##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K/ A


(Amendment No. 1)


|           |  |                                                                                                                                                  
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                                                  
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934                                                         
|          
|           |  | For the fiscal year ended December 31, 2004                                                                                                      
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
    PERIOD FROM (NO FEE REQUIRED)
|          
|           |  | For the transition period
    from           to                                                                                                  

Commission File Number 1-13452





PAXSON COMMUNICATIONS CORPORATION


(Exact name of registrant as specified in its charter)


|                                                                                               |  |                                         
|---------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                       |  | 59-3212788                              
|(State or other jurisdiction of
    incorporation or organization)                             |  | (I.R.S. Employer
    Identification No.)
|                                                                                              
|601 Clearwater Park Road,
    West Palm Beach, Florida(Address of principal executive offices) |  | 33401(Zip Code)                         

Registrants telephone number, including area code:


(561) 659-4122





Securities Registered Pursuant to Section 12(b) of the
Act:





|                                       |  |                                     
|-------------------------------------- |  | ------------------------------------
|Title of Each Class                    |  | Name of Exchange on Which Registered
|                                       |  |                                     
|Class A Common Stock, $0.001 par value |  | American Stock Exchange             

þ


o


þ o






Documents Incorporated By Reference












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EXPLANATORY NOTE










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TABLE OF CONTENTS


|                                           |  |                                                                                                                      |  |      |    | 
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                           |  |                                                                                                                      |  | Page |   
|                                           |  |                                                                                                                      |  |      |   
|Item 1.                                    |  | Business                                                                                                             |  |      | 4  | 
|Item 2.                                    |  | Properties                                                                                                           |  |      | 35 | 
|Item 3.                                    |  | Legal Proceedings                                                                                                    |  |      | 36 | 
|Item 4.                                    |  | Submission of Matters to Vote of Security
    Holders                                                                |  |      | 37 | 
|Item 5.                                    |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 37 | 
|Item 6.                                    |  | Selected Financial Data                                                                                              |  |      | 39 | 
|Item 7.                                    |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 40 | 
|Item 7A.                                   |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 57 | 
|Item 8.                                    |  | Financial Statements and Supplementary
    Financial Data                                                            |  |      | 57 | 
|Item 9.                                    |  | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure                             |  |      | 57 | 
|Item 9A.                                   |  | Controls and Procedures                                                                                              |  |      | 58 | 
|Item 9B.                                   |  | Other Information                                                                                                    |  |      | 59 | 
|Item 10.                                   |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 59 | 
|Item 11.                                   |  | Executive Compensation                                                                                               |  |      | 59 | 
|Item 12.                                   |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 59 | 
|Item 13.                                   |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 59 | 
|Item 14.                                   |  | Principal Accountant Fees and Services                                                                               |  |      | 59 | 
|Item 15.                                   |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 59 | 
|Employment Agreement - Lowell W. Paxson   
|Employment Agreement - Anthony L. Morrison
|Employment Agreement - Dean M. Goodman    
|Employment Agreement - Dean M. Goodman    
|Employment Agreement - Seth A. Grossman   
|Employment Agreement - Seth A. Grossman   
|Employment Agreement - Richard Garcia     
|Employment Agreement - Adam K. Weinstein  
|Subsidiaries of the Company               
|Consent of Ernst & Young LLP              
|Consent of PricewaterhouseCoopers LLP     
|Section 302 CEO Certification             
|Section 302 CFO Certification             
|Section 906 CEO Certification             
|Section 906 CEO Certification             



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##### Table of Contents



PART I







|        |         
|------- | --------
|ITEM 1. | Business

General








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Network Long Form Paid Programming. We sell air time
    for long form paid programming, consisting primarily of
    infomercials, during broadcasting hours when we are not airing
    PAX TV entertainment programming or public interest programming.
    Our network long form paid programming represented approximately
    39.8% of our net revenue during the year ended December 31,
    2004.                                                                                                                                                                                                                                                                                                    
|
| |  | Network Spot Advertising. We sell commercial air time to
    advertisers who want to reach the entire nationwide PAX TV
    viewing audience with a single advertisement. Network spot
    advertising rates are significantly affected by audience ratings
    and our ability to reach audience demographics that are
    desirable to advertisers. Higher ratings generally enable us to
    charge higher rates to advertisers. Our network spot advertising
    revenue represented approximately 20.7% of our net revenue
    during the year ended December 31, 2004.                                                                                                                               
|
| |  | Station Advertising. We sell commercial air time to
    advertisers who want to reach the viewing audience in specific
    geographic markets in which we own and operate our television
    stations. These advertisers may be local businesses or regional
    or national advertisers who want to target their advertising in
    these markets. Station advertising rates are affected by ratings
    and local market conditions. Our station advertising sales
    represented approximately 39.5% of our net revenue during the
    year ended December 31, 2004 (including 22.8% of our net
    revenue during such year which was derived from local and
    national long form paid programming).





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Business Strategy








5



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Operating Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Benefit from a Centralized, Efficient Operating
    Structure. We centralize many of the functions of our owned
    and operated stations, including promotions, advertising,
    research, engineering, accounting and sales traffic. Our
    stations average fewer than ten employees compared to an average
    of 90 employees at network-affiliated stations, and an average
    of 60 employees at independent stations in markets of similar
    size to ours. We employ a centralized programming strategy,
    which we believe enables us to keep our programming costs per
    station significantly lower than those of comparable stations.
    We provide programming for all of our stations and, except for
    local news and syndicated programming provided by JSA partners,
    each station offers substantially the same programming schedule.                                                                                                                   
|
| |  | Continue Airing Long Form Paid Programming. We air a
    substantial amount of long form paid programming as we believe
    this provides us with a stable revenue base. In January 2003, we
    increased our inventory of air time available for long form paid
    programming by approximately 42% by shifting 26.5 hours per
    week of non-prime time PAX TV network entertainment programming
    to long form paid programming. The portion of our net revenues
    which is derived from network advertising decreased to 20.7% for
    the year ended December 31, 2004 from 32.6% for the year
    ended December 31, 2002 and the portion of our net revenues
    which is derived from network and station long form paid
    programming increased to 62.6% for the year ended
    December 31, 2004 from 46.4% for the year ended
    December 31, 2002.                                                                                                                
|
| |  | Maintain a Flexible Programming Strategy. An important
    element of our plan to improve our business operations and cash
    flow is to maintain a flexible programming strategy that allows
    us to take advantage of opportunities that may arise for us to
    improve our return on our broadcast airtime while refraining
    from incurring substantial programming costs. These
    opportunities may include selling blocks of time to third
    parties who would air sports, entertainment or other
    programming. We are not currently investing substantial
    additional amounts in the development of new original
    entertainment programming or the purchase of rights to air
    syndicated programming, and intend to substantially reduce or
    eliminate our sale of spot advertisements that are based on
    television audience ratings. The termination of our JSAs and
    network affiliation agreements is a component of our
    implementation of

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | this programming strategy, as these agreements restrict our
    programming flexibility by requiring us to continue airing a
    certain amount of network entertainment programming and our
    ability to control our local advertising. We expect, however,
    that entertainment programming will continue to constitute a
    significant portion of our network programming schedule.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Expand and Improve PAX TV Distribution. We intend to
    continue to expand our television distribution system to reach
    as many U.S. television households as possible in a cost
    efficient manner. We will seek to replace the distribution lost
    by the termination of our network affiliation agreements through
    the negotiation of new, more flexible affiliation agreements and
    carriage agreements with cable systems in the affected markets,
    as and if such agreements can be concluded on cost efficient
    terms. We continue to improve the channel positioning of our
    broadcast television stations on local cable systems across the
    country, as we believe the ability to view our programming on
    one of the lower numbered channel positions (generally below
    channel 21) on a cable system improves the likelihood that
    viewers will watch our programming.
|
| |  | Provide Quality Entertainment Programming. We believe
    there is significant demand, including from adult demographic
    groups which are attractive to advertisers, for quality
    entertainment programming which is free of excessive violence,
    explicit sexual themes and foul language. We own or have the
    right to air a substantial amount of this type of programming
    which we will continue to air to the extent we continue to carry
    entertainment programming.                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Exploit Our Broadcast Station Groups Digital Television
    Platform. Our owned and operated station group gives us a
    significant platform for digital broadcasting. We have completed
    the construction of digital broadcast facilities for 49 of our
    60 owned and operated stations and intend to explore the most
    effective use of digital broadcast technology for each of our
    stations. We believe that we are able to provide a significant
    broadband platform on which to broadcast digital television,
    including multiple television networks. While future
    applications of this technology and the time frame within which
    the transition to digital broadcasting will be completed are
    uncertain, we believe that with our existing broadcast stations
    we are well positioned to take advantage of future digital
    broadcasting opportunities.               

Joint Sales Agreements






Distribution




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Our Owned and Operated Television Stations.






|                |  |         |   |  |              |  |      |           |  |  |                 |  |  |                |           |  |  |    
|--------------- |  | ------- | - |  | ------------ |  | ---- | --------- |  |  | --------------- |  |  | -------------- | --------- |  |  | ---
|                |  | Market  |   |  | Station Call |  |      | Broadcast |  |  | Total Market TV |  |  |               
|Market Name     |  | Rank(1) |   |  | Letters      |  |      | Channel   |  |  | Households(2)   |  |  | JSA Partner(3)
|                |  |         |   |  |              |  |      |           |  |  |                 |  |  |               
|New York        |  |         | 1 |  |              |  | WPXN |           |  |  | 31              |  |  |                | 7,355,710 |  |  | NBC
|Los Angeles     |  |         | 2 |  |              |  | KPXN |           |  |  | 30              |  |  |                | 5,431,140 |  |  | NBC
|Chicago         |  |         | 3 |  |              |  | WCPX |           |  |  | 38              |  |  |                | 3,417,330 |  |  | NBC
|Philadelphia    |  |         | 4 |  |              |  | WPPX |           |  |  | 61              |  |  |                | 2,919,410 |  |  | NBC
|Boston          |  |         | 5 |  |              |  | WBPX |           |  |  | 68              |  |  |                | 2,391,840 |  |  |   
|Boston          |  |         | 5 |  |              |  | WDPX |           |  |  | 58              |  |  |                | 2,391,840 |  |  |   
|Boston          |  |         | 5 |  |              |  | WPXG |           |  |  | 21              |  |  |                | 2,391,840 |  |  |   
|San Francisco   |  |         | 6 |  |              |  | KKPX |           |  |  | 65              |  |  |                | 2,359,870 |  |  | NBC
|Dallas          |  |         | 7 |  |              |  | KPXD |           |  |  | 68              |  |  |                | 2,292,760 |  |  | NBC
|Washington D.C. |  |         | 8 |  |              |  | WPXW |           |  |  | 66              |  |  |                | 2,241,610 |  |  | NBC

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|                       |  |         |    |  |              |  |      |           |  |  |                 |  |  |                |           |  |  |                                    
|---------------------- |  | ------- | -- |  | ------------ |  | ---- | --------- |  |  | --------------- |  |  | -------------- | --------- |  |  | -----------------------------------
|                       |  | Market  |    |  | Station Call |  |      | Broadcast |  |  | Total Market TV |  |  |               
|Market Name            |  | Rank(1) |    |  | Letters      |  |      | Channel   |  |  | Households(2)   |  |  | JSA Partner(3)
|                       |  |         |    |  |              |  |      |           |  |  |                 |  |  |               
|Washington D.C.        |  |         | 8  |  |              |  | WWPX |           |  |  | 60              |  |  |                | 2,241,610 |  |  | NBC                                
|Atlanta                |  |         | 9  |  |              |  | WPXA |           |  |  | 14              |  |  |                | 2,059,450 |  |  | Gannett Co., Inc.                  
|Detroit                |  |         | 10 |  |              |  | WPXD |           |  |  | 31              |  |  |                | 1,943,930 |  |  |                                   
|Houston                |  |         | 11 |  |              |  | KPXB |           |  |  | 49              |  |  |                | 1,902,810 |  |  | Belo Corp.                         
|Seattle                |  |         | 12 |  |              |  | KWPX |           |  |  | 33              |  |  |                | 1,690,640 |  |  | Belo Corp.                         
|Tampa                  |  |         | 13 |  |              |  | WXPX |           |  |  | 66              |  |  |                | 1,671,040 |  |  | Media General, Inc.                
|Minneapolis            |  |         | 14 |  |              |  | KPXM |           |  |  | 41              |  |  |                | 1,665,540 |  |  | Gannett Co., Inc.                  
|Phoenix                |  |         | 15 |  |              |  | KPPX |           |  |  | 51              |  |  |                | 1,596,950 |  |  | Gannett Co., Inc.                  
|Cleveland              |  |         | 16 |  |              |  | WVPX |           |  |  | 23              |  |  |                | 1,556,670 |  |  | Gannett Co., Inc.                  
|Miami                  |  |         | 17 |  |              |  | WPXM |           |  |  | 35              |  |  |                | 1,496,810 |  |  | NBC                                
|Denver                 |  |         | 18 |  |              |  | KPXC |           |  |  | 59              |  |  |                | 1,401,760 |  |  | Gannett Co., Inc.                  
|Sacramento             |  |         | 19 |  |              |  | KSPX |           |  |  | 29              |  |  |                | 1,315,030 |  |  | Hearst-Argyle Television, Inc.     
|Orlando                |  |         | 20 |  |              |  | WOPX |           |  |  | 56              |  |  |                | 1,303,150 |  |  | Hearst-Argyle Television, Inc.     
|Portland, OR           |  |         | 24 |  |              |  | KPXG |           |  |  | 22              |  |  |                | 1,086,900 |  |  | Belo Corp.                         
|Indianapolis           |  |         | 25 |  |              |  | WIPX |           |  |  | 63              |  |  |                | 1,053,020 |  |  | Dispatch Broadcast Group           
|Hartford               |  |         | 27 |  |              |  | WHPX |           |  |  | 26              |  |  |                | 1,017,530 |  |  | NBC                                
|Raleigh-Durham         |  |         | 29 |  |              |  | WFPX |           |  |  | 62              |  |  |                | 966,720   |  |  | NBC                                
|Raleigh-Durham         |  |         | 29 |  |              |  | WRPX |           |  |  | 47              |  |  |                | 966,720   |  |  | NBC                                
|Nashville              |  |         | 30 |  |              |  | WNPX |           |  |  | 28              |  |  |                | 916,170   |  |  |                                   
|Kansas City            |  |         | 31 |  |              |  | KPXE |           |  |  | 50              |  |  |                | 894,580   |  |  | Scripps Howard Broadcasting Company
|Milwaukee              |  |         | 32 |  |              |  | WPXE |           |  |  | 55              |  |  |                | 886,770   |  |  | Journal Broadcast Group, Inc.      
|Salt Lake City         |  |         | 36 |  |              |  | KUPX |           |  |  | 16              |  |  |                | 800,000   |  |  |                                   
|San Antonio            |  |         | 37 |  |              |  | KPXL |           |  |  | 26              |  |  |                | 748,950   |  |  | Clear Channel Broadcasting, Inc.   
|Grand Rapids           |  |         | 38 |  |              |  | WZPX |           |  |  | 43              |  |  |                | 732,600   |  |  | LIN Television Corp.               
|West Palm Beach        |  |         | 39 |  |              |  | WPXP |           |  |  | 67              |  |  |                | 729,010   |  |  | Scripps Howard Broadcasting Company
|Birmingham             |  |         | 40 |  |              |  | WPXH |           |  |  | 44              |  |  |                | 717,300   |  |  | NBC                                
|Norfolk                |  |         | 41 |  |              |  | WPXV |           |  |  | 49              |  |  |                | 707,750   |  |  | LIN Television Corp.               
|New Orleans(4)(5)      |  |         | 43 |  |              |  | WPXL |           |  |  | 49              |  |  |                | 695,760   |  |  | Hearst-Argyle Television, Inc.     
|Memphis(4)(5)          |  |         | 44 |  |              |  | WPXX |           |  |  | 50              |  |  |                | 658,250   |  |  | Raycom America, Inc.               
|Oklahoma City          |  |         | 45 |  |              |  | KOPX |           |  |  | 62              |  |  |                | 655,250   |  |  | The New York Times Company         
|Buffalo                |  |         | 46 |  |              |  | WPXJ |           |  |  | 51              |  |  |                | 651,970   |  |  | Gannett Co., Inc.                  
|Greensboro             |  |         | 48 |  |              |  | WGPX |           |  |  | 16              |  |  |                | 648,860   |  |  | Hearst-Argyle Television, Inc.     
|Providence             |  |         | 49 |  |              |  | WPXQ |           |  |  | 69              |  |  |                | 644,980   |  |  | NBC                                
|Louisville(4)(6)       |  |         | 50 |  |              |  | WBNA |           |  |  | 21              |  |  |                | 637,680   |  |  |                                   
|Jacksonville-Brunswick |  |         | 52 |  |              |  | WPXC |           |  |  | 21              |  |  |                | 613,000   |  |  | Post-Newsweek Stations, Inc.       
|Wilkes Barre           |  |         | 53 |  |              |  | WQPX |           |  |  | 64              |  |  |                | 592,560   |  |  | The New York Times Company         
|Albany                 |  |         | 55 |  |              |  | WYPX |           |  |  | 55              |  |  |                | 555,640   |  |  |                                   
|Knoxville              |  |         | 59 |  |              |  | WPXK |           |  |  | 54              |  |  |                | 513,630   |  |  | Raycom America, Inc.               
|Tulsa                  |  |         | 60 |  |              |  | KTPX |           |  |  | 44              |  |  |                | 510,960   |  |  | Scripps Howard Broadcasting Company

