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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



| | For the quarterly period ended March 31, 2006
| | ---------------------------------------------



OR



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



| | For the transition period from             to
| | ---------------------------------------------



Commission file number 000-28395



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INTEREP NATIONAL RADIO SALES, INC.

(Exact Name of Registrant as Specified in Its Charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|New York                                                      |  | 13-1865151                         
|(State or Other Jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|100 Park Avenue, New York, New York                           |  | 10017                              
|(Address of Principal Executive Offices)                      |  | (Zip Code)                         



(212) 916-0700

(Registrants Telephone Number, Including Area Code)



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



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



Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x



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



The number of shares of the registrants Common Stock outstanding as of the close of business on May 9, 2006, was 7,112,606 shares of
Class A Common Stock, and 4,183,270 shares of Class B Common Stock.



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PART I

FINANCIAL INFORMATION



Item 1.
FINANCIAL STATEMENTS



INTEREP NATIONAL RADIO SALES, INC.



CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)



|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                                                                                                                                         |  | March 31, 2006 |          |   | December 31, 2005 |  
|                                                                                                                                                                                                                         |  | (unaudited)    |          |   |                   |  
|ASSETS                                                                                                                                                                                                                   |  |                |          |   |                   |   |          |  
|Current assets:                                                                                                                                                                                                          |  |                |          |   |                   |   |          |  
|Cash and cash equivalents                                                                                                                                                                                                |  | $              | 4,257    |   |                   | $ | 6,928    |  
|Receivables, less allowance for doubtful accounts of $588 and $623                                                                                                                                                       |  |                | 16,511   |   |                   |   | 20,905   |  
|Representation contract buyouts receivable                                                                                                                                                                               |  |                | 10,550   |   |                   |   | 12,054   |  
|Current portion of deferred representation contract costs                                                                                                                                                                |  |                | 10,140   |   |                   |   | 11,082   |  
|Prepaid expenses and other current assets                                                                                                                                                                                |  |                | 1,898    |   |                   |   | 1,616    |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|Total current assets                                                                                                                                                                                                     |  |                | 43,356   |   |                   |   | 52,585   |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|Fixed assets, net                                                                                                                                                                                                        |  |                | 3,137    |   |                   |   | 3,594    |  
|Deferred representation contract costs                                                                                                                                                                                   |  |                | 19,849   |   |                   |   | 21,799   |  
|Representation contract buyouts receivable                                                                                                                                                                               |  |                | 2,994    |   |                   |   | 5,123    |  
|Investments and other assets                                                                                                                                                                                             |  |                | 5,828    |   |                   |   | 5,858    |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|                                                                                                                                                                                                                         |  | $              | 75,164   |   |                   | $ | 88,959   |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|LIABILITIES AND CAPITAL DEFICIT                                                                                                                                                                                          |  |                |          |   |                   |   |          |  
|Current liabilities:                                                                                                                                                                                                     |  |                |          |   |                   |   |          |  
|Accounts payable and accrued expenses                                                                                                                                                                                    |  | $              | 15,972   |   |                   | $ | 19,287   |  
|Accrued interest                                                                                                                                                                                                         |  |                | 2,476    |   |                   |   | 4,950    |  
|Representation contract buyouts payable                                                                                                                                                                                  |  |                | 4,543    |   |                   |   | 5,135    |  
|Accrued employee-related liabilities                                                                                                                                                                                     |  |                | 2,668    |   |                   |   | 4,358    |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|Total current liabilities                                                                                                                                                                                                |  |                | 25,659   |   |                   |   | 33,730   |  
|Long-term debt                                                                                                                                                                                                           |  |                | 102,113  |   |                   |   | 99,000   |  
|Representation contract buyouts payable                                                                                                                                                                                  |  |                | 915      |   |                   |   | 1,063    |  
|Other noncurrent liabilities                                                                                                                                                                                             |  |                | 4,130    |   |                   |   | 3,644    |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|Total liabilities                                                                                                                                                                                                        |  |                | 132,817  |   |                   |   | 137,437  |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|Capital deficit:                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|4% Series A cumulative convertible preferred stock, $0.01 par value400,000 shares authorized, 123,342 shares issued and outstanding at
March 31, 2006 and December 31, 2005) (aggregate liquidation preference$12,334) |  |                | 1        |   |                   |   | 1        |  
|Class A common stock, $0.01 par value20,000,000 shares authorized, 7,078,168 and 7,022,446 shares issued and outstanding at
March 31, 2006 and December 31, 2005                                                        |  |                | 71       |   |                   |   | 70       |  
|Class B common stock, $0.01 par value10,000,000 shares authorized, 4,217,708 and 4,273,430 shares issued and outstanding at
March 31, 2006 and December 31, 2005, convertible into Class A common stock                 |  |                | 42       |   |                   |   | 43       |  
|Additional paid-in-capital                                                                                                                                                                                               |  |                | 52,407   |   |                   |   | 52,512   |  
|Accumulated deficit                                                                                                                                                                                                      |  |                | (110,174 | ) |                   |   | (101,104 | )
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|Total capital deficit                                                                                                                                                                                                    |  |                | (57,653  | ) |                   |   | (48,478  | )
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  
|                                                                                                                                                                                                                         |  | $              | 75,164   |   |                   | $ | 88,959   |  
|                                                                                                                                                                                                                         |  |                |          |   |                   |   |          |  



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



2



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INTEREP NATIONAL RADIO SALES, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                                   |  |                                     |        |   |      |   |        |  
|------------------------------------------------------------------ |  | ----------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                   |  | For the Three MonthsEnded March 31, |       
|                                                                   |  | 2006                                |        |   | 2005 |  
|Commission revenues                                                |  | $                                   | 15,135 |   |      | $ | 17,447 |  
|Contract termination revenue                                       |  |                                     | 110    |   |      |   | 226    |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Total revenues                                                     |  |                                     | 15,245 |   |      |   | 17,673 |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Operating expenses:                                                |  |                                     |        |   |      |   |        |  
|Selling expenses                                                   |  |                                     | 15,456 |   |      |   | 13,922 |  
|General and administrative expenses                                |  |                                     | 2,782  |   |      |   | 2,812  |  
|Depreciation and amortization expense                              |  |                                     | 3,547  |   |      |   | 3,977  |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Total operating expenses                                           |  |                                     | 21,785 |   |      |   | 20,711 |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Operating loss                                                     |  |                                     | (6,540 | ) |      |   | (3,038 | )
|Net undistributed earnings of equity investee                      |  |                                     | (93    | ) |      |   | (77    | )
|Interest expense, net                                              |  |                                     | 2,541  |   |      |   | 2,565  |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Loss before income taxes                                           |  |                                     | (8,988 | ) |      |   | (5,526 | )
|Income taxes                                                       |  |                                     | 82     |   |      |   | 104    |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Net loss                                                           |  |                                     | (9,070 | ) |      |   | (5,630 | )
|Preferred stock dividend                                           |  |                                     | 123    |   |      |   | 119    |  
|                                                                   |  |                                     |        |   |      |   |        |  
|Net loss applicable to common shareholders                         |  | $                                   | (9,193 | ) |      | $ | (5,749 | )
|                                                                   |  |                                     |        |   |      |   |        |  
|Basic and diluted loss per share applicable to common shareholders |  | $                                   | (0.81  | ) |      | $ | (0.51  | )
|                                                                   |  |                                     |        |   |      |   |        |  





