 17, 1998, among the Company, the Subsidiary Guarantors
                        named therein and Chase Securities Inc., Donaldson, Lufkin &
                        Jenrette Securities Corporation, BT Alex Brown Incorporated
                        and ING Barings (U.S.) Securities, Inc. as initial
                        purchasers (incorporated by reference to Exhibit 10.12 to
                        the Company's Annual Report on Form 10-K for the fiscal year
                        ended December 31, 1997).

    10.14               Asset Purchase Agreement, dated April 20, 1998, between the
                        Company and Darrel Peters Productions, Inc. (incorporated by
                        reference to Exhibit 2.1 to the Company's Current Report on
                        Form 8-K filed on October 14, 1998).

    10.15               Trade Agreement, dated April 20, 1998, between the Company
                        and Darrel Peters Productions, Inc. (incorporated by
                        reference to Exhibit 2.2 to the Company's Current Report on
                        Form 8-K filed on October 14, 1998).

    21.1                List of Subsidiaries of Big City Radio, Inc. (incorporated
                        by reference to Exhibit 21.1 to the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 2000).

    24.1                Power of Attorney (contained in the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 2000).

    27.1                Financial Data Schedule.
</TABLE>

    (b) Reports on Form 8-K:

    During the period from October 1, 2000 to December 31, 2000, the Company did
not file any reports on Form 8-K.

    As of the date of the filing of this Annual Report on Form 10-K no proxy
materials have been furnished to security holders. Copies of all proxy materials
will be sent to the Commission in compliance with its rules.

                                       60
<PAGE>
                                   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, in East Rutherford,
New Jersey, on this 30th day of March, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       BIG CITY RADIO, INC.

                                                       By:               /s/ PAUL THOMSON
                                                            -----------------------------------------
                                                            Name: Paul Thomson
                                                            Title: Vice President, Chief Financial
                                                            Officer and Treasurer
</TABLE>

    We, the undersigned officers and directors of Big City Radio, Inc., hereby
severally constitute David A. Persing, Silvia Kessel, Paul R. Thomson and
Charles M. Fernandez, and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, any and all reports (including any
amendments thereto), with all exhibits thereto and any and all documents in
connection therewith, and generally do all such things in our name and on our
behalf in such capacities to enable Big City Radio, Inc. to comply with the
applicable provisions of the Securities Exchange Act of 1934, as amended, and
all requirements of the Securities Exchange Commission, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys, or either of
them, to any and all such reports (including any amendments thereto) and other
documents in connection therewith.

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                        NAME                                      TITLE                    DATE
                        ----                                      -----                    ----
<C>                                                    <S>                          <C>
                /s/ STUART SUBOTNICK
     -------------------------------------------       Chairman of the Board of       March 30, 2001
                  Stuart Subotnick                       Directors

              /s/ CHARLES M. FERNANDEZ
     -------------------------------------------       President, Chief Executive     March 30, 2001
                Charles M. Fernandez                     Officer and Director

                                                       Vice President, Chief
                 /s/ PAUL R. THOMSON                     Financial Officer and
     -------------------------------------------         Treasurer (Principal         March 30, 2001
                   Paul R. Thomson                       Financial and Accounting
                                                         Officer)

                 /s/ ANITA SUBOTNICK
     -------------------------------------------       Director                       March 30, 2001
                   Anita Subotnick
</TABLE>

                                       61
<PAGE>

<TABLE>
<CAPTION>
                        NAME                                      TITLE                    DATE
                        ----                                      -----                    ----
<C>                                                    <S>                          <C>
                  /s/ SILVIA KESSEL
     -------------------------------------------       Executive Vice President       March 30, 2001
                    Silvia Kessel                        and Director

                /s/ DAVID A. PERSING                   Executive Vice President,
     -------------------------------------------         General Counsel,             March 30, 2001
                  David A. Persing                       Secretary and Director

                /s/ LEONARD L. WHITE
     -------------------------------------------       Director                       March 30, 2001
                  Leonard L. White

                /s/ MICHAEL H. BOYER
     -------------------------------------------       Director                       March 30, 2001
                  Michael H. Boyer
</TABLE>

                                       62
<PAGE>
                                  SCHEDULE II

                              BIG CITY RADIO, INC.

                       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                            BALANCE AT     CHARGED                                BALANCE AT
                                            BEGINNING    TO COSTS AND     OTHER     DEDUCTIONS/      END
                                            OF PERIOD     PURCHASES      CHARGES    WRITE-OFFS    OF PERIOD
                                            ----------   ------------   ---------   -----------   ----------
<S>                                         <C>          <C>            <C>         <C>           <C>
Allowances for doubtful accounts, etc.
  (deducted from current receivables):

Year ended December 31, 1998..............   $213,000      $138,000     $     --     $(232,000)    $119,000

Year ended December 31, 1999..............   $119,000      $241,000     $     --     $(125,000)    $235,000

Year ended December 31, 2000..............   $235,000      $796,000     $     --     $(693,000)    $338,000
</TABLE>