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|                   |  |         |     |  |              |  |      |           |  |  |                 |  |  |                |         |  |  |                           
|------------------ |  | ------- | --- |  | ------------ |  | ---- | --------- |  |  | --------------- |  |  | -------------- | ------- |  |  | --------------------------
|                   |  | Market  |     |  | Station Call |  |      | Broadcast |  |  | Total Market TV |  |  |               
|Market Name        |  | Rank(1) |     |  | Letters      |  |      | Channel   |  |  | Households(2)   |  |  | JSA Partner(3)
|                   |  |         |     |  |              |  |      |           |  |  |                 |  |  |               
|Charleston, WV     |  |         | 62  |  |              |  | WLPX |           |  |  | 29              |  |  |                | 508,750 |  |  |                          
|Lexington          |  |         | 64  |  |              |  | WUPX |           |  |  | 67              |  |  |                | 481,120 |  |  |                          
|Roanoke            |  |         | 67  |  |              |  | WPXR |           |  |  | 38              |  |  |                | 445,670 |  |  | Media General, Inc.       
|Honolulu           |  |         | 71  |  |              |  | KPXO |           |  |  | 66              |  |  |                | 417,120 |  |  |                          
|Des Moines         |  |         | 73  |  |              |  | KFPX |           |  |  | 39              |  |  |                | 412,230 |  |  | The New York Times Company
|Syracuse           |  |         | 77  |  |              |  | WSPX |           |  |  | 56              |  |  |                | 395,400 |  |  | Raycom America, Inc.      
|Spokane            |  |         | 80  |  |              |  | KGPX |           |  |  | 34              |  |  |                | 384,060 |  |  | KHQ, Incorporated         
|Cedar Rapids       |  |         | 88  |  |              |  | KPXR |           |  |  | 48              |  |  |                | 331,610 |  |  |                          
|Greenville-N. Bern |  |         | 105 |  |              |  | WEPX |           |  |  | 38              |  |  |                | 270,200 |  |  |                          
|Greenville-N. Bern |  |         | 105 |  |              |  | WPXU |           |  |  | 35              |  |  |                | 270,200 |  |  |                          
|Wausau             |  |         | 133 |  |              |  | WTPX |           |  |  | 46              |  |  |                | 181,780 |  |  |                          






|    |                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Market rank is based on the number of television households in
    the television market or Designated Market Area, or
    DMA, as used by Nielsen, effective as of September
    2004.                                                                                                                                                                                             
|   
|(2) | Refers to the number of television households in the DMA as
    estimated by Nielsen, effective as of September 2004.                                                                                                                                                                                                                                                                 
|   
|(3) | Indicates the company with which we have entered into a JSA for
    the station. In March 2005, we notified all of our JSA partners
    other than NBC that we were exercising our right to terminate
    the JSAs, effective June 30, 2005, and we began discussions
    with NBC as to the termination of each of the JSAs with NBC
    (covering 14 of our stations in 12 markets).
|   
|(4) | Station is independently owned and is operated by us under a
    time brokerage agreement.                                                                                                                                                                                                                                                                                            
|   
|(5) | We have the option to acquire the station and the current owner
    has the right to require us to purchase the station at anytime
    after January 1, 2007 through December 31, 2008.                                                                                                                                                                                               
|   
|(6) | We have a right of first refusal to acquire the station.                                                                                                                                                                                                                                                                                                                              

Cable and Satellite Distribution.


Our PAX TV Affiliated Stations.


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Programming










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Ratings






Advertising










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| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | economic and market conditions;                                                                                                                
|
| |  | the size of the market in which a station operates;                                                                                            
|
| |  | a programs popularity among the viewers that an advertiser
    wishes to attract;                                                             
|
| |  | the number of advertisers competing for a time slot;                                                                                           
|
| |  | the availability of alternative advertising media in the market
    area;                                                                      
|
| |  | the demographic composition of the market served by the station;                                                                               
|
| |  | development of projects, features and programs that tie
    advertiser messages to programming; and                                            
|
| |  | quarterly sweeps performance ratings which measure
    household tuning and demographic audience estimates in all 210
    Nielsen TV markets.

NBC Relationship




Series B Preferred Stock.




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Warrant A and Warrant B.




| |   |                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Warrant B may not be exercised before the exercise in full of
    Warrant A; and                                                                                                                                                                                                                                                                 
|
| |  | Warrant B may not be exercised to the extent that, after giving
    effect to the exercise, Mr. Paxson would no longer
    constitute our single majority stockholder unless
    Warrant B is exercised in full and at the same time NBC
    exercises its right to purchase all the shares of our
    Class B common stock held by Mr. Paxson.

Right to Purchase Class B Common Stock.






| |   |                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the average of the closing sale prices of the Class A
    common stock for the 45 consecutive trading days ending on the
    trading day immediately preceding the exercise of NBCs
    call right, provided that the average price shall not be more
    than 17.5% higher or 17.5% lower than the six month trailing
    average closing sale prices; and
|
| |  | $20.00 per share.                                                                                                                                                                                                                                                                                                                                           



Optional Redemption by NBC.






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Default Redemption by NBC.




Inability to Effect a Redemption.


Optional Redemption by the Company.




Consent Rights.




| |   |                                                       
| | - | ------------------------------------------------------
| |  | approval of annual budgets;                           
|
| |  | expenditures materially in excess of budgeted amounts;

15



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| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | material acquisitions of programming;                                                                                                                                                                                 
|
| |  | material amendments to our certificate of incorporation or
    bylaws;                                                                                                                                                
|
| |  | material asset sales or purchases, including, in some cases,
    sales of our television stations;                                                                                                                    
|
| |  | business combinations where we would not be the surviving
    corporation or as a result of which we would experience a change
    of control;                                                                        
|
| |  | issuances or sales of any capital stock, with some exceptions;                                                                                                                                                        
|
| |  | certain affiliate transactions;                                                                                                                                                                                       
|
| |  | stock splits or recombinations;                                                                                                                                                                                       
|
| |  | any increase in the size of our board of directors other than
    any increase resulting from provisions of our outstanding
    preferred stock of up to two additional directors; and                                
|
| |  | joint sales, joint services, time brokerage, local marketing or
    similar agreements as a result of which our stations with
    national household coverage of 20% or more would be subject to
    those agreements.

Miscellaneous Rights.




| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | the right to require the conversion of our television stations
    to NBC network affiliates, subject to various conditions;  
|
| |  | a right of first refusal on proposed sales of television
    stations; and                                                    
|
| |  | the right to require our television stations to carry NBC
    network programming that is preempted by NBC network affiliates.

Stockholders Agreement.


Registration Rights.




| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | conversion of the Series B preferred stock;                                             
|
| |  | conversion of the debentures for which the Series B
    preferred stock is exchangeable;
|
| |  | exercise of the warrants; or                                                            
|
| |  | conversion of the Class B common stock.                                                 

Operational Arrangements.




| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | NBC provides network advertising sales, marketing and network
    research services for PAX TV;
|
| |  | NBC provides national advertising sales services for a majority
    of our stations; and       

16



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##### Table of Contents





| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | NBC has provided some of its programming, including movies and
    sporting events, for broadcast on PAX TV.





Delaware Court of Chancery Proceedings.






Arbitration and FCC Proceedings.




17



---



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Competition




Audience.




Advertising.


Federal Regulation of Broadcasting




License Issuance and Renewal.


18



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General Ownership Matters.






Television National Ownership Rule.






19



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##### Table of Contents







Television Duopoly Rule.




Television/ Newspaper Radio/ Television Cross Ownership.


20



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Television Time Brokerage and Joint Sales Agreements.




Alien Ownership.


Dual Network Rule.


Programming and Operation.








21



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Equal Employment Opportunity Requirements.


Cable Must Carry/ Retransmission Consent
Regulations.






Satellite Carriage of Television Broadcast Signals.


Digital Television Service.


22



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Proposed Changes.


Employees




Seasonality




23



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Trademarks and Service Marks




Available Information




Forward-Looking Statements and Associated Risks and
Uncertainties








| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | We have a high level of indebtedness and are subject to
    restrictions imposed by the terms of our indebtedness and
    preferred stock.

e.g.


24



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| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | We have a history of operating losses and negative cash
    flow and we may not become profitable in the future.



3 4 1 4






| |                                                                    
| | -------------------------------------------------------------------
| | PAX TV may not be successful as a broadcast television
    network.





| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If the rates at which we are able to sell long form paid
    programming were to decline or the audience ratings of our
    entertainment programming were to continue to decline, our
    advertising revenue could decrease.



25



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| |                                                                   
| | ------------------------------------------------------------------
| | We may lose a portion of our television distribution
    platform.





| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | The results of operations of our stations which operated
    under joint sales agreements could be adversely affected by the
    termination of the JSAs.





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our network and national advertising sales could be
    adversely affected by the termination of our network and
    national sales agency agreements with NBC.



26



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| |                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If advertisers have to pay higher residual payments to the
    members of the actors guilds that they use in spot
    advertisements on our network, advertisers may reduce or
    discontinue their advertising on our network.





| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | We may be required to purchase our outstanding debt and
    preferred stock if we experience a change of control.



27



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| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | NBCs exercise of its rights to exert significant
    influence upon our operations could adversely affect our
    business.





| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | approval of annual budgets;                                                                                                                                                                                           
|
| |  | expenditures materially in excess of budgeted amounts;                                                                                                                                                                
|
| |  | material acquisitions of programming;                                                                                                                                                                                 
|
| |  | material amendments to our certificate of incorporation or
    bylaws;                                                                                                                                                
|
| |  | material asset sales or purchases, including sales of our
    television stations which are located in the top 20 DMAs;                                                                                               
|
| |  | business combinations where we would not be the surviving
    corporation or as a result of which we would experience a change
    of control;                                                                        
|
| |  | issuances or sales of any capital stock, with some exceptions;                                                                                                                                                        
|
| |  | stock splits or recombinations;                                                                                                                                                                                       
|
| |  | any increase in the size of our board of directors other than an
    increase resulting from provisions of our outstanding preferred
    stock of up to two additional directors; and                                 
|
| |  | joint sales, joint services, time brokerage, local marketing or
    similar agreements as a result of which our stations with
    national household coverage of 20% or more would be subject to
    those agreements.



| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | We have not redeemed our securities held by NBC that NBC
    has demanded that we redeem and this could have adverse
    consequences for us.





28



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| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | The adjustment to the dividend rate on our Series B
    preferred stock could have adverse consequences for our
    business.





| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Our ability to pursue strategic alternatives is subject to
    limitations and factors beyond our control.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be subject to a material tax liability if the IRS
    successfully challenges our position regarding the 1997
    disposition of our radio division.



29



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| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be adversely affected by actions of the FCC, the
    Congress and the courts that could alter broadcast television
    ownership rules in a way that would materially affect our
    present operations or future business alternatives.







30



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| |                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are required by the FCC to abandon the analog broadcast
    service of 23 of our full power stations occupying the
    700 MHz spectrum and may suffer adverse consequences if we
    are unable to secure alternative distribution on reasonable
    terms.



31



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| |                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to achieve and maintain effective internal control
    over financial reporting in accordance with rules of the
    Securities and Exchange Commission promulgated under
    Section 404 of the Sarbanes-Oxley Act could result in a
    loss of investor confidence in our financial reports, which
    could in turn have a material adverse effect on our business and
    stock price.







| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | We cannot assure you that we will successfully exploit our
    broadcast station groups digital television
    platform.





| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent upon our senior management team and key
    personnel and the loss of any of them could materially and
    adversely affect us.





| |                                                           
| | ----------------------------------------------------------
| | We operate in a very competitive business
    environment.



32



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| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | We may be adversely affected by changes in the television
    broadcasting industry or a general deterioration in economic
    conditions.





| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | the condition of the U.S. economy;                                                                                                       
|
| |  | changes in audience tastes;                                                                                                              
|
| |  | changes in priorities of advertisers;                                                                                                    
|
| |  | new laws and governmental regulations and policies;                                                                                      
|
| |  | changes in broadcast technical requirements;                                                                                             
|
| |  | technological changes;                                                                                                                   
|
| |  | proposals to eliminate the tax deductibility of expenses
    incurred by advertisers;                                                    
|
| |  | changes in the law governing advertising by candidates for
    political office; and                                                     
|
| |  | changes in the willingness of financial institutions and other
    lenders to finance television station acquisitions and
    operations.



33



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##### Table of Contents





| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business is subject to extensive and changing
    regulation that could increase our costs, expose us to greater
    competition, or otherwise adversely affect the ownership and
    operation of our stations or our business strategies.







| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | determine the frequencies, location and power of our broadcast
    stations,                                           
|
| |  | regulate the equipment used by our stations,                                                                           
|
| |  | adopt and implement regulations and policies concerning the
    ownership and operation of our television stations, and
|
| |  | impose penalties on us for violations of the Communications Act
    of 1934 or FCC regulations.                        







| |                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We believe that the success of our television operations
    depends to a significant extent upon access to households served
    by cable television systems. If the law requiring cable system
    operators to carry our signal were to change, we might lose
    access to cable television households, which could adversely
    affect our operations.





34



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##### Table of Contents







| |                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot assure you that we would actually be able to
    realize, in any sale, liquidation, merger or other transaction
    involving our assets, the estimated values of such assets set
    forth in any appraisal.





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | The occurrence of extraordinary events may substantially
    decrease the use of and demand for advertising and may decrease
    our revenues.





| |                                                                               
| | ------------------------------------------------------------------------------
| | Our Class A common stock may be delisted from the
    American Stock Exchange.








|        |           
|------- | ----------
|Item 2. | Properties





35



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings









36



---



##### Table of Contents










|        |                                                  
|------- | -------------------------------------------------
|Item 4. | Submission of Matters to Vote of Security Holders



PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information




|               |  |      |      |  |      |   |      |      |  |   |      |  |  |   |      | 
|-------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|               |  | 2004 |      |  | 2003 |  
|               |  |      |      |  |      |  
|               |  | High |      |  | Low  |   |      | High |  |   | Low  | 
|               |  |      |      |  |      |   |      |      |  |   |      | 
|First Quarter  |  | $    | 4.60 |  |      | $ | 3.51 |      |  | $ | 2.65 |  |  | $ | 1.91 | 
|Second Quarter |  |      | 4.00 |  |      |   | 2.15 |      |  |   | 6.99 |  |  |   | 2.18 | 
|Third Quarter  |  |      | 3.30 |  |      |   | 1.30 |      |  |   | 6.48 |  |  |   | 3.70 | 
|Fourth Quarter |  |      | 1.74 |  |      |   | 0.90 |      |  |   | 6.07 |  |  |   | 3.62 | 



Dividends




Issuer Purchases of Equity Securities




37



---



##### Table of Contents



Equity Compensation Plan Information




|                                                              |       |                      |           |           |                      |                      |                         |                           |  |  |           |           | 
|------------------------------------------------------------- | ----- | -------------------- | --------- | --------- | -------------------- | -------------------- | ----------------------- | ------------------------- |  |  | --------- | --------- | 
|                                                              |       |                      |           |           |                      | Number of Securities |                        
|                                                              |       | Number of Securities |           |           |                      |                      | Remaining Available for |                          
|                                                              |       | to Be Issued         |           |           | Weighted-Average     |                      |                         | Future Issuance Under     | 
|                                                              |       | Upon Exercise of     |           |           | Exercise Price of    |                      |                         | Equity Compensation Plans | 
|                                                              |       | Outstanding Options, |           |           | Outstanding Options, |                      |                         | [Excluding Securities     | 
|Plan Category                                                 |       | Warrants and Rights  |           |           | Warrants and Rights  |                      |                         | Reflected in Column(a)]   | 
|                                                              |       |                      |           |           |                      |                      |                         |                           | 
|Equity compensation plans approved by security holders(1)     |       |                      | 5,336,713 |           |                      | $                    | 0.49                    |                           |  |  | 3,444,603 |          
|Equity compensation plans not approved by security holders(1) |       |                      | 522,500   |           |                      | $                    | 3.04                    |                           |  |  |          |          
|                                                              |       |                      |           |           |                      |                      |                         |                           | 
|                                                              | Total |                      |           | 5,859,213 |                      |                      | $                       | 0.71                      |  |  |           | 3,444,603 | 
|                                                              |       |                      |           |           |                      |                      |                         |                           | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In October 2004, we completed an exchange offer pursuant to
    which 3,197,250 restricted shares of Class A common stock
    were exchanged for options to purchase an equal number of shares
    of Class A common stock, at an exercise price of
    $0.01 per share and with identical vesting provisions as
    the original awards. The restricted shares were originally
    issued to certain employees and directors in connection with the
    October 2003 grant. This exchange did not result in any
    additional stock-based compensation expense. The number of
    shares of Class A common stock issued and outstanding at
    the time of exchange was reduced by the number of restricted
    shares exchanged. A narrative description of the material terms
    of these plans is set forth in Note 11  STOCK
    INCENTIVE PLANS, to our consolidated financial statements which
    are set forth elsewhere in this report.