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



3



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INTEREP NATIONAL RADIO SALES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                |  |                                      |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                |  | For the Three Months Ended March 31, |       
|                                                                                |  | 2006                                 |        |   | 2005 |  
|Cash flows from operating activities:                                           |  |                                      |        |   |      |   |        |  
|Net loss                                                                        |  | $                                    | (9,070 | ) |      | $ | (5,630 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                      |        |   |      |   |        |  
|Depreciation and amortization                                                   |  |                                      | 3,547  |   |      |   | 3,977  |  
|Amortization of renewal payments                                                |  |                                      | 57     |   |      |   | 52     |  
|Net undistributed earnings of equity investee                                   |  |                                      | (93    | ) |      |   | (77    | )
|Non-cash compensation expense                                                   |  |                                      | 18     |   |      |   |       |  
|Changes in assets and liabilities:                                              |  |                                      |        |   |      |   |        |  
|Receivables                                                                     |  |                                      | 4,394  |   |      |   | 5,419  |  
|Representation contract buyouts receivable                                      |  |                                      | 3,633  |   |      |   | 461    |  
|Prepaid expenses and other current assets                                       |  |                                      | (282   | ) |      |   | (81    | )
|Other noncurrent assets                                                         |  |                                      | (61    | ) |      |   | 3      |  
|Accounts payable and accrued expenses                                           |  |                                      | (3,438 | ) |      |   | (1,739 | )
|Accrued interest                                                                |  |                                      | (2,474 | ) |      |   | (2,472 | )
|Accrued employee-related liabilities                                            |  |                                      | (1,690 | ) |      |   | (1,178 | )
|Other noncurrent liabilities                                                    |  |                                      | 486    |   |      |   | (195   | )
|                                                                                |  |                                      |        |   |      |   |        |  
|Net cash used in operating activities                                           |  |                                      | (4,973 | ) |      |   | (1,460 | )
|                                                                                |  |                                      |        |   |      |   |        |  
|Cash flows from investing activities:                                           |  |                                      |        |   |      |   |        |  
|Additions to fixed assets                                                       |  |                                      | (63    | ) |      |   | (202   | )
|                                                                                |  |                                      |        |   |      |   |        |  
|Net cash used in investing activities                                           |  |                                      | (63    | ) |      |   | (202   | )
|                                                                                |  |                                      |        |   |      |   |        |  
|Cash flows from financing activities:                                           |  |                                      |        |   |      |   |        |  
|Station representation contract payments                                        |  |                                      | (748   | ) |      |   | (900   | )
|Gross borrowings on credit facility                                             |  |                                      | 7,549  |   |      |   | 8,000  |  
|Gross repayments on credit facility                                             |  |                                      | (4,436 | ) |      |   | (6,000 | )
|                                                                                |  |                                      |        |   |      |   |        |  
|Net cash provided by financing activities                                       |  |                                      | 2,365  |   |      |   | 1,100  |  
|                                                                                |  |                                      |        |   |      |   |        |  
|Net decrease in cash and cash equivalents                                       |  |                                      | (2,671 | ) |      |   | (562   | )
|Cash and cash equivalents, beginning of period                                  |  |                                      | 6,928  |   |      |   | 4,937  |  
|                                                                                |  |                                      |        |   |      |   |        |  
|Cash and cash equivalents, end of period                                        |  | $                                    | 4,257  |   |      | $ | 4,375  |  
|                                                                                |  |                                      |        |   |      |   |        |  
|Supplemental disclosures of cash flow information:                              |  |                                      |        |   |      |   |        |  
|Cash paid during the period for:                                                |  |                                      |        |   |      |   |        |  
|Interest                                                                        |  | $                                    | 4,956  |   |      | $ | 4,954  |  
|Income taxes                                                                    |  |                                      | 82     |   |      |   | 104    |  
|Non-cash investing and financing activities:                                    |  |                                      |        |   |      |   |        |  
|Station representation contracts acquired                                       |  | $                                    | 8      |   |      | $ | 154    |  
|Preferred stock dividend                                                        |  |                                      | 123    |   |      |   | 119    |  



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



4



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share information)



1. Summary of Significant Accounting Policies



Principles of Consolidation



The consolidated
financial statements include the accounts of Interep National Radio Sales, Inc., together with its subsidiaries (collectively, we or us), and have been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.
All significant intercompany transactions and balances have been eliminated.



The consolidated financial statements as of March 31, 2006 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the results for the periods presented. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Consolidated Financial Statements for the year ended
December 31, 2005, which are available upon request, at our website, www.interep.com, or at the Securities and Exchange Commission website, www.sec.gov. Due to the seasonal nature of our business, the results of operations for the
interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2006.



Use of Estimates



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



Allowance for
doubtful accounts



We provide an allowance for doubtful
accounts equal to our estimated uncollectible accounts receivable. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customers trade accounts
receivable. We write off uncollectible accounts when we confirm with the customer that the account is uncollectible.



Revenue Recognition



We are a national representation firm serving radio broadcast clients and certain television stations and internet service providers throughout the United
States. Commission revenues are derived from sales of advertising time for radio stations and television stations under representation contracts. Commissions and fees are recognized in the month the advertisement is broadcast. In connection with our
unwired radio network business, we collect fees for unwired network radio advertising and, after deducting our commissions, remit the fees to the respective radio stations. In instances when we are not legally obligated to pay a station or service
provider until the corresponding receivable is paid, fees payable to stations have been offset against the related receivable from advertising agencies in the accompanying consolidated balance sheets. We record all commission revenues on a net
basis. Commissions are recognized based on the standard broadcast calendar that ends on the last Sunday in each reporting period. The broadcast calendars for the three months ended March 31, 2006 and 2005 each had 13 weeks, though some
broadcast calendar quarters, such as the fourth quarter of 2006 will have 14 weeks.