                                       63
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
     EXHIBIT NO.                          DESCRIPTION OF EXHIBITS
---------------------                     -----------------------
<C>                     <S>
     3.1                Form of Amended and Restated Certificate of Incorporation of
                        Big City Radio, Inc. (incorporated by reference to Exhibit
                        3.1 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).
     3.2                Form of Amended and Restated Bylaws of Big City Radio, Inc.
                        (incorporated by reference to Exhibit 3.2 to the Company's
                        Registration Statement on Form S-1 (File No. 333-36449)).
     4.1                Specimen Class A Common Stock Certificate of Big City Radio,
                        Inc. (incorporated by reference to Exhibit 4.1 to the
                        Company's Registration Statement on Form S-1 (File No.
                        333-36449)).
     4.2                Indenture, dated as of March 17, 1998, among the Company,
                        the Subsidiary Guarantors named therein and First Trust
                        National Association as Trustee (incorporated by reference
                        to Exhibit 4.2 to the Company's Annual Report on Form 10-K
                        for the fiscal year ended December 31, 1997).
     4.3                Form of 11 1/4% Senior Discount Note due 2005 (incorporated
                        by reference to Exhibit 4.3 to the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 1998).
    10.1                Big City Radio, Inc. 1997 Incentive Stock Plan (incorporated
                        by reference to Exhibit 10.1 to the Company's Registration
                        Statement on Form S-1 (File No. 333-36449)).
    10.2                Big City Radio, Inc. 1998 Incentive Stock Plan (incorporated
                        by reference to Appendix A to the Company's Proxy Statement
                        for the May 12, 1998 Annual Meeting (File No. 001-13715)).
    10.3                Employment Agreement, between Big City Radio, Inc. and
                        Michael Kakoyiannis (incorporated by reference to Exhibit
                        10.2 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).
    10.4                Form of Employment Agreement, between Big City Radio, Inc.
                        and Paul R. Thomson (incorporated by reference to Exhibit
                        10.3 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).
    10.5                Form of Employment Agreement, between Big City Radio, Inc.
                        and Steven G. Blatter (incorporated by reference to Exhibit
                        10.4 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).
    10.6                Form of Employment Agreement, between Big City Radio, Inc.
                        and Alan D. Kirschner (incorporated by reference to Exhibit
                        10.5 to the Company's Registration Statement on Form S-1
                        (File No. 333-36449)).
    10.7                Agreement and Plan of Merger, dated May 20, 1996, between Q
                        Broadcasting, Inc. and Odyssey Communications, Inc.
                        (incorporated by reference to Exhibit 10.6 to the Company's
                        Registration Statement on Form S-1 (File No. 333-36449)).
    10.8                Amended and Restated Credit Agreement between Big City
                        Radio, Inc. and The Chase Manhattan Bank (incorporated by
                        reference to Exhibit 10.7 to the Company's Registration
                        Statement on Form S-1 (File No. 333-36449)).
    10.9                Form of Registration Rights Agreement between Big City
                        Radio, Inc. and Michael Kakoyiannis (incorporated by
                        reference to Exhibit 10.8 to the Company's Registration
                        Statement on Form S-1 (File No. 333-36449)).
    10.10               Form of Registration Rights Agreement between Big City
                        Radio, Inc., Stuart Subotnick and Anita Subotnick
                        (incorporated by reference to Exhibit 10.9 to the Company's
                        Registration Statement on Form S-1 (File No. 333-36449)).
    10.11               Second Amended and Restated Credit Agreement, dated as of
                        March 17, 1998, among the Company, the Subsidiary Guarantors
                        named therein, the lenders named therein and The Chase
                        Manhattan Bank (incorporated by reference to Exhibit 10.10
                        to the Company's Annual Report on Form 10-K for the fiscal
                        year ended December 31, 1997).
</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
     EXHIBIT NO.                          DESCRIPTION OF EXHIBITS
---------------------                     -----------------------
<C>                     <S>
    10.12               Purchase Agreement, dated March 12, 1998, among the Company,
                        the Subsidiary Guarantors named therein and Chase
                        Securities, Inc., Donaldson, Lufkin & Jenrette Securities
                        Corporation, BT Alex Brown Incorporated and ING Barings
                        (U.S.) Securities, Inc. as initial purchasers (incorporated
                        by reference to Exhibit 10.11 to the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 1997).
    10.13               Exchange and Registration Rights Agreement, dated as of
                        March 17, 1998, among the Company, the Subsidiary Guarantors
                        named therein and Chase Securities Inc., Donaldson, Lufkin &
                        Jenrette Securities Corporation, BT Alex Brown Incorporated
                        and ING Barings (U.S.) Securities, Inc. as initial
                        purchasers (incorporated by reference to Exhibit 10.12 to
                        the Company's annual Report on Form 10-K for the fiscal year
                        ended December 31, 1997).
    10.14               Asset Purchase Agreement, dated April 20, 1998, between the
                        Company and Darrel Peters Productions, Inc. (incorporated by
                        reference to Exhibit 2.1 to the Company's Current Report on
                        Form 8-K filed on October 14, 1998).
    10.15               Trade Agreement, dated April 20, 1998, between the Company
                        and Darrel Peters Productions, Inc. (incorporated by
                        reference to Exhibit 2.2 to the Company's Current Report on
                        Form 8-K filed on October 14, 1998).
    21.1                List of Subsidiaries of Big City Radio, Inc. (incorporated
                        by reference to Exhibit 21.1 to the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 2000).
    24.1                Power of Attorney (contained in the Company's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 2000).
</TABLE>

                                       65