38



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                         |                                                         |                                       |            |        |      |   |            |        |   |   |           |        |   |      |           |        |   |   |           |        |  
|-------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------- | ---------- | ------ | ---- | - | ---------- | ------ | - | - | --------- | ------ | - | ---- | --------- | ------ | - | - | --------- | ------ | -
|                                                         |                                                         | For the Years Ended December 31,      |           
|                                                         |                                                         |                                       |           
|                                                         |                                                         | 2004                                  |            |        | 2003 |   |            | 2002   |   |   | 2001      |        |   | 2000 |          
|                                                         |                                                         |                                       |            |        |      |   |            |        |   |   |           |        |   |      |          
|                                                         |                                                         | (In thousands, except per share data) |           
|Statement of Operations Data:                            |                                                         |                                       |            |        |      |   |            |        |   |   |           |        |   |      |           |        |   |   |           |       
|Net revenues                                             |                                                         | $                                     | 276,630    |        |      | $ | 270,939    |        |   | $ | 276,921   |        |   | $    | 265,326   |        |   | $ | 271,892   |       
|Operating (loss) income                                  |                                                         |                                       | (12,419    | )      |      |   | 44,195     |        |   |   | (69,906   | )      |   |      | (150,129  | )      |   |   | (155,946  | )     
|Net loss                                                 |                                                         |                                       | (187,972   | )      |      |   | (76,213    | )      |   |   | (336,186  | )      |   |      | (205,545  | )      |   |   | (169,176  | )     
|Net loss attributable to common stockholders(a)          |                                                         |                                       | (245,735   | )      |      |   | (146,317   | )      |   |   | (446,285  | )      |   |      | (352,201  | )      |   |   | (381,980  | )     
|Basic and Diluted Loss Per Common Share:(b)              |                                                         |                                       |            |        |      |   |            |        |   |   |           |        |   |      |           |        |   |   |           |       
|                                                         | Net loss                                                |                                       | $          | (3.61  | )    |   | $          | (2.14  | ) |   | $         | (6.88  | ) |      | $         | (5.46  | ) |   | $         | (6.01  | )
|                                                         | Weighted average shares outstanding  basic and diluted |                                       |            | 68,139 |      |   |            | 68,390 |   |   |           | 64,849 |   |      |           | 64,509 |   |   |           | 63,515 |  
|Balance Sheet Data:                                      |                                                         |                                       |            |        |      |   |            |        |   |   |           |        |   |      |           |        |   |   |           |       
|Cash and cash equivalents                                |                                                         | $                                     | 82,047     |        |      | $ | 97,123     |        |   | $ | 25,765    |        |   | $    | 83,858    |        |   | $ | 51,363    |       
|Working capital                                          |                                                         |                                       | 77,422     |        |      |   | 67,132     |        |   |   | 19,188    |        |   |      | 57,871    |        |   |   | 74,298    |       
|Total assets                                             |                                                         |                                       | 1,224,305  |        |      |   | 1,283,677  |        |   |   | 1,276,619 |        |   |      | 1,409,840 |        |   |   | 1,552,603 |       
|Total debt                                               |                                                         |                                       | 1,004,093  |        |      |   | 925,608    |        |   |   | 900,101   |        |   |      | 529,180   |        |   |   | 405,476   |       
|Total mandatorily redeemable preferred stock             |                                                         |                                       | 471,355    |        |      |   | 410,739    |        |   |   | 354,498   |        |   |      | 589,958   |        |   |   | 574,587   |       
|Total mandatorily redeemable convertible preferred stock |                                                         |                                       | 740,745    |        |      |   | 684,067    |        |   |   | 638,603   |        |   |      | 574,202   |        |   |   | 505,802   |       
|Total common stockholders deficit                       |                                                         |                                       | (1,327,341 | )      |      |   | (1,089,845 | )      |   |   | (958,267  | )      |   |      | (515,520  | )      |   |   | (175,503  | )     
|Other Data:                                              |                                                         |                                       |            |        |      |   |            |        |   |   |           |        |   |      |           |        |   |   |           |       
|Cash flows (used in) provided by operating activities    |                                                         | $                                     | (9,717     | )      |      | $ | 32,916     |        |   | $ | (75,428   | )      |   | $    | (60,772   | )      |   | $ | (76,036   | )     
|Cash flows (used in) provided by investing activities    |                                                         |                                       | (23,647    | )      |      |   | 60,929     |        |   |   | (7,689    | )      |   |      | 48,477    |        |   |   | (12,784   | )     
|Cash flows provided by (used in) financing activities    |                                                         |                                       | 18,288     |        |      |   | (22,487    | )      |   |   | 25,024    |        |   |      | 44,790    |        |   |   | 14,994    |       
|Program rights payments and deposits                     |                                                         |                                       | 67,682     |        |      |   | 34,239     |        |   |   | 116,243   |        |   |      | 130,566   |        |   |   | 128,288   |       
|Payments for cable distribution rights                   |                                                         |                                       | 123        |        |      |   | 4,347      |        |   |   | 9,286     |        |   |      | 14,418    |        |   |   | 10,727    |       
|Purchases of property and equipment                      |                                                         |                                       | 15,845     |        |      |   | 26,732     |        |   |   | 31,177    |        |   |      | 35,213    |        |   |   | 25,110    |       






|   |                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) | Includes dividends and accretion on redeemable preferred stock.                                                                                                                                                                 
|  
|b) | Because of losses from continuing operations, the effect of
    stock options and warrants is antidilutive. Accordingly, our
    presentation of diluted earnings per share is the same as that
    of basic earnings per share.

39



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Introduction




| |          
| | ---------
| | Overview:









| |                       
| | ----------------------
| | Financial Performance:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net revenues in 2004 increased 2.1% to $276.6 million
    compared to $270.9 million in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Operating loss was $12.4 million in 2004 compared to
    operating income of $44.2 million in 2003. Included in the
    2004 results is a charge of $4.6 million to adjust certain
    programming to net realizable value resulting from a change in
    estimated future advertising revenues expected to be generated
    by certain programming as a result of a change in expected usage
    of such programming, a $4.0 million adjustment to recognize
    additional lease expense for lease arrangements that provide for
    escalating lease payments (of which approximately
    $3.1 million pertained to periods prior to 2004), a
    $1.7 million amortization expense charge for certain
    leasehold improvements to adjust their amortization period to
    the shorter of their useful lives or the lease terms, a
    $3.0 million reduction in music license fees resulting from
    the conclusion of a dispute and the commencement of a new
    agreement with a music license organization and
    $3.3 million of insurance recoveries related to our World
    Trade Center litigation. Operating income for 2003 included
    gains of $51.9 million primarily from sales of television
    station assets.
|
| |  | Net loss attributable to common stockholders was
    $245.7 million in 2004 compared to a net loss attributable
    to common stockholders of $146.3 million in 2003. The net
    loss attributable to common                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

40



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | stockholders for 2004 includes all of the items described above,
    $1.1 million in costs incurred in connection with a
    required adjustment of the dividend rate on our Series B
    preferred stock held by NBC, increased dividends of
    $20.7 million including the increase resulting from the
    aforementioned rate adjustment, a loss on extinguishment of debt
    of $6.3 million resulting from the refinancing of our
    senior credit facility in January 2004 and a $4.9 million
    adjustment to recognize additional provision for income taxes
    resulting from a change in the estimated state income tax rate
    that we expect to incur at the time of reversal of our deferred
    taxes (of which approximately $4.5 million pertained to
    periods prior to 2004). The net loss attributable to common
    stockholders for 2003 included a benefit from income taxes of
    $4.7 million resulting from the sale of television stations.
|
| |  | Cash flow from operating activities decreased $42.6 million
    to a negative $9.7 million in 2004 compared to
    $32.9 million of cash provided by operating activities in
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



| |               
| | --------------
| | Balance Sheet:







| |                 
| | ----------------
| | Sources of Cash:





| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | revenues from the sale of network long form paid programming,
    network spot advertising, station long form paid programming and
    station spot advertising; and
|
| |  | $10.0 million in proceeds from the sale of broadcast
    assets, consisting of one television station.                                                              





| |                                    
| | -----------------------------------
| | Key Company Performance Indicators:





41



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| |                                                    
| | ---------------------------------------------------
| | Factors Expected to Affect our Performance in 2005:











| |                  
| | -----------------
| | Outlook for 2005:





42



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Critical Accounting Policies and Estimates










43



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44



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Results of Continuing Operations




|                                                            |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |   |         |         |         |  |       |      |       | 
|----------------------------------------------------------- | ------------------------------------------------- | ------------------------ | ------- | ------- | ------- |  | ----- | ---- | ----- | - | ------- | ------- | ------- | ---- | ----- | ---- | ----- | - | ------- | ------- | ------- |  | ----- | ---- | ----- | 
|                                                            |                                                   | Years Ended December 31  |        
|                                                            |                                                   |                          |        
|                                                            |                                                   | 2004                     |         |         | %       |  |       | 2003 |       |   | %       |         |         | 2002 |       |      | %     |  
|                                                            |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |  
|Net revenues                                                |                                                   | $                        | 276,630 |         |         |  | 100.0 |      |       | $ | 270,939 |         |         |      | 100.0 |      |       | $ | 276,921 |         |         |  | 100.0 |     
|Expenses:                                                   |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |   |         |         |         |  |       |     
|                                                            | Programming and broadcast operations              |                          |         | 56,472  |         |  |       | 20.4 |       |   |         | 51,954  |         |      |       | 19.2 |       |   |         | 51,204  |         |  |       | 18.5 |      
|                                                            | Program rights amortization                       |                          |         | 53,616  |         |  |       | 19.4 |       |   |         | 51,082  |         |      |       | 18.9 |       |   |         | 77,980  |         |  |       | 28.2 |      
|                                                            | Selling, general and administrative               |                          |         | 121,835 |         |  |       | 44.0 |       |   |         | 110,976 |         |      |       | 41.0 |       |   |         | 132,305 |         |  |       | 47.8 |      
|                                                            | Business interruption insurance proceeds          |                          |         |        |         |  |       |     |       |   |         |        |         |      |       |     |       |   |         | (1,617  | )       |  |       | (0.6 | )    
|                                                            | Time brokerage and affiliation fees               |                          |         | 4,466   |         |  |       | 1.6  |       |   |         | 4,403   |         |      |       | 1.6  |       |   |         | 4,079   |         |  |       | 1.5  |      
|                                                            | Stock-based compensation                          |                          |         | 8,501   |         |  |       | 3.1  |       |   |         | 12,766  |         |      |       | 4.7  |       |   |         | 3,810   |         |  |       | 1.4  |      
|                                                            | Adjustment of programming to net realizable value |                          |         | 4,645   |         |  |       | 1.7  |       |   |         | 1,066   |         |      |       | 0.4  |       |   |         | 41,270  |         |  |       | 14.9 |      
|                                                            | Restructuring (credits) charges                   |                          |         | (5      | )       |  |       |     |       |   |         | 48      |         |      |       |     |       |   |         | 2,173   |         |  |       | 0.8  |      
|                                                            | Reserve for state taxes                           |                          |         | 691     |         |  |       | 0.2  |       |   |         | 3,055   |         |      |       | 1.1  |       |   |         |        |         |  |       |     |      
|                                                            | Depreciation and amortization                     |                          |         | 43,664  |         |  |       | 15.8 |       |   |         | 42,983  |         |      |       | 15.9 |       |   |         | 58,529  |         |  |       | 21.1 |      
|                                                            |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |  
|                                                            |                                                   | Total operating expenses |         |         | 293,885 |  |       |      | 106.2 |   |         |         | 278,333 |      |       |      | 102.7 |   |         |         | 369,733 |  |       |      | 133.5 | 
|                                                            |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |  
|Gain on sale or disposal of broadcast and other assets, net |                                                   |                          | 4,836   |         |         |  | 1.7   |      |       |   | 51,589  |         |         |      | 19.0  |      |       |   | 22,906  |         |         |  | 8.3   |     
|                                                            |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |  
|Operating (loss) income                                     |                                                   | $                        | (12,419 | )       |         |  | (4.5  | )    |       | $ | 44,195  |         |         |      | 16.3  |      |       | $ | (69,906 | )       |         |  | (25.2 | )   
|                                                            |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |  
|Other Data:                                                 |                                                   |                          |         |         |         |  |       |      |       |   |         |         |         |      |       |      |       |   |         |         |         |  |       |     
|Cash flows (used in) provided by operating activities       |                                                   | $                        | (9,717  | )       |         |  |       |      |       | $ | 32,916  |         |         |      |       |      |       | $ | (75,428 | )       |         |  |       |     
|Cash flows (used in) provided by investing activities       |                                                   |                          | (23,647 | )       |         |  |       |      |       |   | 60,929  |         |         |      |       |      |       |   | (7,689  | )       |         |  |       |     
|Cash flows provided by (used in) financing activities       |                                                   |                          | 18,288  |         |         |  |       |      |       |   | (22,487 | )       |         |      |       |      |       |   | 25,024  |         |         |  |       |     
|Program rights payments and deposits                        |                                                   |                          | 67,682  |         |         |  |       |      |       |   | 34,239  |         |         |      |       |      |       |   | 116,243 |         |         |  |       |     
|Payments for cable distribution rights                      |                                                   |                          | 123     |         |         |  |       |      |       |   | 4,347   |         |         |      |       |      |       |   | 9,286   |         |         |  |       |     
|Purchases of property and equipment                         |                                                   |                          | 15,845  |         |         |  |       |      |       |   | 26,732  |         |         |      |       |      |       |   | 31,177  |         |         |  |       |     

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| |                                       
| | --------------------------------------
| | Years Ended December 31, 2004 and 2003















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1 4 1 4








| |                                       
| | --------------------------------------
| | Years Ended December 31, 2003 and 2002





Touched By An Angel










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1 4 1 4


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Restructuring Activities




Income Taxes






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Liquidity and Capital Resources


1 4










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1 2 1 2 1 4 1 4 1 2






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Contractual Obligations and Commitments




|                                                              |  |      |        |  |      |   |        |      |  |   |        |  |  |      |         |  |            |   |         |       |  |   |         |  |  |   |           | 
|------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------- |  | ---------- | - | ------- | ----- |  | - | ------- |  |  | - | --------- | 
|                                                              |  | 2005 |        |  | 2006 |   |        | 2007 |  |   | 2008   |  |  | 2009 |         |  | Thereafter |   |         | Total | 
|                                                              |  |      |        |  |      |   |        |      |  |   |        |  |  |      |         |  |            |   |         |       | 
|Senior secured and senior subordinated Notes                  |  | $    | 64     |  |      | $ | 71     |      |  | $ | 79     |  |  | $    | 200,086 |  |            | $ | 496,358 |       |  | $ | 365,048 |  |  | $ | 1,061,706 | 
|Obligations for program rights and program rights commitments |  |      | 43,776 |  |      |   | 1,703  |      |  |   |       |  |  |      |        |  |            |   |        |       |  |   |        |  |  |   | 45,479    | 
|Obligations to CBS                                            |  |      | 17,726 |  |      |   | 9,191  |      |  |   |       |  |  |      |        |  |            |   |        |       |  |   |        |  |  |   | 26,917    | 
|Obligations for cable distribution rights                     |  |      | 2,896  |  |      |   |       |      |  |   |       |  |  |      |        |  |            |   |        |       |  |   |        |  |  |   | 2,896     | 
|Operating leases and employment agreements                    |  |      | 19,701 |  |      |   | 17,516 |      |  |   | 15,892 |  |  |      | 14,679  |  |            |   | 12,450  |       |  |   | 107,160 |  |  |   | 187,398   | 
|                                                              |  |      |        |  |      |   |        |      |  |   |        |  |  |      |         |  |            |   |         |       | 
|                                                              |  | $    | 84,163 |  |      | $ | 28,481 |      |  | $ | 15,971 |  |  | $    | 214,765 |  |            | $ | 508,808 |       |  | $ | 472,208 |  |  | $ | 1,324,396 | 
|                                                              |  |      |        |  |      |   |        |      |  |   |        |  |  |      |         |  |            |   |         |       | 



|     |  |                     |         |  |                |   |         |                      |  |   |         | 
|---- |  | ------------------- | ------- |  | -------------- | - | ------- | -------------------- |  | - | ------- | 
|     |  | Junior Exchangeable |         |  | Convertible    |   |         | Series B Convertible | 
|     |  | Preferred Stock     |         |  | Preferred      |   |         | Preferred Stock      | 
|     |  | 141/4%(1)           |         |  | Stock 93/4%(2) |   |         | 16.2%(3)             | 
|     |  |                     |         |  |                |   |         |                      | 
|2005 |  | $                   | 540,916 |  |                | $ | 155,323 |                      |  | $ | 667,933 | 
|2006 |  |                     | 609,879 |  |                |   | 171,029 |                      |  |   | 735,163 | 
|2007 |  |                     |        |  |                |   |        |                      |  |   | 802,393 | 
|2008 |  |                     |        |  |                |   |        |                      |  |   | 869,623 | 
|2009 |  |                     |        |  |                |   |        |                      |  |   | 936,853 | 






|    |                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mandatorily redeemable on November 15, 2006; redeemable by
    us.                                                                                                                                                                                                                                                                                     
|   
|(2) | Mandatorily redeemable on December 31, 2006; redeemable by
    us.                                                                                                                                                                                                                                                                                     
|   
|(3) | As further discussed above, on November 13, 2003, we
    received notice from NBC that NBC was exercising its right under
    its investment agreement with us to demand that we redeem or
    arrange for a third party to acquire, by payment in cash, all
    41,500 outstanding shares of our Series B Convertible
    Preferred Stock held by NBC.