5



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(in thousands, except share information)



Representation Contract Termination Revenue and Contract Acquisition Costs



Our station representation contracts have stated initial terms, and
thereafter usually renew automatically from year to year unless either party provides written notice of termination at least twelve months prior to the next automatic renewal date. In accordance with industry practice, in lieu of termination, an
arrangement is normally made for the purchase of such contracts by a successor representative firm. The purchase price paid by the successor representation firm is generally based upon historic commission income projected over the remaining contract
period plus two months. Income earned from the sale of station representation contracts (contract termination revenue) is recognized on the effective date of the buyout agreement. Costs of obtaining station representation contracts are deferred and
amortized over the life of the new contract. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. Amounts which are to be amortized during the next year are
included as current assets in the accompanying consolidated balance sheets. We review the realizability of these deferred costs on a quarterly basis. From time to time, we have paid inducements to extend the life of contracts with our radio groups.
These inducement payments are recorded as deferred costs and expensed in the period benefited.



Loss Per Share



Basic
loss per share applicable to common shareholders for each of the respective periods has been computed by dividing the net loss by the weighted average number of common shares outstanding during the period, amounting to 11,295,876 for both the three
months ended March 31, 2006 and 2005. Diluted loss per share would reflect the potential dilution that could occur if the outstanding options to purchase common stock were exercised. For the three months ended March 31, 2006 and 2005, the
exercise of outstanding options would have an antidilutive effect and therefore have been excluded from the calculation. Shares issuable under options that have not been included in the fully diluted loss per share calculation because of their
antidilutive effect were 4,210,785 and 5,140,217 at March 31, 2006 and 2005.



Restructuring and Severance Charges



In 2005,
we continued to offer an early retirement program, which was accepted by 18 people, including one executive, to reduce compensation costs on a going forward basis. We accrued $991 in the first quarter of 2006 for the 8 terminations. In accordance
with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,we recorded this liability at fair value as of the time the liability was incurred. At December 31, 2005, the accompanying consolidated balance
sheets include accruals relating to the restructuring program of $1,705. We paid approximately $842 and $394 of termination benefits during the three months ended March 31, 2006 and 2005, and accreted approximately $35 and $40 of interest
expense. As of March 31, 2006, the remaining accrual was $1,889, of which $1,454 is included in accrued employee related liabilities and $435 is included in other noncurrent liabilities.



Stock-Based Compensation



Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards (SFAS) No. 123(R), Share-Based Payment (SFAS No. 123R), using the modified prospective application transition method. As described in Note 1 of the December 31, 2005 Consolidated Financial Report,
SFAS No. 123R revises SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). Under the modified prospective method, we have recorded compensation cost for the unvested portion of previously issued awards
that remain outstanding at the initial date of adoption (using the amounts previously measured under SFAS No. 123 for pro forma disclosure purposes). Since we have chosen the modified prospective application transition method, the financial
statements for the prior interim period have not been restated.



6



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(in thousands, except share information)



SFAS No. 123R requires us to estimate forfeitures in calculating the expense relating to
stock-based compensation as opposed to recognizing these forfeitures and the corresponding reduction in expense as they occur. In addition, SFAS No. 123R requires the Company to reflect the tax savings resulting from tax deductions in excess of
compensation expense reflected in its financial statements as a cash inflow from financing activities in its statement of cash flows rather than as an operating cash flow as in prior periods.



Prior to January 1, 2006 as permitted under generally accepted
accounting principles, we accounted for our employee stock-based compensation plan using the intrinsic value method, as prescribed by APB No. 25 Accounting for Stock Issued to Employees and interpretations thereof (collectively APB
25) versus the fair value method allowed by SFAS No. 123. We implemented the disclosure provision of SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure. This statement amended the disclosure
provisions of SFAS No. 123, to require prominent disclosure of the effect on reported net income of an entitys accounting policy decisions with respect to stock-based employee compensation and amended APB Opinion No. 28, Interim
Financial Reporting, to require disclosure of those effects in interim financial information. Accordingly, no compensation cost has been recognized in the accompanying Consolidated Statements of Operations for the quarter ended March 31, 2005
in respect of stock options granted during that period. Had compensation cost for these options been determined consistent with SFAS No. 123 and SFAS No. 148, our net loss applicable to common shareholders, basic and diluted loss per share
would have been as follows:



|                                                                                                                                            |  |               |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | -
|                                                                                                                                            |  | March 31,2005 |       
|Net loss applicable to common shareholders, as reported                                                                                     |  | $             | (5,749 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |               | (193   | )
|                                                                                                                                            |  |               |        |  
|Pro forma net loss                                                                                                                          |  | $             | (5,942 | )
|                                                                                                                                            |  |               |        |  
|Loss per share:                                                                                                                             |  |               |        |  
|Basic and dilutedas reported                                                                                                               |  | $             | (0.51  | )
|Basic and dilutedpro forma                                                                                                                 |  | $             | (0.53  | )



Pro forma information
regarding net income and earnings per share, as presented in Note 1, is required by SFAS No. 123, as amended by SFAS No. 148, and has been determined as if we had accounted for our employee stock options under the fair value method of SFAS
No. 123 as of its effective date. The weighted averaged fair value for options was estimated at the dates of grant using the Black-Scholes option-pricing model, with the following weighted average assumptions: risk free interest rate of 3.25%
for the quarter ended March 31, 2005; expected volatility factors of 108% for quarter ended March 31, 2005; expected dividend yield of 0% for the quarter ended March 31, 2005; and estimated option lives of 5 years for the quarter
ended March 31, 2005. No options were issued in the quarter ended March 31, 2005.



Consistent with prior years, the fair value of each stock option granted during the three months ended March 31, 2006 was estimated at the date of grant using a Black-Scholes option pricing model based on the
assumptions of expected volatility of 262%, expected dividend yield of 0%, expected term of 5 years and a risk-free interest rate of 3.25%. The expected volatility is based on our consideration of the historical volatility of our stock based on our
historical stock prices. The expected term of an option is based on our historical review of employee exercise behavior based on the employee class (executive or non-executive) and based on our consideration of the remaining contractual term if
limited exercise activity existed for a certain employee class. The risk-free interest rate is the constant maturity interest rate for U.S. Treasury instruments with terms consistent with the expected lives of the awards.



7



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(in thousands, except share information)



A summary of stock option activity as of March 31, 2006 and changes during the three months
ended March 31, 2006 is presented below (in thousands except share and per share amounts):



|                                       |  |                 |   |  |                                |      |                                                  |     |                          |  
|-------------------------------------- |  | --------------- | - |  | ------------------------------ | ---- | ------------------------------------------------ | --- | ------------------------ | -
|                                       |  | Number ofShares |   |  | Weighted-AverageExercise Price |      | Weighted-AverageRemainingContractualTerm (Years) |     | AggregateIntrinsic Value
|Options Outstanding at January 1, 2006 |  | 4,508,885       |   |  | $                              | 2.00 |                                                  |    |                          | 
|Granted                                |  | 20,000          |   |  |                                | 0.36 |                                                  |    |                          | 
|Exercised                              |  |                |   |  |                                |     |                                                  |    |                          | 
|Cancelled                              |  | (318,100        | ) |  |                                | 1.86 |                                                  |    |                          | 
|                                       |  |                 |   |  |                                |      |                                                  |     |                          |  
|Options Outstanding at March 31, 2006  |  | 4,210,785       |   |  | $                              | 2.00 |                                                  | 6.7 |                          | 
|                                       |  |                 |   |  |                                |      |                                                  |     |                          |  
|Exercisable at March 31, 2006          |  | 4,155,783       |   |  | $                              | 2.02 |                                                  | 6.7 |                          | 



The weighted average
grant-date fair value of stock options granted during the three months ended March 31, 2006 was $0.31.



As of March 31, 2006, we had $51 of total unrecognized stock-based compensation expense related to stock options that is expected to be recognized
over a weighted average period of 1.3 years.



New Accounting Pronouncements



In February 2006, the Financial Accounting Standards
Board (FASB) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. SFAS No. 155 permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives
or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. This standard is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins
after September 15, 2006. We are currently evaluating the impact of this standard, but would not expect SFAS No. 155 to have a material impact on our consolidated results of operations or financial condition.



Reclassification



Certain reclassifications have been made to prior period financial statements to conform to the current periods
presentation.



2. Stock-Based Employee Compensation



On January 2, 2006, we granted 20,000 options to an executive at an
exercise price of $0.36, which was the fair market value at the date of grant. These options were fully vested on the date of grant. The weighted averaged fair value for options was estimated at the dates of grant using the Black-Scholes
option-pricing model to be $0.31 for the quarter ended March 31, 2006, with the following weighted average assumptions: risk free interest rate of 3.25% for the quarter ended March 31, 2006; expected volatility factors of 262% for the
quarter ended March 31, 2006, which is based upon historical volatility; expected dividend yield of 0% for the quarter ended March 31, 2006; and estimated option lives of 5 years for the quarter ended March 31, 2006. See Note 1 above
for additional information on Stock-based employee compensation.



8



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(in thousands, except share information)



3. Capital Deficit



In May 2002, we amended our restated certificate of incorporation for the purpose of establishing a series of preferred stock referred to as the Series
A Convertible Preferred Stock (the Series A Stock), with the authorization to issue up to 400,000 shares. The Series A Stock has a face value of $100 per share and a liquidation preference in such amount in priority over our Class A
and Class B common stock. Each share of the Series A Stock may be converted at the option of the holder at any time into 25 shares of Class A common stock at an initial conversion price of $4.00 per share (subject to anti-dilution adjustments).
If the market price of our Class A common stock is $8.00 or more for 30 consecutive trading days, the Series A Stock will automatically be converted into shares of Class A common stock at the then applicable conversion price. The Series A
Stock bears a 4% annual cumulative dividend that may be paid in cash or in kind (in additional shares of the Series A Stock) at our discretion. We expect to pay such dividends in kind for the foreseeable future. Holders of shares of the Series A
Stock vote on most matters on an as converted basis, together with the holders of Class A and Class B common stock. During 2002, we completed a series of private placements to issue 110,000 units for an aggregate purchase price of
$11,000. Each unit consists of one share of Series A Stock and 6.25 warrants to acquire an equal number of shares of Class A common stock. The warrants are exercisable at any time from the date of grant and expire at various times in 2007. We
allocated the net proceeds of approximately $10,230 from the sale of Series A Stock between the convertible preferred stock and the warrants, both of which are classified in additional paid in capital. We incurred approximately $770 in legal and
other costs directly related to the private placements. A stock dividend for the Series A Stock in the amount of 4,744 was paid as of May 1, 2005.



Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder or automatically under certain
circumstances. Each share of the Class B common stock is entitled to 10 votes per share in all matters presented to the shareholders, except for certain amendments to the Restated Certificate of Incorporation, certain going private
transactions and as otherwise required by applicable law. The shares of Class A common stock are entitled to one vote per share on all matters.



4. Long-Term Debt



Long-term debt at March 31, 2006 was comprised of $99,000 in 10.0% Senior Subordinated Notes due July 1, 2008 (the Notes) and $3,113
of the $10,000 senior secured revolving credit facility, as described below.



The Notes are general unsecured obligations of the Company, and the indenture for the Notes provides, among other things, restrictions on incurring additional indebtedness, payment of dividends, repurchase of equity
interests (as defined), creation of liens (as defined), transactions with affiliates (as defined), sales of assets or certain mergers and consolidations. Management believes that we are in compliance with these covenants. The Notes bear interest at
the rate of 10.0% per annum, payable semiannually on January 1 and July 1. The Notes are subject to redemption at the option of the Company, in whole or in part. All of our subsidiaries are guarantors of the Notes. Each guarantee is
full, unconditional and joint and several with the other guarantees. We have no other assets or operations separate from our investment in the subsidiaries.



We capitalized $4,689 of costs incurred in the offering of the Notes which is being amortized over the ten year life of the Notes. At March 31, 2006,
the remaining balance is $1,052.