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|     |  |                 |        |  |                |   |        |       |  |   |        | 
|---- |  | --------------- | ------ |  | -------------- | - | ------ | ----- |  | - | ------ | 
|     |  | Obligations for |        |  |                |   |       
|     |  | Program         |        |  | Program Rights |   |        |      
|     |  | Rights          |        |  | Commitments    |   |        | Total | 
|     |  |                 |        |  |                |   |        |       | 
|2005 |  | $               | 18,436 |  |                | $ | 25,340 |       |  | $ | 43,776 | 
|2006 |  |                 | 1,703  |  |                |   |       |       |  |   | 1,703  | 
|     |  |                 |        |  |                |   |        |       | 
|     |  | $               | 20,139 |  |                | $ | 25,340 |       |  | $ | 45,479 | 
|     |  |                 |        |  |                |   |        |       | 

Touched By
An Angel (Touched)




Touched Touched


Touched Touched Touched


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Touched Touched


|                             |      |                |        |             |             |   |         |            |   |   |        |       | 
|---------------------------- | ---- | -------------- | ------ | ----------- | ----------- | - | ------- | ---------- | - | - | ------ | ----- | 
|                             |      |                |        | Amounts Due |             |   |        
|                             |      | Obligations to |        |             | from        |   |         |           
|                             |      | CBS            |        |             | Crown Media |   |         | Net Amount |  
|                             |      |                |        |             |             |   |         |            |  
|                             | 2005 |                | $      | 17,726      |             |   | $       | (10,439    | ) |   | $      | 7,287 | 
|                             | 2006 |                |        | 9,191       |             |   |         | (1,711     | ) |   |        | 7,480 | 
|                             |      |                |        |             |             |   |         |            |  
|                             |      |                | 26,917 |             |             |   | (12,150 | )          |   |   | 14,767 |      
|Amount representing interest |      |                |       |             |             |   | 610     |            |   |   | 610    |      
|                             |      |                |        |             |             |   |         |            |  
|                             |      | $              | 26,917 |             |             | $ | (11,540 | )          |   | $ | 15,377 |      
|                             |      |                |        |             |             |   |         |            |  



New Accounting Pronouncements










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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk









|                       |  |                        |      |   |              |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |         |   |  |   |         |  |  |   |         | 
|---------------------- |  | ---------------------- | ---- | - | ------------ | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - | ---------- | - | ---- | ----- |  | - | ------- | - |  | - | ------- |  |  | - | ------- | 
|                       |  | Expected Maturity Date |      |   | Fair Value   |  
|                       |  |                        |      |   | December 31, |  
|December 31, 2004      |  | 2005                   |      |   | 2006         |   |      | 2007 |  |   | 2008 |   |  | 2009 |      |   | Thereafter |   |      | Total |  |   | 2004    |  
|                       |  |                        |      |   |              |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |         |  
|                       |  | (In thousands)         |     
|Variable rate debt     |  | $                      | 64   |   |              | $ | 71   |      |  | $ | 79   |   |  | $    | 86   |   |            | $ | 95   |       |  | $ | 365,048 |   |  | $ | 365,443 |  |  | $ | 365,443 | 
|Average interest rates |  |                        | 8.22 | % |              |   | 6.85 | %    |  |   | 6.85 | % |  |      | 6.85 | % |            |   | 6.85 | %     |  |   | 7.33    | % |  |   |         |  |  |   |         | 

|                       |  |                        |      |   |              |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |         |   |  |   |         |  |  |   |         | 
|---------------------- |  | ---------------------- | ---- | - | ------------ | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - | ---------- | - | ---- | ----- |  | - | ------- | - |  | - | ------- |  |  | - | ------- | 
|                       |  | Expected Maturity Date |      |   | Fair Value   |  
|                       |  |                        |      |   | December 31, |  
|December 31, 2003      |  | 2004                   |      |   | 2005         |   |      | 2006 |  |   | 2007 |   |  | 2008 |      |   | Thereafter |   |      | Total |  |   | 2003    |  
|                       |  |                        |      |   |              |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |         |  
|                       |  | (In thousands)         |     
|Variable rate debt     |  | $                      | 61   |   |              | $ | 65   |      |  | $ | 71   |   |  | $    | 79   |   |            | $ | 86   |       |  | $ | 335,768 |   |  | $ | 336,130 |  |  | $ | 336,130 | 
|Average interest rates |  |                        | 9.59 | % |              |   | 8.63 | %    |  |   | 7.66 | % |  |      | 7.66 | % |            |   | 7.66 | %     |  |   | 6.76    | % |  |   |         |  |  |   |         | 






|        |                                                          
|------- | ---------------------------------------------------------
|Item 8. | Financial Statements and Supplementary Financial
    Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure



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|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures








Changes in Internal Control Over Financial Reporting




Report on Internal Control Over Financial Reporting




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|         |                  
|-------- | -----------------
|Item 9B. | Other Information



PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. The financial statements filed as part of this report
    are listed separately in the Index to Consolidated Financial
    Statements and Financial Statement Schedule on page F-1 of this
    report.                                                                                                                                                                                    
|
| | 2. The Financial Statement Schedule filed as part of this
    report is listed separately in the Index to Consolidated
    Financial Statements and Financial Statement Schedule on page
    F-1 of this report.                                                                                                                                                                             
|
| | 3. For Exhibits see Item 15(b), below. Each management
    contract or compensatory plan or arrangement required to be
    filed as an exhibit hereto is listed in Exhibits Nos.
    10.27, 10.28, 10.157, 10.208, 10.208.1, 10.208.2, 10.208.3,
    10.224, 10.225, 10.225.1, 10.227, 10.227.1, 10.228, 10.231,
    10.231.1, 10.231.2, 10.232, 10.232.1 and 10.233 of
    Item 15(b) below.

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|        |    |       |  |                         |  |                                                                                                                                                                                                                                                
|------- | -- | ----- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |  |                        
|Number  |    |       |  | Description of Exhibits
|        |    |       |  |                        
|        | 3  | .1.1  |  |                        |  | Certificate of Incorporation of the Company(2)                                                                                                                                                                                                 
|       
|        | 3  | .1.6  |  |                        |  | Certificate of Designation of the Companys
    93/4%
    Series A Convertible Preferred Stock(7)                                                                                                                                              
|       
|        | 3  | .1.7  |  |                        |  | Certificate of Designation of the Companys
    141/4%
    Cumulative Junior Exchangeable Preferred Stock(7)                                                                                                                                   
|       
|        | 3  | .1.8  |  |                        |  | Certificate of Designation of the Companys 16.2%
    Series B Convertible Exchangeable Preferred Stock(8)                                                                                                                                     
|       
|        | 3  | .1.9  |  |                        |  | Certificate of Amendment to the Certificate of Incorporation of
    the Company(16)                                                                                                                                                            
|       
|        | 3  | .2    |  |                        |  | Bylaws of the Company(11)                                                                                                                                                                                                                      
|       
|        | 4  | .4    |  |                        |  | Investment Agreement, dated as of September 15, 1999, by
    and between the Company and National Broadcasting Company,
    Inc.(8)                                                                                                            
|       
|        | 4  | .4.1  |  |                        |  | Stockholder Agreement, dated as of September 15, 1999,
    among the Company, National Broadcasting Company, Inc., Lowell
    W. Paxson, Second Crystal Diamond Limited Partnership and Paxson
    Enterprises, Inc.(8)                        
|       
|        | 4  | .4.2  |  |                        |  | Class A Common Stock Purchase Warrant, dated
    September 15, 1999, with respect to up to
    13,065,507 shares of Class A Common Stock(8)                                                                                                    
|       
|        | 4  | .4.3  |  |                        |  | Class A Common Stock Purchase Warrant, dated
    September 15, 1999, with respect to up to
    18,966,620 shares of Class A Common Stock(8)                                                                                                    
|       
|        | 4  | .4.5  |  |                        |  | Form of Indenture with respect to the Companys 8% Exchange
    Debentures due 2009(8)                                                                                                                                                         
|       
|        | 4  | .4.6  |  |                        |  | Registration Rights Agreement, dated September 15, 1999,
    between the Company and National Broadcasting Company, Inc.(8)                                                                                                                    
|       
|        | 4  | .5    |  |                        |  | Indenture, dated as of June 10, 1998, by and between the
    Company, the Guarantors named therein and the Bank of New York,
    as Trustee, with respect to the New Exchange Debentures(7)                                                    
|       
|        | 4  | .6    |  |                        |  | Indenture, dated as of July 12, 2001, among the Company,
    the Subsidiary Guarantors party thereto, and The Bank of New
    York, as Trustee, with respect to the Companys
    10% Senior Subordinated Notes due 2008(12)                   
|       
|        | 4  | .8    |  |                        |  | Indenture, dated as of January 14, 2002, among the Company,
    the Subsidiary Guarantors party thereto, and The Bank of New
    York, as Trustee, with respect to the Companys
    121/4% Senior
    Subordinated Discount Notes due 2009(14)
|       
|        | 4  | .9    |  |                        |  | Indenture, dated as of January 12, 2004, among the Company,
    the Subsidiary Guarantors party thereto, and The Bank of New
    York, as Trustee, with respect to the Companys Senior
    Secured Floating Rate Notes due 2010(19)           
|       
|        | 10 | .27   |  |                        |  | Paxson Communications Corp. Profit Sharing Plan(1)                                                                                                                                                                                             
|       
|        | 10 | .28   |  |                        |  | Paxson Communications Corp. Stock Incentive Plan(1)                                                                                                                                                                                            
|       
|        | 10 | .83.1 |  |                        |  | Facility Lease Agreement, dated as of July 1, 2003, by and
    between the Company and The Christian Network, Inc.(18)                                                                                                                         
|       
|        | 10 | .157  |  |                        |  | Paxson Communications Corporation 1996 Stock Incentive Plan(4)                                                                                                                                                                                 
|       
|        | 10 | .183  |  |                        |  | Stock Purchase Agreement, dated September 9, 1997, by and
    among Channel 46 of Tucson, Inc., Paxson Communications of
    Tucson-46, Inc. and Sungilt Corporation, Inc.(5)                                                                  
|       
|        | 10 | .186  |  |                        |  | Option Agreement, dated November 14, 1997, by and between
    the Company and Flinn Broadcasting Corporation for Television
    station WCCL-TV, New Orleans, Louisiana(6)                                                                     
|       
|        | 10 | .187  |  |                        |  | Option Agreement, dated November 14, 1997, by and between
    the Company and Flinn Broadcasting Corporation for Television
    station WFBI-TV, Memphis, Tennessee(6)                                                                         
|       
|        | 10 | .193  |  |                        |  | Programming Agreement, dated August 11, 1998, by and
    between Paxson Communications of Chicago-38, Inc. and Christian
    Communications of Chicagoland Inc.(6)                                                                             
|       
|        | 10 | .208  |  |                        |  | Employment Agreement, dated October 16, 1999, by and
    between the Company and Lowell W. Paxson(9)                                                                                                                                           

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|        |    |        |  |                         |  |                                                                                                                                                                                                                                                                                                               
|------- | -- | ------ |  | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        |  |                        
|Number  |    |        |  | Description of Exhibits
|        |    |        |  |                        
|       
|        | 10 | .208.1 |  |                        |  | Amendment to Employment Agreement, dated as of December 16,
    2002, by and between the Company and Lowell W. Paxson(15)                                                                                                                                                                                     
|       
|        | 10 | .208.2 |  |                        |  | Amendment No. 2 to Employment Agreement, dated as of
    January 15, 2004 between the Company and Lowell W.
    Paxson(19)                                                                                                                                                                                    
|       
|        | 10 | .208.3 |  |                        |  | Amendment to Employment Agreement, dated as of February 9,
    2005, between the Company and Lowell W. Paxson                                                                                                                                                                                                 
|       
|        | 10 | .209   |  |                        |  | Asset Purchase Agreement, dated November 21, 1999, by and
    between the Company and DP Media, Inc.(9)                                                                                                                                                                                                       
|       
|        | 10 | .209.1 |  |                        |  | Restated and Amended Asset Purchase Agreement, dated
    November 21, 1999, by and between Paxson Communications
    Corporation and DP Media(10)                                                                                                                                                             
|       
|        | 10 | .210   |  |                        |  | Asset Purchase Agreement dated April 30, 1999, by and
    between DP Media of Boston, Inc. and Boston University
    Communications, Inc. for television stations WABU (TV), Boston,
    MA WZBU (TV), Vineyard Haven, MA WNBU (TV), Concord, NH and Low
    Power television station W67BA (TV) Dennis, MA(9)
|       
|        | 10 | .217   |  |                        |  | Indenture, dated as of July 12, 2001, among the Company,
    the Subsidiary Guarantors party thereto, and The Bank of New
    York, as Trustee, with respect to the Companys
    103/4% Senior
    Subordinated Notes due 2008 (incorporated by reference to
    Exhibit 4.6)(12)                            
|       
|        | 10 | .219   |  |                        |  | First Supplemental Indenture, dated as of August 2, 2001,
    by and among the Company, S&E Network, Inc., the Subsidiary
    Guarantors party thereto, and The Bank of New York, as
    Trustee(13)                                                                                                          
|       
|        | 10 | .221   |  |                        |  | Indenture, dated as of January 14, 2002, among the Company,
    the Subsidiary Guarantors party thereto, and The Bank of New
    York, as Trustee, with respect to the Companys
    121/4% Senior
    Subordinated Discount Notes due 2009 (incorporated by reference
    to Exhibit 4.8)(14)                
|       
|        | 10 | .224   |  |                        |  | Amended and Restated Employment Agreement, by and between the
    Company and Anthony L. Morrison, effective January 1, 2004                                                                                                                                                                                  
|       
|        | 10 | .225   |  |                        |  | Amended and Restated Employment Agreement, by and between the
    Company and Dean M. Goodman, effective January 1, 2004                                                                                                                                                                                      
|       
|        | 10 | .225.1 |  |                        |  | Amendment to Employment Agreement, dated February 9, 2005,
    between the Company and Dean M. Goodman                                                                                                                                                                                                        
|       
|        | 10 | .227   |  |                        |  | Amended and Restated Employment Agreement, by and between the
    Company and Seth A. Grossman, effective January 1, 2004                                                                                                                                                                                     
|       
|        | 10 | .227.1 |  |                        |  | Amendment to Employment Agreement, dated February 9, 2005,
    between the Company and Seth A. Grossman                                                                                                                                                                                                       
|       
|        | 10 | .228   |  |                        |  | Paxson Communications Corporation 1998 Stock Incentive Plan, as
    amended(16)                                                                                                                                                                                                                               
|       
|        | 10 | .229   |  |                        |  | Indenture, dated as of January 12, 2004, among the Company,
    the Subsidiary Guarantors party thereto, and The Bank of New
    York, as Trustee, with respect to the Companys Senior
    Secured Floating Rate Notes due 2010 (incorporated by reference
    to Exhibit 4.9)                               
|       
|        | 10 | .230   |  |                        |  | Purchase Agreement, dated January 5, 2004, among the
    Company, the Subsidiary Guarantors party thereto, and Citigroup
    Global Markets Inc., Bear, Stearns & Co. Inc., and CIBC
    World Markets Corp., as representatives of the Initial
    Purchasers(19)                                            
|       
|        | 10 | .231   |  |                        |  | Amended and Restated Employment Agreement, by and between the
    Company and Richard Garcia, effective as of January 1,
    2004(20)                                                                                                                                                                         
|       
|        | 10 | .231.1 |  |                        |  | Amendment to Employment Agreement, dated February 9, 2005,
    between the Company and Richard Garcia                                                                                                                                                                                                         
|       
|        | 10 | .231.2 |  |                        |  | Amendment to Employment Agreement, dated March 15, 2005,
    between the Company and Richard Garcia(23)                                                                                                                                                                                                       
|       
|        | 10 | .232   |  |                        |  | Employment Agreement, dated as of January 1, 2004, as
    amended effective January 1, 2005, by and between the
    Company and Adam K. Weinstein(21)                                                                                                                                                         
|       
|        | 10 | .232.1 |  |                        |  | Amendment to Employment Agreement, dated February 9, 2005,
    between the Company and Adam K. Weinstein                                                                                                                                                                                                      

61



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|        |    |      |  |                         |  |                                                                                                                                                                                                      
|------- | -- | ---- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |  |                        
|Number  |    |      |  | Description of Exhibits
|        |    |      |  |                        
|       
|        | 10 | .233 |  |                        |  | Form of Indemnification Agreement by and between the Company and
    members of the Board of Directors of the Company(22)                                                                            
|       
|        | 14 | .1   |  |                        |  | Code of Ethics and Business Conduct(19)                                                                                                                                                              
|       
|        | 21 |      |  |                        |  | Subsidiaries of the Company                                                                                                                                                                          
|       
|        | 23 | .1   |  |                        |  | Consent of Ernst & Young LLP                                                                                                                                                                         
|       
|        | 23 | .2   |  |                        |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                
|       
|        | 31 | .1   |  |                        |  | Certification by the Chief Executive Officer of Paxson
    Communications Corporation pursuant to Rule 13a-14 under
    the Securities Exchange Act of 1934, as amended                              
|       
|        | 31 | .2   |  |                        |  | Certification by the Chief Financial Officer of Paxson
    Communications Corporation pursuant to Rule 13a-14 under
    the Securities Exchange Act of 1934, as amended                              
|       
|        | 32 | .1   |  |                        |  | Certification by the Chief Executive Officer of Paxson
    Communications Corporation pursuant to 18 U.S.C.
    Section 1350 as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002
|       
|        | 32 | .2   |  |                        |  | Certification by the Chief Financial Officer of Paxson
    Communications Corporation pursuant to 18 U.S.C.
    Section 1350 as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002
|       
|        | 99 | .1   |  |                        |  | Tax Exemption Savings Agreement, dated May 15, 1994,
    between the Company and The Christian Network, Inc.(3)                                                                                      






|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed with the Companys Registration Statement on
    Form S-4, filed September 26, 1994, Registration
    No. 33-84416, and incorporated herein by reference.                            
|   
|(2) | Filed with the Companys Annual Report on Form 10-K,
    dated March 31, 1995 (Commission File No. 1-13452),
    and incorporated herein by reference.                                     
|   
|(3) | Filed with the Companys Registration Statement on
    Form S-1, as amended, filed January 26, 1996,
    Registration No. 333-473, and incorporated herein by
    reference.               
|   
|(4) | Filed with the Companys Registration Statement on
    Form S-8, filed January 22, 1997, Registration
    No. 333-20163, and incorporated herein by reference.                             
|   
|(5) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated September 30, 1997 (Commission File
    No. 1-13452), and incorporated herein by reference.                              
|   
|(6) | Filed with the Companys Annual Report on Form 10-K,
    dated December 31, 1997 (Commission File No. 1-13452),
    and incorporated herein by reference.                                  
|   
|(7) | Filed with the Companys Registration Statement on
    Form S-4, as amended, filed July 23, 1998,
    Registration No. 333-59641, and incorporated herein by
    reference.                
|   
|(8) | Filed with the Companys Form 8-K, filed with the
    Securities and Exchange Commission on September 24, 1999
    (Commission File No. 1-13452), and incorporated herein by
    reference.
|   
|(9) | Filed with the Companys Annual Report on Form 10-K,
    dated December 31, 1999 (Commission File No. 1-13452),
    and incorporated herein by reference.                                  



|     |                                                                                                                                                                                 
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated March 31, 2000, and incorporated
    herein by reference.                                                     
|    
|(11) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated March 31, 2001, and incorporated
    herein by reference.                                                     
|    
|(12) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated June 30, 2001, and incorporated
    herein by reference.                                                      
|    
|(13) | Filed with the Companys Registration Statement on
    Form S-4, as amended, filed September 10, 2001,
    Registration No. 333-69192, and incorporated herein by
    reference.
|    
|(14) | Filed with the Companys Annual Report on Form 10-K,
    dated December 31, 2001, and incorporated herein by
    reference.                                                     

62



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|     |                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(15) | Filed with the Companys Annual Report on Form 10-K,
    dated December 31, 2002, and incorporated herein by
    reference.                             
|    
|(16) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated March 31, 2003, and incorporated
    herein by reference.                             
|    
|(17) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated June 30, 2003, and incorporated
    herein by reference.                              
|    
|(18) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated September 30, 2003, and incorporated
    herein by reference.                         
|    
|(19) | Filed with the Companys Annual Report on Form 10-K,
    dated December 31, 2003, and incorporated herein by
    reference.                             
|    
|(20) | Filed with the Companys Quarterly Report on
    Form 10-Q, dated June 30, 2004, and incorporated
    herein by reference.                              
|    
|(21) | Filed with the Companys Form 8-K, filed with the
    Securities and Exchange Commission on January 7, 2005, and
    incorporated herein by reference.  
|    
|(22) | Filed with the Companys Form 8-K, filed with the
    Securities and Exchange Commission on February 28, 2005,
    and incorporated herein by reference.
|    
|(23) | Filed with the Companys Form 8-K, filed with the
    Securities and Exchange Commission on March 18, 2005, and
    incorporated herein by reference.   



63



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SIGNATURES






| |                                  
| | ---------------------------------
| | PAXSON COMMUNICATIONS CORPORATION



| |     |                     
| | --- | --------------------
| | By: | /s/ LOWELL W. PAXSON

| |                                          
| | -----------------------------------------
| |                                          
| | Lowell W. Paxson                         
| | Chairman of the Board and Chief Executive
| | Officer (Principal Executive Officer)    



|                                               |  |                                                                                                |  |                |  | 
|---------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signatures                                     |  | Title                                                                                          |  | Date          
|                                               |  |                                                                                                |  |               
|                                              
|/s/ LOWELL W. PAXSONLowell
    W. Paxson       |  | Chairman of the Board, Director and Chief Executive Officer
    (Principal Executive Officer)  |  | April 29, 2005
|                                              
|/s/ RICHARD GARCIARichard
    Garcia           |  | Senior Vice President and
    Chief Financial Officer
    (Principal Financial Officer)        |  | April 29, 2005
|                                              
|/s/ TAMMY G. HEDGETammy
    G. Hedge           |  | Vice President, Controller and
    Chief Accounting Officer
    (Principal Accounting Officer) |  | April 29, 2005
|                                              
|/s/ BRUCE L. BURNHAMBruce
    L. Burnham       |  | Director                                                                                       |  | April 29, 2005
|                                              
|/s/ JOHN E. OXENDINEJohn
    E. Oxendine       |  | Director                                                                                       |  | April 29, 2005
|                                              
|/s/ HENRY J. BRANDONHenry
    J. Brandon       |  | Director                                                                                       |  | April 29, 2005
|                                              
|/s/ ELIZABETH J. HUDSONElizabeth
    J. Hudson |  | Director                                                                                       |  | April 29, 2005
|                                              
|/s/ W. LAWRENCE PATRICKW.
    Lawrence Patrick |  | Director                                                                                       |  | April 29, 2005

64



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PAXSON COMMUNICATIONS CORPORATION


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND


FINANCIAL STATEMENT SCHEDULE


|                                                                      |  |      |      | 
|--------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                      |  | Page |     
|                                                                      |  |      |     
|Managements Report on Internal
    Control over Financial Reporting  |  |      | F-2  | 
|Report of Independent Registered Certified
    Public Accountants     |  |      | F-3  | 
|Report of Independent Registered Certified
    Public Accountants     |  |      | F-4  | 
|Report of Independent Registered Certified
    Public Accounting Firm |  |      | F-6  | 
|Consolidated Balance Sheets                                           |  |      | F-7  | 
|Consolidated Statements of Operations                                 |  |      | F-8  | 
|Consolidated Statements of
    Stockholders Deficit                  |  |      | F-9  | 
|Consolidated Statements of Cash Flows                                 |  |      | F-10 | 
|Notes to Consolidated Financial
    Statements                        |  |      | F-11 | 
|Financial Statement Schedule 
    Valuation and Qualifying Accounts  |  |      | F-56 | 

F-1



---



##### Table of Contents






MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING




| |   |                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of our assets;                                                                                                                                                                                       
| |  | provide reasonable assurance that the transactions are recorded
    as necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and
    directors; and
| |  | provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.                                                                                                                               



Internal Control-Integrated Framework






Report of Independent Registered Certified Public
Accountants.


F-2



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTANTS














| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





F-3



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTANTS


















F-4



---



##### Table of Contents









| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





F-5



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING
FIRM












| |                               
| | ------------------------------
| | /s/ PricewaterhouseCoopers LLP





F-6



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION





CONSOLIDATED BALANCE SHEETS


|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |            |           |            |         |            |  
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ------- | ---------- | --------- | ---------- | ------- | ---------- | -
|                                                                                                      |                                                                                                         | December 31,                                                                                                                                                  |                            
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                            
|                                                                                                      |                                                                                                         | 2004                                                                                                                                                          |                             |            | 2003    |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                      |                                                                                                         | (In thousands except                                                                                                                                          |                            
|                                                                                                      |                                                                                                         | share data)                                                                                                                                                   |                            
|ASSETS                                                                                               
|Current assets:                                                                                       |                                                                                                         |                                                                                                                                                               |                             |            |         |            |           |           
|                                                                                                      | Cash and cash equivalents                                                                               |                                                                                                                                                               | $                           | 82,047     |         |            | $         | 97,123     |        
|                                                                                                      | Short-term investments                                                                                  |                                                                                                                                                               |                             | 5,993      |         |            |           | 12,948     |        
|                                                                                                      | Accounts receivable, net of allowance for doubtful accounts of
    $648 and $1,090, respectively        |                                                                                                                                                               |                             | 24,961     |         |            |           | 24,357     |        
|                                                                                                      | Program rights                                                                                          |                                                                                                                                                               |                             | 38,853     |         |            |           | 41,659     |        
|                                                                                                      | Amounts due from Crown Media                                                                            |                                                                                                                                                               |                             | 9,885      |         |            |           | 13,883     |        
|                                                                                                      | Deposits for programming letters of credit                                                              |                                                                                                                                                               |                             | 24,603     |         |            |           |           |        
|                                                                                                      | Prepaid expenses and other current assets                                                               |                                                                                                                                                               |                             | 3,119      |         |            |           | 4,406      |        
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                      |                                                                                                         | Total current assets                                                                                                                                          |                             |            | 189,461 |            |           |            | 194,376 |           
|Property and equipment, net                                                                           |                                                                                                         |                                                                                                                                                               | 103,526                     |            |         |            | 120,841   |           
|Intangible assets:                                                                                    |                                                                                                         |                                                                                                                                                               |                             |            |         |            |           |           
|                                                                                                      | FCC license intangible assets                                                                           |                                                                                                                                                               |                             | 843,462    |         |            |           | 843,140    |        
|                                                                                                      | Other intangible assets, net                                                                            |                                                                                                                                                               |                             | 40,448     |         |            |           | 50,814     |        
|Program rights, net of current portion                                                                |                                                                                                         |                                                                                                                                                               | 19,581                      |            |         |            | 28,640    |           
|Amounts due from Crown Media, net of current portion                                                  |                                                                                                         |                                                                                                                                                               | 1,655                       |            |         |            | 11,540    |           
|Investments in broadcast properties                                                                   |                                                                                                         |                                                                                                                                                               | 2,205                       |            |         |            | 2,736     |           
|Assets held for sale                                                                                  |                                                                                                         |                                                                                                                                                               | 2,556                       |            |         |            | 7,301     |           
|Other assets, net                                                                                     |                                                                                                         |                                                                                                                                                               | 21,411                      |            |         |            | 24,289    |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|Total assets                                                                                          |                                                                                                         | $                                                                                                                                                             | 1,224,305                   |            |         | $          | 1,283,677 |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                     
|LIABILITIES, MANDATORILY REDEEMABLE AND CONVERTIBLE PREFERRED
    STOCK
    AND STOCKHOLDERS DEFICIT
|Current liabilities:                                                                                  |                                                                                                         |                                                                                                                                                               |                             |            |         |            |           |           
|                                                                                                      | Accounts payable and accrued liabilities                                                                |                                                                                                                                                               | $                           | 40,500     |         |            | $         | 39,303     |        
|                                                                                                      | Accrued interest                                                                                        |                                                                                                                                                               |                             | 16,073     |         |            |           | 14,875     |        
|                                                                                                      | Current portion of obligations for program rights                                                       |                                                                                                                                                               |                             | 18,436     |         |            |           | 35,382     |        
|                                                                                                      | Current portion of obligations to CBS                                                                   |                                                                                                                                                               |                             | 17,726     |         |            |           | 19,556     |        
|                                                                                                      | Current portion of obligations for cable distribution rights                                            |                                                                                                                                                               |                             | 2,896      |         |            |           | 2,494      |        
|                                                                                                      | Deferred revenue                                                                                        |                                                                                                                                                               |                             | 16,344     |         |            |           | 15,573     |        
|                                                                                                      | Current portion of senior secured and senior subordinated notes                                         |                                                                                                                                                               |                             | 64         |         |            |           | 61         |        
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               | Total current liabilities   |            |         | 112,039    |           |            |         | 127,244    |  
|Obligations for program rights, net of current portion                                                |                                                                                                         |                                                                                                                                                               | 1,703                       |            |         |            | 7,902     |           
|Obligations to CBS, net of current portion                                                            |                                                                                                         |                                                                                                                                                               | 9,191                       |            |         |            | 27,704    |           
|Obligations for cable distribution rights, net of current portion                                     |                                                                                                         |                                                                                                                                                               |                            |            |         |            | 283       |           
|Deferred revenue, net of current portion                                                              |                                                                                                         |                                                                                                                                                               | 6,898                       |            |         |            | 6,898     |           
|Deferred income taxes                                                                                 |                                                                                                         |                                                                                                                                                               | 194,706                     |            |         |            | 175,281   |           
|Senior secured and senior subordinated notes, net of current
    portion                              |                                                                                                         |                                                                                                                                                               | 1,004,029                   |            |         |            | 925,547   |           
|Mandatorily redeemable preferred stock                                                                |                                                                                                         |                                                                                                                                                               | 471,355                     |            |         |            | 410,739   |           
|Other long-term liabilities                                                                           |                                                                                                         |                                                                                                                                                               | 10,980                      |            |         |            | 7,857     |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               | Total liabilities           |            |         | 1,810,901  |           |            |         | 1,689,455  |  
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|Mandatorily redeemable and convertible preferred stock                                                |                                                                                                         |                                                                                                                                                               | 740,745                     |            |         |            | 684,067   |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|Commitments and contingencies (See Notes to Consolidated
    Financial Statements)                    |                                                                                                         |                                                                                                                                                               |                             |            |         |            |           |           
|                                                                                                      | Stockholders deficit:                                                                                  |                                                                                                                                                               |                             |            |         |            |           |            |        
|                                                                                                      |                                                                                                         | Class A common stock, $0.001 par value; one vote per
    share; 215,000,000 shares authorized and 60,545,269 and
    63,131,125 shares issued and outstanding |                             |            | 61      |            |           |            | 63      |           
|                                                                                                      |                                                                                                         | Class B common stock, $0.001 par value; ten votes per
    share; 35,000,000 shares authorized and
    8,311,639 shares issued and outstanding                 |                             |            | 8       |            |           |            | 8       |           
|                                                                                                      |                                                                                                         | Class C non-voting common stock, $0.001 par value,
    77,500,000 shares authorized, no shares issued and
    outstanding                                     |                             |            |        |            |           |            |        |           
|                                                                                                      | Common stock warrants and call option                                                                   |                                                                                                                                                               |                             | 66,663     |         |            |           | 66,663     |        
|                                                                                                      | Additional paid-in capital                                                                              |                                                                                                                                                               |                             | 542,138    |         |            |           | 540,377    |        
|                                                                                                      | Deferred stock option compensation                                                                      |                                                                                                                                                               |                             | (10,687    | )       |            |           | (17,167    | )      
|                                                                                                      | Accumulated deficit                                                                                     |                                                                                                                                                               |                             | (1,925,524 | )       |            |           | (1,679,789 | )      
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                      |                                                                                                         |                                                                                                                                                               | Total stockholders deficit |            |         | (1,327,341 | )         |            |         | (1,089,845 | )
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           
|                                                                                                      | Total liabilities, mandatorily redeemable and convertible
    preferred stock and stockholders deficit |                                                                                                                                                               | $                           | 1,224,305  |         |            | $         | 1,283,677  |        
|                                                                                                      |                                                                                                         |                                                                                                                                                               |                             |            |         |           



F-7



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |         |   |            |         |         | 
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---------- | ------- | ------- | - | ---------- | ------- | ------- | - | ---------- | ------- | ------- | 
|                                                                                            |                                                                                                            | For the Years Ended December 31,               |           
|                                                                                            |                                                                                                            |                                                |           
|                                                                                            |                                                                                                            | 2004                                           |            |         | 2003    |   |            | 2002    |        
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|                                                                                            |                                                                                                            | (In thousands except share and per share data) |           
|NET REVENUES (net of agency commissions of $46,565, $46,067, and
    $44,975, respectively) |                                                                                                            | $                                              | 276,630    |         |         | $ | 270,939    |         |         | $ | 276,921    |        
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|EXPENSES:                                                                                   |                                                                                                            |                                                |            |         |         |   |            |         |         |   |            |        
|                                                                                            | Programming and broadcast operations (excluding stock-based
    compensation of $1,012, $1,872 and $575)   |                                                |            | 56,472  |         |   |            | 51,954  |         |   |            | 51,204  |        
|                                                                                            | Program rights amortization                                                                                |                                                |            | 53,616  |         |   |            | 51,082  |         |   |            | 77,980  |        
|                                                                                            | Selling, general and administrative (excluding stock-based
    compensation of $7,489, $10,894 and $3,235) |                                                |            | 121,835 |         |   |            | 110,976 |         |   |            | 132,305 |        
|                                                                                            | Business interruption insurance                                                                            |                                                |            |        |         |   |            |        |         |   |            | (1,617  | )      
|                                                                                            | Time brokerage and affiliation fees                                                                        |                                                |            | 4,466   |         |   |            | 4,403   |         |   |            | 4,079   |        
|                                                                                            | Stock-based compensation                                                                                   |                                                |            | 8,501   |         |   |            | 12,766  |         |   |            | 3,810   |        
|                                                                                            | Adjustment of programming to net realizable value                                                          |                                                |            | 4,645   |         |   |            | 1,066   |         |   |            | 41,270  |        
|                                                                                            | Restructuring (credits) charges                                                                            |                                                |            | (5      | )       |   |            | 48      |         |   |            | 2,173   |        
|                                                                                            | Reserve for state taxes                                                                                    |                                                |            | 691     |         |   |            | 3,055   |         |   |            |        |        
|                                                                                            | Depreciation and amortization                                                                              |                                                |            | 43,664  |         |   |            | 42,983  |         |   |            | 58,529  |        
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|                                                                                            |                                                                                                            | Total operating expenses                       |            |         | 293,885 |   |            |         | 278,333 |   |            |         | 369,733 | 
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Gain on sale or disposal of broadcast and other assets, net                                 |                                                                                                            |                                                | 4,836      |         |         |   | 51,589     |         |         |   | 22,906     |        
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Operating (loss) income                                                                     |                                                                                                            |                                                | (12,419    | )       |         |   | 44,195     |         |         |   | (69,906    | )      
|OTHER INCOME (EXPENSE):                                                                     |                                                                                                            |                                                |            |         |         |   |            |         |         |   |            |        
|                                                                                            | Interest expense                                                                                           |                                                |            | (94,192 | )       |   |            | (92,202 | )       |   |            | (85,214 | )      
|                                                                                            | Dividends on mandatorily redeemable preferred stock                                                        |                                                |            | (60,616 | )       |   |            | (27,539 | )       |   |            |        |        
|                                                                                            | Interest income                                                                                            |                                                |            | 2,811   |         |   |            | 3,440   |         |   |            | 2,363   |        
|                                                                                            | Other income, net                                                                                          |                                                |            |        |         |   |            | 341     |         |   |            | 1,876   |        
|                                                                                            | Loss on extinguishment of debt                                                                             |                                                |            | (6,286  | )       |   |            |        |         |   |            | (17,552 | )      
|                                                                                            | Gain on modification of program rights obligations                                                         |                                                |            | 1,481   |         |   |            | 2,103   |         |   |            | 1,520   |        
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Loss before income taxes                                                                    |                                                                                                            |                                                | (169,221   | )       |         |   | (69,662    | )       |         |   | (166,913   | )      
|Income tax provision                                                                        |                                                                                                            |                                                | (18,751    | )       |         |   | (6,551     | )       |         |   | (169,273   | )      
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Net loss                                                                                    |                                                                                                            |                                                | (187,972   | )       |         |   | (76,213    | )       |         |   | (336,186   | )      
|Dividends and accretion on redeemable and convertible preferred
    stock                   |                                                                                                            |                                                | (57,763    | )       |         |   | (70,104    | )       |         |   | (110,099   | )      
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Net loss attributable to common stockholders                                                |                                                                                                            | $                                              | (245,735   | )       |         | $ | (146,317   | )       |         | $ | (446,285   | )      
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Basic and diluted loss per common share                                                     |                                                                                                            | $                                              | (3.61      | )       |         | $ | (2.14      | )       |         | $ | (6.88      | )      
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        
|Weighted average shares outstanding                                                         |                                                                                                            |                                                | 68,139,205 |         |         |   | 68,389,640 |         |         |   | 64,849,068 |        
|                                                                                            |                                                                                                            |                                                |            |         |         |   |            |         |        