In September 2003, we entered
into a $10,000 senior secured revolving credit facility with Commerce Bank, N.A.. In July 2005 we amended our revolving credit facility in certain respects (the Amendment). The revolving credit facility enables us to efficiently manage
our cash as we may borrow, repay and re-borrow funds as needed. The revolving credit facility had an initial term of three years, which was extended by 15 months pursuant to the Amendment. The credit facility is secured by a first priority lien on
all of our and our



9



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(in thousands, except share information)



subsidiaries property and assets, tangible and intangible. Interest is payable monthly on the borrowings at rates based on either a prime rate or
LIBOR, plus a premium of 1% for prime rate borrowings, and 4% for LIBOR borrowings. In addition to covenants similar to those in the indenture governing the Notes, the credit facility requires, among other things, that we (i) maintain certain
12-month trailing Operating EBITDA levels (Operating EBITDA was defined in the Loan and Security Agreement, prior to the Amendment as, for any period: (a) the Companys consolidated net income (loss), plus (b) all taxes on
income plus state and local franchise and corporate taxes paid by the Company and any of its subsidiaries plus (c) all interest expense deducted in determining such net income, plus (d) all depreciation and amortization expense and other
non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs expensed but not yet paid in cash, less (f) extraordinary gains, plus
(g) extraordinary losses, less (h) contract termination revenue); (ii) have a certain minimum accounts receivable balance as of the end of each quarter; (iii) have not less than $200,000 of representation contract value (as
defined) as of the end of each quarter; and (iv) have not less than $2,000 of cash and cash equivalents as of the end of each quarter. We incurred approximately $500 in legal and other costs directly related to the revolving credit facility,
which are being amortized as interest expense over the life of the facility. Substantially all of our subsidiaries, jointly, severally and unconditionally guarantee the revolving credit facility.



The Amendment was entered into on July 21, 2005. The principal change
effected by the Amendment was to extend the term of our revolving credit facility from September 25, 2006 through December 31, 2007. The Amendment also revised certain of the financial covenants to more appropriately reflect our current
business operations. It also revised the definition of Operating EBITDA as for any period: (a) Net Income (Loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by the Borrower and any of
its Subsidiaries plus (c) all interest expense deducted in determining such Net Income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the
repricing of employee stock options), plus (e) severance costs expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) Contract Termination Revenue, but plus Contract Termination
Revenue received in cash and (i) less Contract Acquisition Payments, in each case for such period, in each case in connection with Borrower and its Subsidiaries, on a consolidated basis. We incurred an additional $100 in legal and other costs
directly related to the amendment of the revolving credit facility, which are being amortized as interest expense over the life of the extended facility. Management believes that we are in compliance with these covenants.



5. Commitments and Contingencies



We are involved in various legal actions from time to time arising in the
normal course of business. In the opinion of management, there are no matters outstanding that would have a material adverse effect on the consolidated financial position or results of our operations.



We maintain some of our cash in bank deposit accounts, money market funds and
certificates of deposits, which at March 31, 2006 exceeded federally insured limits by approximately $3,150. These accounts are maintained in high credit quality financial institutions in order to reduce the risk of potential losses. We have
not experienced any losses in these accounts.



6. Subsequent Events



On April 21, 2006, we sold our investment in Burst
Media in conjunction with its initial public offering. We realized net proceeds of approximately $8,200 on the sale. The carrying value of the investment at the time of sale was approximately $2,000.



10



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS



The following discussion should be read in
conjunction with our Consolidated Financial Statements, including the notes thereto, included elsewhere in this Report.



Throughout this Quarterly Report, when we refer to Interep or the Company, we refer collectively to Interep National Radio Sales,
Inc. and all of our subsidiaries unless the context indicates otherwise or as otherwise noted.



Important Note Regarding Forward Looking Statements



Some of the statements made in this Quarterly Report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not statements of
historical fact, but instead represent our belief about future events. In some cases, you can identify forward-looking statements by terminology such as may, will, should, expects, plans,
anticipates, believes, estimates, predicts, potential, continue, or the negative of these terms or other comparable terminology. These statements are based on many assumptions
and involve known and unknown risks and uncertainties that are inherently uncertain and beyond our control. These risks and uncertainties may cause our or our industrys actual results, levels of activity, performance or achievements to be
materially different than any expressed or implied by these forward-looking statements. Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should review the factors noted in Managements Discussion and Analysis of Financial Condition and Results of OperationCertain Factors That May Affect Our Results of Operations below for a discussion of some of
the things that could cause actual results to differ from those expressed in our forward-looking statements.



Overview



We derive a
substantial majority of our revenues from commissions on sales of national spot radio advertising airtime for the radio stations we represent. Generally, advertising agencies or media buying services retained by advertisers purchase national spot
advertising time. We receive commissions from our client radio stations based on the national spot radio advertising billings of the station, net of agency commissions, generally 15%. We enter into written representation contracts with our clients,
which include negotiated commission rates. Because commissions are based on the prices paid to radio stations for spots, our revenue base is essentially adjusted for inflation.



Our operating results generally depend on:



| |  |  | changes in advertising expenditures;
| | - |  | ------------------------------------



| |  |  | increases and decreases in the size of the total national spot radio advertising market;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | changes in our share of this market;
| | - |  | ------------------------------------



| |  |  | acquisitions and terminations of representation contracts; and
| | - |  | --------------------------------------------------------------



| |  |  | operating expense levels.
| | - |  | -------------------------



The effect of these factors on our financial condition and results of operations varies from period to period.



A number of factors influence the performance of the national spot radio
advertising market, including, but not limited to, general economic conditions, consumer attitudes and spending patterns, the amount spent on advertising generally, the share of total advertising spent on radio and the share of total radio
advertising represented by national spot radio.



11



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Our share of the national spot advertising market changes as a result of increases and decreases in the
amount of national spot advertising broadcast by our clients. Moreover, our market share increases as we acquire representation contracts with new client stations and decreases if current client representation contracts are terminated. Thus, our
ability to attract new clients and to retain existing clients affects our market share.



The value of representation contracts that have been acquired or terminated during the last few years has tended to increase due to a number of factors, including the consolidation of ownership in the radio broadcast
industry following the passage of the Telecommunications Act of 1996. In the period following that legislation, we increased our representation contract acquisition activity and devoted a significant amount of our resources to these acquisitions. We
base our decisions to acquire a representation contract on the market share opportunity presented and an analysis of the costs and net benefits to be derived. We continuously seek opportunities to acquire additional representation contracts on
attractive terms, while maintaining our current clients. Our ability to acquire and maintain representation contracts has had, and will continue to have, a significant impact on our revenues and cash flows.