F-8



---



##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION





CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT


|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          |   |          |          |          |  
|----------------------------------------------------------------------------- | ------------------------------------- | -------------- | -- | ----- | -------- | ------ | ----- | ------------ |  | - | ---------- | - |  | ------------ | ------ | ----------- | ------------ | - | ------- | ------------- |  | ----- | ------------- | - |  | ------------- | ---------- | -------- | -------- | - | ------ | ------ | - | - | ---------- | -------- | -------- | - | -------- | -------- | -------- | -
|                                                                              |                                       |                |    |       |          | Common |       |              |  |   |            |   |  |              |        |             |              |   |         |               | 
|                                                                              |                                       |                |    | Stock |          |        | Stock |              |  |   |            |   |  |              |        | Accumulated |              |   |         |               | 
|                                                                              |                                       | Common Stock   |    |       | Warrants |        |       | Subscription |  |   | Additional |   |  | Deferred     |        |             |              |   | Other   |               |  | Total |               |   | 
|                                                                              |                                       |                |    |       | and Call |        |       | Notes        |  |   | Paid-In    |   |  | Stock Option |        |             | Accumulated  |   |         | Comprehensive |  |       | Stockholders |   |  | Comprehensive |           
|                                                                              |                                       | Class A        |    |       | Class B  |        |       | Option       |  |   | Receivable |   |  | Capital      |        |             | Compensation |   |         | Deficit       |  |       | Loss          |   |  | Deficit       |            |          | Loss     |  
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|                                                                              |                                       | (In thousands) |   
|Balance at January 1, 2002                                                    |                                       | $              | 56 |       |          | $      | 8     |              |  | $ | 68,384     |   |  | $            | (1,088 | )           |              | $ | 512,194 |               |  | $     | (6,537        | ) |  | $             | (1,087,187 | )        |          | $ | (1,350 | )      |   | $ | (515,520   | )        |          |   |          |         
|                                                                              | Comprehensive loss:                   |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          |   |          |          |         
|                                                                              | Net loss                              |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            | (336,186 | )        |   |        |        |   |   |            | (336,186 | )        |   | $        | (336,186 | )       
|                                                                              | Unrealized loss on interest rate swap |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        | (1,796 | ) |   |            | (1,796   | )        |   |          | (1,796   | )       
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|                                                                              | Comprehensive loss                    |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          |   | $        | (337,982 | )       
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Deferred stock option compensation                                            |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | (267    | )             |  |       | 267           |   |  |               |            |          |          |   |        |        |   |   |           |          |          |   |          |         
|Stock-based compensation                                                      |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       | 3,810         |   |  |               |            |          |          |   |        |        |   |   | 3,810      |          |          |   |          |         
|Stock options exercised                                                       |                                       |                | 1  |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | 1,182   |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   | 1,183      |          |          |   |          |         
|Interest on stock subscription notes receivable                               |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              | (489   | )           |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   | (489       | )        |          |   |          |         
|Reserve on stock subscription notes receivable                                |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              | 830    |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   | 830        |          |          |   |          |         
|Dividends on redeemable and convertible preferred stock                       |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               | (88,373    | )        |          |   |        |        |   |   | (88,373    | )        |          |   |          |         
|Accretion on redeemable preferred stock                                       |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               | (21,726    | )        |          |   |        |        |   |   | (21,726    | )        |          |   |          |         
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Balance at December 31, 2002                                                  |                                       |                | 57 |       |          |        | 8     |              |  |   | 68,384     |   |  |              | (747   | )           |              |   | 513,109 |               |  |       | (2,460        | ) |  |               | (1,533,472 | )        |          |   | (3,146 | )      |   |   | (958,267   | )        |          |   |          |         
|Comprehensive loss:                                                           |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          |   |          |         
|                                                                              |                                       | Net loss       |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          | (76,213  | ) |        |        |   |   |            |          | (76,213  | ) |          | $        | (76,213  | )
|Unrealized gain on interest rate swap                                         |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   | 3,146  |        |   |   | 3,146      |          |          |   | 3,146    |         
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Comprehensive loss                                                            |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          | $ | (73,067  | )       
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Deferred stock option compensation                                            |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | 27,314  |               |  |       | (27,314       | ) |  |               |            |          |          |   |        |        |   |   |           |          |          |   |          |         
|Stock-based compensation                                                      |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       | 12,607        |   |  |               |            |          |          |   |        |        |   |   | 12,607     |          |          |   |          |         
|Stock options exercised                                                       |                                       |                | 6  |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | 568     |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   | 574        |          |          |   |          |         
|Expiration of common stock warrants                                           |                                       |                |    |       |          |        |       |              |  |   | (1,721     | ) |  |              |        |             |              |   | 1,721   |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |           |          |          |   |          |         
|Payment of employee withholding taxes on exercise of common
    stock options |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | (2,335  | )             |  |       |               |   |  |               |            |          |          |   |        |        |   |   | (2,335     | )        |          |   |          |         
|Reduction of stock subscription notes receivable                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              | 747    |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   | 747        |          |          |   |          |         
|Dividends on redeemable and convertible preferred stock                       |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               | (69,009    | )        |          |   |        |        |   |   | (69,009    | )        |          |   |          |         
|Accretion on redeemable preferred stock                                       |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               | (1,095     | )        |          |   |        |        |   |   | (1,095     | )        |          |   |          |         
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Balance at December 31, 2003                                                  |                                       |                | 63 |       |          |        | 8     |              |  |   | 66,663     |   |  |              |       |             |              |   | 540,377 |               |  |       | (17,167       | ) |  |               | (1,679,789 | )        |          |   |       |        |   |   | (1,089,845 | )        |          |   |          |         
|Comprehensive loss:                                                           |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          |   |          |         
|                                                                              |                                       | Net loss       |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          | (187,972 | ) |        |        |   |   |            |          | (187,972 | ) |          | $        | (187,972 | )
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Comprehensive loss                                                            |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |            |          |          | $ | (187,972 | )       
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Deferred stock option compensation                                            |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | 1,756   |               |  |       | (1,756        | ) |  |               |            |          |          |   |        |        |   |   |           |          |          |   |          |         
|Stock-based compensation                                                      |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       | 8,236         |   |  |               |            |          |          |   |        |        |   |   | 8,236      |          |          |   |          |         
|Restricted stock exchanged for options                                        |                                       |                | (3 | )     |          |        |       |              |  |   |            |   |  |              |        |             |              |   | 3       |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   |           |          |          |   |          |         
|Stock options exercised                                                       |                                       |                | 1  |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   | 2       |               |  |       |               |   |  |               |            |          |          |   |        |        |   |   | 3          |          |          |   |          |         
|Dividends on redeemable and convertible preferred stock                       |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               | (56,175    | )        |          |   |        |        |   |   | (56,175    | )        |          |   |          |         
|Accretion on redeemable preferred stock                                       |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               | (1,588     | )        |          |   |        |        |   |   | (1,588     | )        |          |   |          |         
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  
|Balance at December 31, 2004                                                  |                                       | $              | 61 |       |          | $      | 8     |              |  | $ | 66,663     |   |  | $            |       |             |              | $ | 542,138 |               |  | $     | (10,687       | ) |  | $             | (1,925,524 | )        |          | $ |       |        |   | $ | (1,327,341 | )        |          |   |          |         
|                                                                              |                                       |                |    |       |          |        |       |              |  |   |            |   |  |              |        |             |              |   |         |               |  |       |               |   |  |               |            |          |          |  



F-9



---



##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |        |         |         |          |        |         |        | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------------------------------------- | --------------------------------------------------- | ------- | ------- | ------ | ------- | ------ | ------- | ------- | -------- | ------ | ------- | ------ | 
|                                                 |                                                                                               | For the Years Ended December 31,                                 |                                                                  
|                                                 |                                                                                               |                                                                  |                                                                  
|                                                 |                                                                                               | 2004                                                             |                                                                   |                                                     | 2003    |         |        | 2002    |       
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|                                                 |                                                                                               | (In thousands)                                                   |                                                                  
|Cash flows from operating activities:            |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |        |         |         |         
|                                                 | Net loss                                                                                      |                                                                  | $                                                                 | (187,972                                            | )       |         | $      | (76,213 | )      |         | $       | (336,186 | )     
|                                                 | Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities: |                                                                  |                                                                   |                                                     |         |         |        |         |        |         |         |          |       
|                                                 |                                                                                               | Depreciation and amortization                                    |                                                                   |                                                     | 43,664  |         |        |         | 42,983 |         |         |          | 58,529 |        
|                                                 | Stock-based compensation                                                                      |                                                                  |                                                                   | 8,501                                               |         |         |        | 12,766  |        |         |         | 3,810    |       
|                                                 | Loss on extinguishment of debt                                                                |                                                                  |                                                                   | 6,286                                               |         |         |        |        |        |         |         | 17,552   |       
|                                                 | Restructuring (credits) charges                                                               |                                                                  |                                                                   | (5                                                  | )       |         |        | 48      |        |         |         | 486      |       
|                                                 | Program rights amortization                                                                   |                                                                  |                                                                   | 53,616                                              |         |         |        | 51,082  |        |         |         | 77,980   |       
|                                                 | Adjustment of programming to net realizable value                                             |                                                                  |                                                                   | 4,645                                               |         |         |        | 1,066   |        |         |         | 41,270   |       
|                                                 | Payments for cable distribution rights                                                        |                                                                  |                                                                   | (123                                                | )       |         |        | (4,347  | )      |         |         | (9,286   | )     
|                                                 | Non-cash barter revenue                                                                       |                                                                  |                                                                   | (129                                                | )       |         |        | (66     | )      |         |         | (659     | )     
|                                                 | Program rights payments and deposits                                                          |                                                                  |                                                                   | (67,682                                             | )       |         |        | (34,239 | )      |         |         | (116,243 | )     
|                                                 | Provision for doubtful accounts                                                               |                                                                  |                                                                   | 155                                                 |         |         |        | (418    | )      |         |         | (126     | )     
|                                                 | Deferred income tax provision                                                                 |                                                                  |                                                                   | 19,425                                              |         |         |        | 6,670   |        |         |         | 168,611  |       
|                                                 | Reserve on stock subscription notes receivable                                                |                                                                  |                                                                   | (407                                                | )       |         |        | (240    | )      |         |         | 830      |       
|                                                 | Gain on sale or disposal of broadcast and other assets, net                                   |                                                                  |                                                                   | (4,836                                              | )       |         |        | (51,589 | )      |         |         | (22,906  | )     
|                                                 | Equity in income of unconsolidated investment                                                 |                                                                  |                                                                   |                                                    |         |         |        | (80     | )      |         |         | (460     | )     
|                                                 | Dividends and accretion on
    141/4%
    mandatorily redeemable preferred stock              |                                                                  |                                                                   | 60,616                                              |         |         |        | 27,539  |        |         |         |         |       
|                                                 | Accretion on senior subordinated discount notes                                               |                                                                  |                                                                   | 49,172                                              |         |         |        | 43,660  |        |         |         | 37,480   |       
|                                                 | Gain on modification of program rights obligations                                            |                                                                  |                                                                   | (1,481                                              | )       |         |        | (2,103  | )      |         |         | (1,520   | )     
|                                                 | Business interruption insurance                                                               |                                                                  |                                                                   |                                                    |         |         |        |        |        |         |         | (1,697   | )     
|                                                 | Changes in assets and liabilities:                                                            |                                                                  |                                                                   |                                                     |         |         |        |         |        |         |         |          |       
|                                                 |                                                                                               | (Increase) decrease in accounts receivable                       |                                                                   |                                                     | (1,834  | )       |        |         | 9,697  |         |         |          | 1,418  |        
|                                                 |                                                                                               | Decrease in amounts due from Crown Media                         |                                                                   |                                                     | 13,883  |         |        |         | 4,404  |         |         |          | 3,221  |        
|                                                 |                                                                                               | Decrease (increase) in prepaid expenses and other current assets |                                                                   |                                                     | 975     |         |        |         | (1,450 | )       |         |          | 354    |        
|                                                 |                                                                                               | Decrease in other assets                                         |                                                                   |                                                     | 6,514   |         |        |         | 5,931  |         |         |          | 7,842  |        
|                                                 |                                                                                               | Increase in accounts payable and accrued liabilities             |                                                                   |                                                     | 4,963   |         |        |         | 5,210  |         |         |          | 4,809  |        
|                                                 |                                                                                               | Increase (decrease) in accrued interest                          |                                                                   |                                                     | 1,198   |         |        |         | 254    |         |         |          | (599   | )      
|                                                 |                                                                                               | Decrease in obligations to CBS                                   |                                                                   |                                                     | (18,861 | )       |        |         | (7,649 | )       |         |          | (9,938 | )      
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|                                                 |                                                                                               |                                                                  | Net cash (used in) provided by operating activities               |                                                     |         | (9,717  | )      |         |        | 32,916  |         |          |        | (75,428 | )     
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|Cash flows from investing activities:            |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |        |         |         |         
|                                                 |                                                                                               |                                                                  | Decrease (increase) in short-term investments                     |                                                     |         | 6,955   |        |         |        | 4,125   |         |          |        | (4,923  | )     
|                                                 |                                                                                               |                                                                  | Deposits for programming letters of credit                        |                                                     |         | (24,603 | )      |         |        |        |         |          |        |        |       
|                                                 |                                                                                               |                                                                  | Acquisitions of broadcasting properties                           |                                                     |         |        |        |         |        |        |         |          |        | (265    | )     
|                                                 |                                                                                               |                                                                  | Increase in investments in broadcast properties                   |                                                     |         |        |        |         |        | (24     | )       |          |        |        |       
|                                                 |                                                                                               |                                                                  | Purchases of property and equipment                               |                                                     |         | (15,845 | )      |         |        | (26,732 | )       |          |        | (31,177 | )     
|                                                 |                                                                                               |                                                                  | Proceeds from sales of broadcast assets                           |                                                     |         | 9,988   |        |         |        | 83,332  |         |          |        | 26,647  |       
|                                                 |                                                                                               |                                                                  | Proceeds from sale of broadcast towers and property and equipment |                                                     |         | 28      |        |         |        | 360     |         |          |        | 143     |       
|                                                 |                                                                                               |                                                                  | Proceeds from insurance recoveries                                |                                                     |         |        |        |         |        |        |         |          |        | 2,722   |       
|                                                 |                                                                                               |                                                                  | Other                                                             |                                                     |         | (170    | )      |         |        | (132    | )       |          |        | (836    | )     
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|                                                 | Net cash (used in) provided by investing activities                                           |                                                                  |                                                                   | (23,647                                             | )       |         |        | 60,929  |        |         |         | (7,689   | )     
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|Cash flows from financing activities:            |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |        |         |         |         
|                                                 | Borrowings of long-term debt                                                                  |                                                                  |                                                                   | 365,000                                             |         |         |        | 2,000   |        |         |         | 336,338  |       
|                                                 | Repayments of long-term debt                                                                  |                                                                  |                                                                   | (335,687                                            | )       |         |        | (20,152 | )      |         |         | (2,898   | )     
|                                                 | Redemption of
    121/2%
    exchange debentures                                              |                                                                  |                                                                   |                                                    |         |         |        |        |        |         |         | (284,410 | )     
|                                                 | Payment of loan origination costs                                                             |                                                                  |                                                                   | (11,441                                             | )       |         |        | (2,259  | )      |         |         | (10,886  | )     
|                                                 | Debt extinguishment premium and costs                                                         |                                                                  |                                                                   |                                                    |         |         |        |        |        |         |         | (14,302  | )     
|                                                 | Payments of employee withholding taxes on exercise of common
    stock options                |                                                                  |                                                                   |                                                    |         |         |        | (2,335  | )      |         |         |         |       
|                                                 | Proceeds from exercise of common stock options, net                                           |                                                                  |                                                                   | 3                                                   |         |         |        | 115     |        |         |         | 1,182    |       
|                                                 | Repayment of stock subscription notes receivable                                              |                                                                  |                                                                   | 413                                                 |         |         |        | 144     |        |         |         |         |       
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|                                                 |                                                                                               |                                                                  |                                                                   | Net cash provided by (used in) financing activities |         |         | 18,288 |         |        |         | (22,487 | )        |        |         | 25,024 | 
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|(Decrease) increase in cash and cash equivalents |                                                                                               |                                                                  | (15,076                                                           | )                                                   |         |         | 71,358 |         |        |         | (58,093 | )       
|Cash and cash equivalents, beginning of year     |                                                                                               |                                                                  | 97,123                                                            |                                                     |         |         | 25,765 |         |        |         | 83,858  |         
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       
|Cash and cash equivalents, end of year           |                                                                                               | $                                                                | 82,047                                                            |                                                     |         | $       | 97,123 |         |        | $       | 25,765  |         
|                                                 |                                                                                               |                                                                  |                                                                   |                                                     |         |         |        |         |       



F-10



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                                                          
|-- | -------------------------------------------------------------------------
|1. | NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES

Basis of Presentation








Cash and Cash Equivalents




Short-Term Investments




Accounts Receivable




F-11



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Property and Equipment




|                                     |  |  |            | 
|------------------------------------ |  |  | ---------- | 
|Broadcasting towers and equipment    |  |  | 4-30 years | 
|Office furniture and equipment       |  |  | 5-10 years | 
|Buildings and leasehold improvements |  |  | 7-40 years | 
|Aircraft, vehicles and other         |  |  | 5 years    | 



Intangible Assets






F-12



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Program Rights






Cable and Satellite Distribution Rights








F-13



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Investments in Broadcast Properties






Long-Lived Assets








Derivative Financial Instruments




F-14



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Revenue Recognition




Advertising Costs




Time Brokerage Agreements




Stock-Based Compensation




F-15



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                        |             |                          |          |       |      |   |          |       |   |   |          |       |  
|----------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------------ | -------- | ----- | ---- | - | -------- | ----- | - | - | -------- | ----- | -
|                                                                                                                        |             | Years Ended December 31, |         
|                                                                                                                        |             |                          |         
|                                                                                                                        |             | 2004                     |          |       | 2003 |   |          | 2002  |  
|                                                                                                                        |             |                          |          |       |      |   |          |       |  
|Net loss attributable to common stockholders                                                                            |             | $                        | (245,735 | )     |      | $ | (146,317 | )     |   | $ | (446,285 | )    
|Add: Stock-based compensation expense determined under the
    intrinsic value method and included in reported net loss |             |                          | 8,501    |       |      |   | 12,766   |       |   |   | 3,810    |      
|Deduct: Total stock-based compensation expense determined under
    the fair value method                               |             |                          | (8,632   | )     |      |   | (15,079  | )     |   |   | (7,317   | )    
|                                                                                                                        |             |                          |          |       |      |   |          |       |  
|Pro forma net loss attributable to common stockholders                                                                  |             | $                        | (245,866 | )     |      | $ | (148,630 | )     |   | $ | (449,792 | )    
|                                                                                                                        |             |                          |          |       |      |   |          |       |  
|Basic and diluted net loss per share:                                                                                   |             |                          |          |       |      |   |          |       |   |   |          |      
|                                                                                                                        | As reported |                          | $        | (3.61 | )    |   | $        | (2.14 | ) |   | $        | (6.88 | )
|                                                                                                                        | Pro forma   |                          |          | (3.61 | )    |   |          | (2.17 | ) |   |          | (6.94 | )



Income and Other Taxes








F-16



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Per Share Data






|                                                                                  |  |      |        |  |      |  |        |      |  |  |        | 
|--------------------------------------------------------------------------------- |  | ---- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                                                  |  | 2004 |        |  | 2003 |  |        | 2002 | 
|                                                                                  |  |      |        |  |      |  |        |      | 
|Stock options outstanding                                                         |  |      | 5,859  |  |      |  | 3,129  |      |  |  | 11,426 | 
|Class A common stock warrants and restricted Class A
    common stock outstanding |  |      | 32,321 |  |      |  | 32,032 |      |  |  | 32,428 | 
|Class A common stock reserved for issuance under
    convertible securities       |  |      | 40,712 |  |      |  | 39,903 |      |  |  | 39,167 | 
|                                                                                  |  |      |        |  |      |  |        |      | 
|                                                                                  |  |      | 78,892 |  |      |  | 75,064 |      |  |  | 83,021 | 
|                                                                                  |  |      |        |  |      |  |        |      | 

3 4


Use of Estimates




New Accounting Pronouncements




F-17



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|   |                 
|-- | ----------------
|2. | NBC TRANSACTIONS





F-18



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














F-19



---



##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |              
|-- | -------------
|3. | RESTRUCTURING





F-20



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |                       |                   |    |                 |                     |   |    |            |   |   |                   |     |   |   |   |   | 
|----------------------- | --------------------- | ----------------- | -- | --------------- | ------------------- | - | -- | ---------- | - | - | ----------------- | --- | - | - | - | - | 
|                        |                       |                   |    | Amounts Charged |                     |   |    |            |  
|                        |                       | Balance           |    |                 | (Credited) to Costs |   |    | Cash       |   |   | Balance           |    
|                        |                       | December 31, 2003 |    |                 | and Expenses        |   |    | Deductions |   |   | December 31, 2004 |    
|                        |                       |                   |    |                 |                     |   |    |            |   |   |                   |    
|Corporate Restructuring |                       |                   |    |                 |                     |   |    |            |   |   |                   |     |   |   |   |  
|Accrued liabilities:    |                       |                   |    |                 |                     |   |    |            |   |   |                   |     |   |   |   |  
|                        | Lease and other costs |                   | $  | 51              |                     |   | $  |           |   |   | $                 | (51 | ) |   | $ |  | 
|                        | Severance             |                   |    | 5               |                     |   |    | (5         | ) |   |                   |    |   |   |   |  | 
|                        |                       |                   |    |                 |                     |   |    |            |   |   |                   |    
|                        |                       | $                 | 56 |                 |                     | $ | (5 | )          |   | $ | (51               | )   |   | $ |  |  
|                        |                       |                   |    |                 |                     |   |    |            |   |   |                   |    
|JSA Restructuring       |                       |                   |    |                 |                     |   |    |            |   |   |                   |     |   |   |   |  
|Accrued liabilities:    |                       |                   |    |                 |                     |   |    |            |   |   |                   |     |   |   |   |  
|                        | Lease costs           |                   | $  | 89              |                     |   | $  |           |   |   | $                 | (87 | ) |   | $ | 2 | 
|                        |                       |                   |    |                 |                     |   |    |            |   |   |                   |    

|                        |                       |                   |     |                 |                     |   |    |            |   |   |                   |      |   |   |    |    | 
|----------------------- | --------------------- | ----------------- | --- | --------------- | ------------------- | - | -- | ---------- | - | - | ----------------- | ---- | - | - | -- | -- | 
|                        |                       |                   |     | Amounts Charged |                     |   |    |            |  
|                        |                       | Balance           |     |                 | (Credited) to Costs |   |    | Cash       |   |   | Balance           |     
|                        |                       | December 31, 2002 |     |                 | and Expenses        |   |    | Deductions |   |   | December 31, 2003 |     
|                        |                       |                   |     |                 |                     |   |    |            |   |   |                   |     
|Corporate Restructuring |                       |                   |     |                 |                     |   |    |            |   |   |                   |      |   |   |    |   
|Accrued liabilities:    |                       |                   |     |                 |                     |   |    |            |   |   |                   |      |   |   |    |   
|                        | Lease and other costs |                   | $   | 262             |                     |   | $  | 115        |   |   | $                 | (326 | ) |   | $  | 51 | 
|                        | Severance             |                   |     | 732             |                     |   |    | (67        | ) |   |                   | (660 | ) |   |    | 5  | 
|                        |                       |                   |     |                 |                     |   |    |            |   |   |                   |     
|                        |                       | $                 | 994 |                 |                     | $ | 48 |            |   | $ | (986              | )    |   | $ | 56 |   
|                        |                       |                   |     |                 |                     |   |    |            |   |   |                   |     
|JSA Restructuring       |                       |                   |     |                 |                     |   |    |            |   |   |                   |      |   |   |    |   
|Accrued liabilities:    |                       |                   |     |                 |                     |   |    |            |   |   |                   |      |   |   |    |   
|                        | Lease costs           |                   | $   | 528             |                     |   | $  |           |   |   | $                 | (439 | ) |   | $  | 89 | 
|                        |                       |                   |     |                 |                     |   |    |            |   |   |                   |     

|                        |                       |                   |       |                 |                     |   |       |            |   |   |                   |        |   |   |     |     | 
|----------------------- | --------------------- | ----------------- | ----- | --------------- | ------------------- | - | ----- | ---------- | - | - | ----------------- | ------ | - | - | --- | --- | 
|                        |                       |                   |       | Amounts Charged |                     |   |       |            |  
|                        |                       | Balance           |       |                 | (Credited) to Costs |   |       | Cash       |   |   | Balance           |       
|                        |                       | December 31, 2001 |       |                 | and Expenses        |   |       | Deductions |   |   | December 31, 2002 |       
|                        |                       |                   |       |                 |                     |   |       |            |   |   |                   |       
|Corporate Restructuring |                       |                   |       |                 |                     |   |       |            |   |   |                   |        |   |   |     |    
|Accrued liabilities:    |                       |                   |       |                 |                     |   |       |            |   |   |                   |        |   |   |     |    
|                        | Lease and other costs |                   | $     |                |                     |   | $     | 422        |   |   | $                 | (160   | ) |   | $   | 262 | 
|                        | Severance             |                   |       |                |                     |   |       | 2,218      |   |   |                   | (1,486 | ) |   |     | 732 | 
|                        |                       |                   |       |                 |                     |   |       |            |   |   |                   |       
|                        |                       | $                 |      |                 |                     | $ | 2,640 |            |   | $ | (1,646            | )      |   | $ | 994 |    
|                        |                       |                   |       |                 |                     |   |       |            |   |   |                   |       
|JSA Restructuring       |                       |                   |       |                 |                     |   |       |            |   |   |                   |        |   |   |     |    
|Accrued liabilities:    |                       |                   |       |                 |                     |   |       |            |   |   |                   |        |   |   |     |    
|                        | Lease costs           |                   | $     | 1,717           |                     |   | $     | (194       | ) |   | $                 | (995   | ) |   | $   | 528 | 
|                        | Severance             |                   |       | 382             |                     |   |       | (273       | ) |   |                   | (109   | ) |   |     |    | 
|                        |                       |                   |       |                 |                     |   |       |            |   |   |                   |       
|                        |                       | $                 | 2,099 |                 |                     | $ | (467  | )          |   | $ | (1,104            | )      |   | $ | 528 |    
|                        |                       |                   |       |                 |                     |   |       |            |   |   |                   |       

F-21



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                                    
|-- | ---------------------------------------------------
|4. | CERTAIN TRANSACTIONS WITH RELATED AND OTHER PARTIES



DP Media, Inc.




The Christian Network, Inc.




CNI Master Agreement.


License Agreement.


CNI Tax Indemnification Agreement.


Network Operations Center.


F-22



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Loans






|   |                        
|-- | -----------------------
|5. | PROPERTY AND EQUIPMENT:



|                                          |  |      |          |   |      |   |          |  
|----------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                          |  | 2004 |          |   | 2003 |  
|                                          |  |      |          |   |      |  
|Broadcasting towers and equipment         |  | $    | 233,235  |   |      | $ | 245,492  |  
|Office furniture and equipment            |  |      | 16,834   |   |      |   | 19,031   |  
|Buildings and leasehold improvements      |  |      | 22,622   |   |      |   | 16,963   |  
|Land and improvements                     |  |      | 1,232    |   |      |   | 667      |  
|Aircraft, vehicles and other              |  |      | 3,945    |   |      |   | 3,959    |  
|                                          |  |      |          |   |      |  
|                                          |  |      | 277,868  |   |      |   | 286,112  |  
|Accumulated depreciation and amortization |  |      | (174,342 | ) |      |   | (165,271 | )
|                                          |  |      |          |   |      |  
|Property and equipment, net               |  | $    | 103,526  |   |      | $ | 120,841  |  
|                                          |  |      |          |   |      |  







|   |                  
|-- | -----------------
|6. | INTANGIBLE ASSETS



|                                   |                                         |          |         |         |              |   |         |          |   |   |              |         |  |   |         |         |  
|---------------------------------- | --------------------------------------- | -------- | ------- | ------- | ------------ | - | ------- | -------- | - | - | ------------ | ------- |  | - | ------- | ------- | -
|                                   |                                         | 2004     |         |         | 2003         |  
|                                   |                                         |          |         |         |              |  
|                                   |                                         | Gross    |         |         |              |   | Gross   |          |   |  
|                                   |                                         | Carrying |         |         | Accumulated  |   |         | Carrying |   |   | Accumulated  |        
|                                   |                                         | Amount   |         |         | Amortization |   |         | Amount   |   |   | Amortization |        
|                                   |                                         |          |         |         |              |   |         |          |   |   |              |        
|Amortizable intangible assets:     |                                         |          |         |         |              |   |         |          |   |   |              |         |  |   |         |        
|                                   | Cable and satellite distribution rights |          | $       | 127,793 |              |   | $       | (87,740  | ) |   | $            | 128,810 |  |   | $       | (78,957 | )
|                                   | Other                                   |          |         | 5,025   |              |   |         | (4,630   | ) |   |              | 5,025   |  |   |         | (4,064  | )
|Indefinite lived intangible asset: |                                         |          |         |         |              |   |         |          |   |   |              |         |  |   |         |        
|                                   | FCC licenses                            |          |         | 843,462 |              |   |         |         |   |   |              | 843,140 |  |   |         |        |  
|                                   |                                         |          |         |         |              |   |         |          |   |   |              |        
|                                   |                                         | $        | 976,280 |         |              | $ | (92,370 | )        |   | $ | 976,975      |         |  | $ | (83,021 | )      
|                                   |                                         |          |         |         |              |   |         |          |   |   |              |        

F-23



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ | 9,956  | 
|2006       |  |   | 9,832  | 
|2007       |  |   | 9,557  | 
|2008       |  |   | 7,044  | 
|2009       |  |   | 1,195  | 
|Thereafter |  |   | 2,864  | 
|           |  |   |       
|           |  | $ | 40,448 | 
|           |  |   |       



|   |               
|-- | --------------
|7. | PROGRAM RIGHTS



|                         |  |      |          |   |      |   |          |  
|------------------------ |  | ---- | -------- | - | ---- | - | -------- | -
|                         |  | 2004 |          |   | 2003 |  
|                         |  |      |          |   |      |  
|Program rights           |  | $    | 208,055  |   |      | $ | 371,146  |  
|Accumulated amortization |  |      | (149,621 | ) |      |   | (300,847 | )
|                         |  |      |          |   |      |  
|                         |  |      | 58,434   |   |      |   | 70,299   |  
|Less: current portion    |  |      | (38,853  | ) |      |   | (41,659  | )
|                         |  |      |          |   |      |  
|Program rights, net      |  | $    | 19,581   |   |      | $ | 28,640   |  
|                         |  |      |          |   |      |  





|     |  |                 |        |  |                |   |        |       |  |   |        | 
|---- |  | --------------- | ------ |  | -------------- | - | ------ | ----- |  | - | ------ | 
|     |  | Obligations for |        |  |                |   |       
|     |  | Program         |        |  | Program Rights |   |        |      
|     |  | Rights          |        |  | Commitments    |   |        | Total | 
|     |  |                 |        |  |                |   |        |       | 
|2005 |  | $               | 18,436 |  |                | $ | 25,340 |       |  | $ | 43,776 | 
|2006 |  |                 | 1,703  |  |                |   |       |       |  |   | 1,703  | 
|     |  |                 |        |  |                |   |        |       | 
|     |  | $               | 20,139 |  |                | $ | 25,340 |       |  | $ | 45,479 | 
|     |  |                 |        |  |                |   |        |       | 



(Touched)


F-24



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Touched Touched Touched




Touched Touched


Touched Touched Touched


Touched Touched


|                             |  |             |        |  |                  |   |         |            |  |   |        | 
|---------------------------- |  | ----------- | ------ |  | ---------------- | - | ------- | ---------- |  | - | ------ | 
|                             |  | Obligations |        |  | Amounts Due from |   |         |           
|                             |  | to CBS      |        |  | Crown Media      |   |         | Net Amount | 
|                             |  |             |        |  |                  |   |         |            | 
|2005                         |  | $           | 17,726 |  |                  | $ | (10,439 | )          |  | $ | 7,287  | 
|2006                         |  |             | 9,191  |  |                  |   | (1,711  | )          |  |   | 7,480  | 
|                             |  |             |        |  |                  |   |         |            | 
|                             |  |             | 26,917 |  |                  |   | (12,150 | )          |  |   | 14,767 | 
|Amount representing interest |  |             |       |  |                  |   | 610     |            |  |   | 610    | 
|                             |  |             |        |  |                  |   |         |            | 
|                             |  | $           | 26,917 |  |                  | $ | (11,540 | )          |  | $ | 15,377 | 
|                             |  |             |        |  |                  |   |         |            | 

F-25



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                     
|-- | --------------------
|8. | ASSETS HELD FOR SALE





|                            |  |      |       |  |      |   |       | 
|--------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                            |  | 2004 |       |  | 2003 |  
|                            |  |      |       |  |      |  
|Intangible assets, net      |  | $    | 315   |  |      | $ | 3,499 | 
|Property and equipment, net |  |      | 2,241 |  |      |   | 3,802 | 
|                            |  |      |       |  |      |  
|                            |  | $    | 2,556 |  |      | $ | 7,301 | 
|                            |  |      |       |  |      |  















F-26



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                             
|-- | --------------------------------------------
|9. | SENIOR SECURED AND SENIOR SUBORDINATED NOTES



|                                                                                                                                                                          |                                                                                                                                                                                                                                                                |      |           |   |      |   |           |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --------- | - | ---- | - | --------- | ------- | 
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                | 2004 |           |   | 2003 |  
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                |      |           |   |      |  
|Senior Secured Floating Rate Notes due 2010, secured by
    substantially all of the assets of the Company, interest at
    LIBOR plus 2.75% (4.82% at December 31, 2004) |                                                                                                                                                                                                                                                                | $    | 365,000   |   |      | $ |          |        
|121/4% Senior
    Subordinated Discount Notes due 2009                                                                                                                    |                                                                                                                                                                                                                                                                |      | 496,263   |   |      |   | 496,263   |        
|103/4% Senior
    Subordinated Notes, due 2008                                                                                                                            |                                                                                                                                                                                                                                                                |      | 200,000   |   |      |   | 200,000   |        
|Senior Credit Facility:                                                                                                                                                   |                                                                                                                                                                                                                                                                |      |           |   |      |   |           |        
|                                                                                                                                                                          |  $25.0 million revolving line of credit,
    maturing June 30, 2006, interest at LIBOR plus 3.25% or
    Base Rate (as defined) plus 2.25% at the Companys option
    (4.52% at December 31, 2003)                                                           |      |           |  |      |   |           | 8,000   | 
|                                                                                                                                                                          |  $50.0 million Term A loan, maturing
    December 31, 2005, interest at LIBOR plus 3.25% or Base
    Rate (as defined) plus 2.25% at the Companys option (4.85%
    at December 31, 2003), quarterly principal payments that
    commenced in September 2003 |      |           |  |      |   |           | 49,750  | 
|                                                                                                                                                                          |  $285.0 million Term B loan, maturing
    June 30, 2006, interest at LIBOR plus 3.25% or Base Rate
    (as defined) plus 2.25% at the Companys option (4.43% at
    December 31, 2003), quarterly principal payments that
    commenced in September 2001    |      |           |  |      |   |           | 277,875 | 
|Other                                                                                                                                                                     |                                                                                                                                                                                                                                                                |      | 443       |   |      |   | 505       |        
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                |      |           |   |      |  
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                |      | 1,061,706 |   |      |   | 1,032,393 |        
|Less: discount on Senior Subordinated Discount Notes                                                                                                                      |                                                                                                                                                                                                                                                                |      | (57,613   | ) |      |   | (106,785  | )      
|Less: current portion                                                                                                                                                     |                                                                                                                                                                                                                                                                |      | (64       | ) |      |   | (61       | )      
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                |      |           |   |      |  
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                | $    | 1,004,029 |   |      | $ | 925,547   |        
|                                                                                                                                                                          |                                                                                                                                                                                                                                                                |      |           |   |      |  