We recognize revenues on a contract termination as of the effective date of
the termination, except in the case of a material dispute. In that event, revenue is recognized when the dispute is resolved. When a contract is terminated, we write off in full the unamortized portion, if any, of the cost we originally incurred on
our acquisition of the contract. When we enter into a representation contract with a new client, we amortize the contract acquisition cost in equal monthly installments over the life of the new contract. As a result, our operating income is
affected, negatively or positively, by the acquisition or loss of client stations. We are unable to forecast any trends in contract buyout activity, or in the amount of revenues or expenses that will likely be associated with buyouts during a
particular period. Generally, the amount of revenue resulting from the buyout of a representation contract depends on the length of the remaining term of the contract and the revenue generated under the contract during the 12-month trailing
period preceding the date of termination. The amount recognized by us as contract termination revenue in any period is not, however, indicative of contract termination revenue that may be realized in any future period. Historically, the level
of buyout activity has varied from period to period. Additionally, the length of the remaining terms, and the commission revenue generation, of the contracts which are terminated in any period vary to a considerable extent. Accordingly, while buyout
activity and the size of buyout payments generally increased after 1996, their impact on our revenues and income is expected to be uncertain, due to the variables of contract length and commission generation.



Similar to radio representation, we sell advertising on behalf of Internet
website clients. Revenues and expenses from this portion of our business are affected generally by the level of advertising on the Internet, and the portion of that advertising that we can direct to our clients websites, the prices obtained
for advertising on the Internet and our ability to obtain contracts from high-traffic Internet websites and from Internet advertisers.



In November 2005, we entered into the television representation business by organizing Azteca America Spot Television Sales, Inc. (Azteca Television
Sales), a dedicated television representation company for the Azteca America network. As with radio representation, we sell advertising on behalf of our television clients.



Our selling and corporate expense levels are dependent on management decisions regarding operating and staffing levels and
inflation. Selling expenses represent all costs associated with our marketing, sales and sales support functions. Corporate expenses include items such as corporate management, corporate communications, financial services, advertising and promotion
expenses and employee benefit plan contributions.



Our business
generally follows the pattern of advertising expenditures. It is seasonal to the extent that radio advertising spending increases during the fourth calendar quarter in connection with the Christmas season and tends to be weaker during the first
calendar quarter. Radio advertising also generally increases during the second and third quarters due to holiday-related advertising, school vacations and back-to-school sales. Additionally, radio tends to experience increases in the amount of
advertising revenues as a result of special events such as political election campaigns. Furthermore, the level of advertising revenues of radio stations, and therefore our



12



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level of revenues, is susceptible to prevailing general and local economic conditions and the corresponding increases or decreases in the budgets of
advertisers, as well as market conditions and trends affecting advertising expenditures in specific industries.



Results of Operations



Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005



Commission revenues. Commission revenues for the first quarter of 2006 decreased to $15.1 million from $17.4 million for the first quarter of 2005,
or approximately 13.3%. The majority of this $2.3 million decrease can be attributed to the termination of our Cumulus Broadcasting, Inc. and Radio One, Inc. representation contracts in 2005.



Contract termination revenue. Contract termination revenue of $0.1
million for the first quarter of 2006 decreased $0.1 million, or 51.3%, from $0.2 million in the comparable period of 2005.



Selling expenses. Selling expenses for the first quarter of 2006 increased to $15.4 million from $13.9 million in the first quarter of 2005. The
$1.5 million, or 11.0%, increase was, in large part, attributable to severance for programs implemented in 2006 and the costs related to starting up Azteca Television Sales, which began at the end of the fourth quarter 2005.



General and administrative expenses. General and administrative
expenses of $2.8 million for the first quarter of 2006 were essentially the same as in the comparable period of 2005.



Operating (loss) income before depreciation and amortization. For the first three months of 2006, we had an operating loss before depreciation and
amortization of $3.0 million as compared to operating income before depreciation and amortization of $0.9 million for the comparable period of 2005, a decrease of $3.9 million, for the reasons discussed above. Operating (loss) income before
depreciation and amortization is not a measure of performance calculated in accordance with Generally Accepted Accounting Principles (GAAP) and should not be considered in isolation from or as a substitute for operating income (loss),
net income (loss), cash flow or other GAAP measurements. We believe it is useful in evaluating our performance, in addition to the GAAP data presented, as it is commonly used by lenders and the investment community to evaluate the performance of
companies in our industry.



Reconciliation of net loss to operating income
(loss) before depreciation and amortization



|                                                             |  |                        |        |   |               |   |        |  
|------------------------------------------------------------ |  | ---------------------- | ------ | - | ------------- | - | ------ | -
|                                                             |  | March 31,2006          |        |   | March 31,2005 |  
|                                                             |  | (dollars in thousands) |       
|Net loss                                                     |  | $                      | (9,070 | ) |               | $ | (5,630 | )
|Add back:                                                    |  |                        |        |   |               |   |        |  
|Depreciation and amortization                                |  |                        | 3,547  |   |               |   | 3,977  |  
|Tax provision                                                |  |                        | 82     |   |               |   | 104    |  
|Net undistributed income of equity investee                  |  |                        | (93    | ) |               |   | (77    | )
|Interest expense, net                                        |  |                        | 2,541  |   |               |   | 2,565  |  
|                                                             |  |                        |        |   |               |   |        |  
|Operating (loss) income before depreciation and amortization |  | $                      | (2,993 | ) |               | $ | 939    |  
|                                                             |  |                        |        |   |               |   |        |  



Depreciation and
amortization expense. Depreciation and amortization expense decreased $0.5 million, or 10.8%, during the first quarter of 2006, to $3.5 million from $4.0 million in the first quarter of 2005. This decrease was primarily the result of lower
contract acquisition cost amortization.



Operating loss.
Operating loss increased by $3.5 million, or 115.3%, for the first quarter of 2006 to $6.5 million, as compared to $3.0 million for the first quarter of 2005, for the reasons discussed above.



13



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Interest expense, net. Interest expense, net, of $2.5 million in the first quarter 2006 was
essentially the same as in the comparable period of 2005.



Provision for income taxes. Our current and deferred income taxes, and associated valuation allowances, are affected by events and transactions arising in the normal course of business as well as in connection with special and
non-recurring items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments.
Actual collections and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions affecting related income tax balances. The provision for income taxes for the first quarter of 2006 of
$0.1 million was essentially the same as in the comparable 2005 period.



Preferred stock dividend. We accrued $0.1 million for preferred stock dividends in the first quarter of 2006 and 2005. All dividends are paid in additional shares of preferred stock and not in cash.



Net loss applicable to common shareholders. Our net loss applicable to
common shareholders increased $3.5 million, or 60.0%, to $9.2 million for the first quarter of 2006, from $5.7 million for the first quarter of 2005, for the reasons discussed above.



Liquidity and Capital Resources



Our cash requirements have been primarily funded by cash provided from operations and financing transactions. At March 31, 2006, we had cash and cash
equivalents of $4.3 million and working capital of $17.7 million and availability under our credit facility of $6.9 million.



Net cash used in operating activities during the first quarter of 2006 was $5.0 million as compared to $1.5 million during the first quarter of 2005.
This fluctuation was primarily attributable to working capital components, including decreases in representation contracts receivable of $3.6 million and accounts payable and accrued expenses of $3.4 million.



Net cash used in investing activities was attributable to capital
expenditures. Net cash used in investing activities during the first quarter of 2006 and 2005 was $0.1 million and $0.2 million. The payments made in 2005 included $0.1 million, which was capitalized in 2003.



Net cash provided by financing activities was $2.4 million during the
first quarter of 2006 and consisted of $3.1 million of net borrowings under our credit facility, partially offset by $0.7 million of representation contract acquisition payments. Cash provided by financing activities was $1.1 million during the
first quarter of 2005 and consisted of $2.0 million of net borrowings under our credit facility, partially offset by $0.9 million of representation contract acquisition payments.



In general, as we acquire new representation contracts, we use more cash and, as our contracts are terminated, we receive
additional cash. For the reasons noted above in Overview, we are not able to predict the amount of cash we will require for contract acquisitions, or the cash we will receive on contract terminations, from period to period.



We do not have any written options on financial assets, nor do we have any
special purpose entities. We have not guaranteed any obligations of our unconsolidated investments.



Our 10% Senior Subordinated Notes, due July 1, 2008 (the Notes), were issued under an indenture that limits our ability to engage in
various activities. Among other things, we are generally not able to pay any dividends to our shareholders, other than dividends payable in shares of common stock; we can only incur additional indebtedness under limited circumstances, and certain
types of mergers, asset sales and changes of control either are not permitted or permit the note holders to demand immediate redemption of their Notes. Management believes that we are in compliance with these covenants.



14



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The Notes are redeemable at our option. If certain events occurred which would be deemed to involve a
change of control under the indenture, we would be required to offer to repurchase all of the Notes at a price equal to 101% of their aggregate principal, plus unpaid interest.



In September 2003, we entered into a $10 million senior secured revolving credit facility with Commerce Bank, N.A.. In July
2005 we amended our revolving credit facility in certain respects (the Amendment). The revolving credit facility enables us to efficiently manage our cash as we may borrow, repay and re-borrow funds as needed. The revolving credit
facility had an initial term of three years, which was extended by 15 months pursuant to the Amendment. The credit facility is secured by a first priority lien on all of our and our subsidiaries property and assets, tangible and intangible.
Interest is payable monthly on the borrowings at rates based on either a prime rate or LIBOR, plus a premium of 1% for prime rate borrowings, and 4% for LIBOR borrowings. In addition to covenants similar to those in the indenture governing the
Notes, the credit facility requires, among other things, that we (i) maintain certain 12-month trailing Operating EBITDA levels (Operating EBITDA was defined in the Loan and Security Agreement, prior to the Amendment as, for any
period: (a) the Companys consolidated net income (loss), plus (b) all taxes on income plus state and local franchise and corporate taxes paid by the Company and any of its subsidiaries plus (c) all interest expense deducted in
determining such net income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs
expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) contract termination revenue); (ii) have a certain minimum accounts receivable balance as of the end of each quarter;
(iii) have not less than $200 million of representation contract value (as defined) as of the end of each quarter; and (iv) have not less than $2 million of cash and cash equivalents as of the end of each quarter. We incurred approximately
$0.5 million in legal and other costs directly related to the revolving credit facility, which are being amortized as interest expense over the life of the facility. Substantially all of our subsidiaries, jointly, severally and unconditionally
guarantee the revolving credit facility. At March 31, 2006, we had $6.9 million available under our revolving credit facility.



The Amendment was entered into on July 21, 2005. The principal change effected by the Amendment was to extend the term of our revolving credit
facility from September 25, 2006 through December 31, 2007. The Amendment also revised certain of the financial covenants to more appropriately reflect our current business operations. It also revised the definition of Operating
EBITDA as for any period: (a) Net Income (Loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by the Borrower and any of its Subsidiaries plus (c) all interest expense deducted in
determining such Net Income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs
expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) Contract Termination Revenue, but plus Contract Termination Revenue received in cash and (i) less Contract Acquisition
Payments, in each case for such period, in each case in connection with Borrower and its Subsidiaries, on a consolidated basis. Management believes that we are in compliance with these covenants. We incurred an additional $0.1 million in legal and
other costs directly related to the Amendment, which are being amortized as interest expense over the life of the extended facility.



We believe that the liquidity resulting from the transactions described above, together with anticipated cash from continuing operations, should be
sufficient to fund our operations and anticipated needs for required representation contract acquisition payments, and to make the required 10% annual interest payments on the Senior Subordinated Notes, as well as the monthly interest payments under
our senior secured revolving loan facility, for at least the next 12 months. We may not, however, generate sufficient cash flow for these purposes or to repay the notes at maturity.



Our ability to fund our operations and required contract acquisition payments and to make scheduled principal and interest
payments will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We



15



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may also need to refinance all or a portion of the Senior Subordinated Notes on or prior to maturity. There can be no assurance that we will be able to
effect any such refinancing on commercially reasonable terms, if at all.



During 2004, 2005 and 2006, we implemented various cost efficiency measures, including the termination of several employees. Our liquidity and cash flows will be positively affected by these reductions. It is
anticipated that our operations over the long term will further benefit from these terminations as well as the other material cost efficiency measures such as lease renegotiations and reductions in consulting, which were implemented in 2004 and
2005.



Certain Factors That May Affect Our Results of Operations



The following factors are some, but not all, of the
variables that may have an impact on our results of operations:



| |  |  | Changes in the ownership of our radio station clients, in the demand for radio advertising, in our expenses, in the types of services offered by our competitors, and in general
economic factors may adversely affect our ability to generate the same levels of revenue and operating results.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Advertising tends to be seasonal in nature as advertisers typically spend less on radio advertising during the first calendar quarter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Terrorism, the military action in Iraq and other geopolitical situations have caused uncertainty. While the ongoing consequences of these events remain unclear, we believe that they
have likely had an adverse effect on general economic conditions, consumer confidence, advertising and the media industry and may continue to do so in the future.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The termination of a representation contract will increase our results of operations for the fiscal quarter in which the termination occurs due to the termination payments that are
usually required to be paid, but will negatively affect our results in later quarters due to the loss of commission revenues. Hence, our results of operations on a quarterly basis are not predictable and are subject to significant fluctuations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We depend heavily on our key personnel, including our Chief Executive Officer, Ralph C. Guild, and our President and Chief Operating Officer, George E. Pine, and our inability to
retain them could adversely affect our business.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We rely on a limited number of clients for a significant portion of our revenues.
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Our significant indebtedness may burden our operations, which could make us more vulnerable to general adverse economic and industry conditions, make it more difficult to obtain
additional financing when needed, reduce our cash flow from operations to make payments of principal and interest and make it more difficult to react to changes in our business and industry.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may need additional financing for our future capital needs, which may not be available on favorable terms, if at all.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Competition could harm our business. Our only significant competitor is Katz Radio Group, Inc., which is a subsidiary of a major radio station group that has significantly greater
financial and other resources than do we. In addition, radio must compete for a share of advertisers total advertising budgets with other advertising media such as television, cable, print, outdoor advertising and the Internet.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical Accounting Policies



Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial
statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2005 Annual Report on Form 10-K, filed on March 31, 2006, in the Notes to the Consolidated
Financial Statements, Note 1, and the Critical Accounting Policies section of Item 7 of Part II.



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Critical Accounting Estimates for Share-Based Payments



In December 2004, the FASB issued SFAS No. 123R, which revised
SFAS No. 123 and supersedes APB 25. In March 2005, the Securities and Exchange Commission (SEC) issued SAB 107, which provides interpretive guidance on SFAS No. 123R. Accounting and reporting under SFAS No. 123R is
generally similar to the SFAS No. 123 approach. We adopted SFAS 123R on January 1, 2006, under the modified prospective method. For additional information related to No. SFAS 123R, see the Notes to the Unaudited Interim Consolidated
Financial Statements of this Form 10-Q.



Off Balance Sheet
Arrangements



We have no off balance sheet
arrangements as defined by Item 303 (a) (4) of Regulation S-K.



Contractual Obligations and Other Commercial Commitments



|                                    |  |                        |       |               |   |           |  |           |       |                 |   |      |  |   |     
|----------------------------------- |  | ---------------------- | ----- | ------------- | - | --------- |  | --------- | ----- | --------------- | - | ---- |  | - | ----
|                                    |  | Payments Due by Period
|                                    |  | Total                  |       | Remainder2006 |   | 2007-2008 |  | 2009-2010 |       | 2011-Thereafter
|                                    |  | (Dollars in Millions) 
|Long term debt                      |  | $                      | 102.1 |               | $ |          |  | $         | 102.1 |                 | $ |     |  | $ |    
|Operating leases                    |  |                        | 44.5  |               |   | 3.6       |  |           | 9.0   |                 |   | 6.4  |  |   | 25.5
|Interest expense                    |  |                        | 24.7  |               |   | 4.9       |  |           | 19.8  |                 |   |     |  |   |    
|Annual fees for accounting services |  |                        | 16.4  |               |   | 2.7       |  |           | 7.8   |                 |   | 5.9  |  |   |    
|Representation contract buyouts     |  |                        | 5.5   |               |   | 4.4       |  |           | 0.7   |                 |   | 0.4  |  |   |    
|                                    |  |                        |       |               |   |           |  |           |       |                 |   |      |  |   |     
|Total                               |  | $                      | 193.2 |               | $ | 15.6      |  | $         | 139.4 |                 | $ | 12.7 |  | $ | 25.5
|                                    |  |                        |       |               |   |           |  |           |       |                 |   |      |  |   |     



Item 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed
to market risk from changes in interest rates that may adversely affect our results of operations and financial condition. We seek to minimize the risks from these interest rate fluctuations through our regular operating and financing activities.
Our policy is not to use financial instruments for trading or other speculative purposes. We are not currently a party to any financial instruments.



Because our obligation under the senior secured revolving credit facility bears interest at a variable rate, we are sensitive to changes in prevailing
interest rates. A one-point fluctuation in market rates would not have had a material impact on 2006 earnings to date.



Item 4. CONTROLS AND PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures



In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, our management, under the supervision of our Chief Executive Officer
and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(c) under that Act) as of the end of the period covered by this
quarterly report. Based upon that evaluation, our Chairman and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2006.



(b) Changes in Internal Controls over Financial Reporting



There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 2006 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect,
our control over financial reporting.



17



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PART II



OTHER INFORMATION



Item 1. LEGAL PROCEEDINGS



We are involved in judicial and administrative proceedings from time to time concerning matters arising in connection with the conduct of our business. We
believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our financial condition or operations.



Item 1A. RISK FACTORS



See Certain Risk Factors That May Affect Our Results of OperationsManagements Discussion and Analysis of
Financial Condition and Results of Operations. There have been no material changes in risk factors relevant to us from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2005.



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



None.



Item 3. DEFAULTS UPON SENIOR SECURITIES



None.



Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



None.



Item 5. OTHER INFORMATION



None.



18



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Item 6. EXHIBITS AND REPORTS ON FORM 8-K.



(A) Documents Filed as Part of this Report



|            |  |                                                                                                                                                                       
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                           
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(a) (filed herewith)                                                                                  
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(a) (filed herewith)                                                                                  
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished
herewith)*
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished
herewith)*

---

|* | The information furnished in Exhibit 32.1 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general
incorporation language in such filing.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(B) Reports on
Form 8-K



|                 |  |                     |  |                          
|---------------- |  | ------------------- |  | -------------------------
|Date of Report   |  | Items Reported      |  | FinancialStatements Filed
|February 8, 2006 |  | Items 8.01 and 9.01 |  | No                       



19



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SIGNATURES



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



May 15, 2006



INTEREP NATIONAL RADIO SALES, INC.By:

/s/    WILLIAM J. MCENTEE,
JR.William J. McEntee, Jr.Senior Vice President andChief Financial Officer(Principle Financial and Accounting Officer)




20



---

Exhibit Index



|            |  |                                                                                                                                                                       
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                           
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(a) (filed herewith)                                                                                  
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(a) (filed herewith)                                                                                  
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished
herewith)*
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished
herewith)*

---

|* | The information furnished in Exhibit 32.1 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general
incorporation language in such filing.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21