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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


1 4 1 2 1 4 1 4 1 4 1 4 1 2


1 4


|                                          |  |  |         |  
|----------------------------------------- |  |  | ------- | -
|Twelve Month Period Beginning January 15, |  | 
|                                          |  | 
|2006                                      |  |  | 106.125 | %
|2007                                      |  |  | 103.063 | %
|2008 and thereafter                       |  |  | 100.000 | %

3 4 3 4 3 4 3 4


|                                       |  |  |         |  
|-------------------------------------- |  |  | ------- | -
|Twelve Month Period Beginning July 15, |  | 
|                                       |  | 
|2005                                   |  |  | 105.375 | %
|2006                                   |  |  | 102.688 | %
|2007                                   |  |  | 100.000 | %

1 4 3 4 1 4 3 4




F-28



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|           |  |   |           | 
|---------- |  | - | --------- | 
|2005       |  | $ | 64        | 
|2006       |  |   | 71        | 
|2007       |  |   | 79        | 
|2008       |  |   | 200,086   | 
|2009       |  |   | 496,358   | 
|Thereafter |  |   | 365,048   | 
|           |  |   |          
|           |  | $ | 1,061,706 | 
|           |  |   |          





|    |             
|--- | ------------
|10. | INCOME TAXES



|          |                               |                                  |         |         |         |   |        |         |        |   |          |          |          |  
|--------- | ----------------------------- | -------------------------------- | ------- | ------- | ------- | - | ------ | ------- | ------ | - | -------- | -------- | -------- | -
|          |                               | 2004                             |         |         | 2003    |   |        | 2002    |       
|          |                               |                                  |         |         |         |   |        |         |       
|Current:  |                               |                                  |         |         |         |   |        |         |        |   |          |         
|          | Federal                       |                                  | $       | 542     |         |   | $      |        |        |   | $        | (542     | )       
|          | State                         |                                  |         | 132     |         |   |        | 119     |        |   |          | (120     | )       
|          |                               |                                  |         |         |         |   |        |         |       
|          |                               |                                  | 674     |         |         |   | 119    |         |        |   | (662     | )       
|          |                               |                                  |         |         |         |   |        |         |       
|Deferred: |                               |                                  |         |         |         |   |        |         |        |   |          |         
|          | Federal                       |                                  |         | 35,080  |         |   |        | 14,513  |        |   |          | 50,723   |         
|          | State                         |                                  |         | 9,020   |         |   |        | 1,244   |        |   |          | 4,348    |         
|          | Change in valuation allowance |                                  |         | (63,525 | )       |   |        | (22,427 | )      |   |          | (223,682 | )       
|          |                               |                                  |         |         |         |   |        |         |       
|          |                               |                                  | (19,425 | )       |         |   | (6,670 | )       |        |   | (168,611 | )       
|          |                               |                                  |         |         |         |   |        |         |       
|          |                               | Total provision for income taxes |         | $       | (18,751 | ) |        | $       | (6,551 | ) |          | $        | (169,273 | )
|          |                               |                                  |         |         |         |   |        |         |       

F-29



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |                                                                                                          |                                                                                |         |          |          |   |         |          |          |  
|------------------------- | -------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                          |                                                                                                          | 2004                                                                           |         |          | 2003     |  
|                          |                                                                                                          |                                                                                |         |          |          |  
|Deferred tax assets:      |                                                                                                          |                                                                                |         |          |          |   |         |         
|                          | Net operating loss carryforwards                                                                         |                                                                                | $       | 362,300  |          |   | $       | 314,692  |         
|                          | Programming                                                                                              |                                                                                |         | 9,621    |          |   |         | 18,369   |         
|                          | Deferred compensation                                                                                    |                                                                                |         | 23,915   |          |   |         | 20,687   |         
|                          | Deferred interest expense                                                                                |                                                                                |         | 43,290   |          |   |         | 26,278   |         
|                          | Other                                                                                                    |                                                                                |         | 3,627    |          |   |         | 593      |         
|                          |                                                                                                          |                                                                                |         |          |          |  
|                          |                                                                                                          |                                                                                | 442,753 |          |          |   | 380,619 |         
|                          |                                                                                                          |                                                                                |         |          |          |  
|                          | Deferred tax asset valuation allowance                                                                   |                                                                                |         | (434,062 | )        |   |         | (370,537 | )       
|                          |                                                                                                          |                                                                                |         |          |          |  
|                          |                                                                                                          | Net deferred tax assets                                                        |         |          | 8,691    |   |         |          | 10,082   |  
|Deferred tax liabilities: |                                                                                                          |                                                                                |         |          |          |   |         |         
|                          | Basis difference on FCC licenses no longer amortized for
    financial reporting purposes under SFAS 142 |                                                                                |         | (194,706 | )        |   |         | (175,281 | )       
|                          |                                                                                                          | Basis difference on other fixed assets and certain other
    intangible assets |         |          | (8,691   | ) |         |          | (10,082  | )
|                          |                                                                                                          |                                                                                |         |          |          |  
|                          |                                                                                                          | Net deferred tax liability                                                     |         | $        | (194,706 | ) |         | $        | (175,281 | )
|                          |                                                                                                          |                                                                                |         |          |          |  



|                                                                 |  |      |         |   |      |   |         |      |  |   |          |  
|---------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                 |  | 2004 |         |   | 2003 |   |         | 2002 | 
|                                                                 |  |      |         |   |      |   |         |      | 
|Tax benefit at U.S. federal statutory tax rate                   |  | $    | 38,199  |   |      | $ | 14,743  |      |  | $ | 58,651   |  
|State income tax benefit, net of federal tax                     |  |      | 4,344   |   |      |   | 1,264   |      |  |   | 5,024    |  
|Effect of increase in state tax rate on net deferred liabilities |  |      | 4,864   |   |      |   |        |      |  |   |         |  
|Non-deductible preferred stock redemption premium                |  |      |        |   |      |   |        |      |  |   | (6,647   | )
|Disqualified original issue discount                             |  |      | (2,832  | ) |      |   | (2,451  | )    |  |   | (2,104   | )
|Non-deductible items                                             |  |      | (264    | ) |      |   | (247    | )    |  |   | (515     | )
|Valuation allowance                                              |  |      | (63,525 | ) |      |   | (22,427 | )    |  |   | (223,682 | )
|Tax benefit of disposed FCC license intangible                   |  |      |        |   |      |   | 3,078   |      |  |   |         |  
|Other                                                            |  |      | 463     |   |      |   | (511    | )    |  |   |         |  
|                                                                 |  |      |         |   |      |   |         |      | 
|Provision for income taxes                                       |  | $    | (18,751 | ) |      | $ | (6,551  | )    |  | $ | (169,273 | )
|                                                                 |  |      |         |   |      |   |         |      | 



F-30



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












F-31



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                      
|--- | ---------------------
|11. | STOCK INCENTIVE PLANS





|                        |  |                    |           | 
|----------------------- |  | ------------------ | --------- | 
|                        |  | Restricted Stock   |          
|                        |  | Awards and Options |          
|Year Ended December 31, |  | Vesting            |          
|                        |  |                    |          
|2005                    |  |                    | 564,500   | 
|2006                    |  |                    | 321,167   | 
|2007                    |  |                    | 64,000    | 
|2008                    |  |                    | 1,956,000 | 
|                        |  |                    |          
|                        |  |                    | 2,905,667 | 
|                        |  |                    |          





F-32



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                               |  |           |           |          |          |   |      |           |          |  |            |   |  |           |      |  |          |  |           |   |  |   |      | 
|-------------------------------------------------------------- |  | --------- | --------- | -------- | -------- | - | ---- | --------- | -------- |  | ---------- | - |  | --------- | ---- |  | -------- |  | --------- | - |  | - | ---- | 
|                                                               |  | 2004      |           |          | 2003     |   |      | 2002      |         
|                                                               |  |           |           |          |          |   |      |           |         
|                                                               |  |           |           | Weighted |          |   |      |           | Weighted |  |            |   |  | Weighted  |     
|                                                               |  |           |           | Average  |          |   |      |           | Average  |  |            |   |  | Average   |     
|                                                               |  | Number of |           |          | Exercise |   |      | Number of |          |  | Exercise   |   |  | Number of |      |  | Exercise | 
|                                                               |  | Options   |           |          | Price    |   |      | Options   |          |  | Price      |   |  | Options   |      |  | Price    | 
|                                                               |  |           |           |          |          |   |      |           |          |  |            |   |  |           |      |  |          | 
|Outstanding, beginning of year                                 |  |           | 2,606,686 |          |          | $ | 2.70 |           |          |  | 9,103,336  |   |  | $         | 5.88 |  |          |  | 9,452,436 |   |  | $ | 5.91 | 
|Granted                                                        |  |           | 4,316,000 |          |          |   | .01  |           |          |  | 7,529,409  |   |  |           | .04  |  |          |  | 80,500    |   |  |   | 7.25 | 
|Forfeited                                                      |  |           | (915,625  | )        |          |   | 4.88 |           |          |  | (6,410,350 | ) |  |           | 7.25 |  |          |  | (240,950  | ) |  |   | 7.25 | 
|Exercised                                                      |  |           | (670,348  | )        |          |   | .01  |           |          |  | (7,615,709 | ) |  |           | .04  |  |          |  | (188,650  | ) |  |   | 6.37 | 
|                                                               |  |           |           |          |          |   |      |           |          |  |            |   |  |           |      |  |          | 
|Outstanding, end of year                                       |  |           | 5,336,713 |          |          |   | .49  |           |          |  | 2,606,686  |   |  |           | 2.70 |  |          |  | 9,103,336 |   |  |   | 5.88 | 
|                                                               |  |           |           |          |          |   |      |           |          |  |            |   |  |           |      |  |          | 
|Weighted average fair value of options granted during the year |  |           |           |          |          | $ | 1.64 |           |          |  |            |   |  | $         | 3.72 |  |          |  |           |   |  | $ | 7.66 | 





|                |  |              |           |          |             |  |     |                |  |  |           | 
|--------------- |  | ------------ | --------- | -------- | ----------- |  | --- | -------------- |  |  | --------- | 
|                |  |              |           | Weighted |             |  |    
|                |  | Number       |           |          | Average     |  |     | Number         | 
|                |  | Outstanding  |           |          | Remaining   |  |     | Exercisable at | 
|                |  | December 31, |           |          | Contractual |  |     | December 31,   | 
|Exercise Prices |  | 2004         |           |          | Life        |  |     | 2004           | 
|                |  |              |           |          |             |  |     |                | 
|$0.01           |  |              | 4,385,652 |          |             |  | 7.5 |                |  |  | 707,902   | 
|$1.00           |  |              | 360,000   |          |             |  | 1.6 |                |  |  | 360,000   | 
|$2.11           |  |              | 5,000     |          |             |  | 1.4 |                |  |  | 5,000     | 
|$3.42           |  |              | 539,511   |          |             |  | 1.5 |                |  |  | 539,511   | 
|$7.25           |  |              | 46,550    |          |             |  | 3.7 |                |  |  | 46,550    | 
|                |  |              |           |          |             |  |     |                | 
|                |  |              | 5,336,713 |          |             |  |     |                |  |  | 1,658,963 | 
|                |  |              |           |          |             |  |     |                | 



F-33



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                               |  |           |         |          |          |   |      |           |          |  |            |   |  |           |       |  |          |  |            |   |  |   |       | 
|-------------------------------------------------------------- |  | --------- | ------- | -------- | -------- | - | ---- | --------- | -------- |  | ---------- | - |  | --------- | ----- |  | -------- |  | ---------- | - |  | - | ----- | 
|                                                               |  | 2004      |         |          | 2003     |   |      | 2002      |         
|                                                               |  |           |         |          |          |   |      |           |         
|                                                               |  |           |         | Weighted |          |   |      |           | Weighted |  |            |   |  | Weighted  |      
|                                                               |  |           |         | Average  |          |   |      |           | Average  |  |            |   |  | Average   |      
|                                                               |  | Number of |         |          | Exercise |   |      | Number of |          |  | Exercise   |   |  | Number of |       |  | Exercise | 
|                                                               |  | Options   |         |          | Price    |   |      | Options   |          |  | Price      |   |  | Options   |       |  | Price    | 
|                                                               |  |           |         |          |          |   |      |           |          |  |            |   |  |           |       |  |          | 
|Outstanding, beginning of year                                 |  |           | 522,500 |          |          | $ | 3.04 |           |          |  | 2,322,500  |   |  | $         | 8.62  |  |          |  | 3,200,000  |   |  | $ | 10.23 | 
|Granted                                                        |  |           |        |          |          |   |     |           |          |  |           |   |  |           |      |  |          |  | 122,500    |   |  |   | 7.25  | 
|Forfeited                                                      |  |           |        |          |          |   |     |           |          |  | (1,800,000 | ) |  |           | 10.24 |  |          |  | (1,000,000 | ) |  |   | 10.35 | 
|Exercised                                                      |  |           |        |          |          |   |     |           |          |  |           |   |  |           |      |  |          |  |           |   |  |   |      | 
|                                                               |  |           |         |          |          |   |      |           |          |  |            |   |  |           |       |  |          | 
|Outstanding, end of year                                       |  |           | 522,500 |          |          |   | 3.04 |           |          |  | 522,500    |   |  |           | 3.04  |  |          |  | 2,322,500  |   |  |   | 8.62  | 
|                                                               |  |           |         |          |          |   |      |           |          |  |            |   |  |           |       |  |          | 
|Weighted average fair value of options granted during the year |  |           |         |          |          | $ |     |           |          |  |            |   |  | $         |      |  |          |  |            |   |  | $ | 6.70  | 



|               |  |             |         |           |             |  |     |             |  |  |         | 
|-------------- |  | ----------- | ------- | --------- | ----------- |  | --- | ----------- |  |  | ------- | 
|               |  |             |         | Weighted  |             |  |    
|               |  |             |         | Average   |             |  |    
|               |  |             |         | Remaining |             |  |    
|               |  | Number      |         |           | Contractual |  |     | Number      | 
|Exercise Price |  | Outstanding |         |           | Life        |  |     | Exercisable | 
|               |  |             |         |           |             |  |     |             | 
|$2.85          |  |             | 500,000 |           |             |  | 1.6 |             |  |  | 500,000 | 
|$7.25          |  |             | 22,500  |           |             |  | 7.0 |             |  |  | 22,500  | 
|               |  |             |         |           |             |  |     |             | 
|               |  |             | 522,500 |           |             |  |     |             |  |  | 522,500 | 
|               |  |             |         |           |             |  |     |             | 



|    |                                       
|--- | --------------------------------------
|12. | MANDATORILY REDEEMABLE PREFERRED STOCK

1 4 1 4 1 4 3 4


F-34



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |           |         | 
|----------------------------------------------------------------------------------- | ----------------------------------------------- | ---------------------------- | ------- | -------- | ----------- | - | ------- | -------------- | ------- | - | ------------ | ------- | ------- | ----- | - | -------- | - | - | --------- | --------- | ------- | 
|                                                                                    |                                                 | 141/4% Junior                |         |          | 93/4%       |   |         | 16.2% Series B |         |   | 121/2%       |         |         |      
|                                                                                    |                                                 | Exchangeable                 |         |          | Convertible |   |         | Convertible    |         |   | Exchangeable |         |         |      
|                                                                                    |                                                 | Preferred                    |         |          | Preferred   |   |         | Preferred      |         |   | Preferred    |         |         |      
|                                                                                    |                                                 | Stock                        |         |          | Stock       |   |         | Stock          |         |   | Stock        |         |         | Total |  
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|Mandatorily redeemable and convertible preferred stock:                             |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|                                                                                    | Balance at January 1, 2002                      |                              | $       | 310,068  |             |   | $       | 103,140        |         |   | $            | 471,062 |         |       | $ | 279,890  |   |   | $         | 1,164,160 |        
|                                                                                    | Accretion                                       |                              |         | 1,185    |             |   |         | 496            |         |   |              | 20,021  |         |       |   | 24       |   |   |           | 21,726    |        
|                                                                                    | Accrual of cumulative dividends                 |                              |         | 43,245   |             |   |         | 10,684         |         |   |              | 33,200  |         |       |   | 1,244    |   |   |           | 88,373    |        
|                                                                                    | Exchange into debentures (see Note 9)           |                              |         |         |             |   |         |               |         |   |              |        |         |       |   | (281,158 | ) |   |           | (281,158  | )      
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|                                                                                    | Balance at December 31, 2002                    |                              |         | 354,498  |             |   |         | 114,320        |         |   |              | 524,283 |         |       |   |         |   |   |           | 993,101   |        
|                                                                                    | Accretion                                       |                              |         | 596      |             |   |         | 499            |         |   |              |        |         |       |   |         |   |   |           | 1,095     |        
|                                                                                    | Accrual of cumulative Dividends                 |                              |         | 24,044   |             |   |         | 11,765         |         |   |              | 33,200  |         |       |   |         |   |   |           | 69,009    |        
|                                                                                    | Reclassification as a liability on July 1, 2003 |                              |         | (379,138 | )           |   |         |               |         |   |              |        |         |       |   |         |   |   |           | (379,138  | )      
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|                                                                                    | Balance at December 31, 2003                    |                              |         |         |             |   |         | 126,584        |         |   |              | 557,483 |         |       |   |         |   |   |           | 684,067   |        
|                                                                                    | Accretion                                       |                              |         |         |             |   |         | 503            |         |   |              |        |         |       |   |         |   |   |           | 503       |        
|                                                                                    | Accrual of cumulative dividends                 |                              |         |         |             |   |         | 12,955         |         |   |              | 43,220  |         |       |   |         |   |   |           | 56,175    |        
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|                                                                                    |                                                 | Balance at December 31, 2004 |         | $        |            |   |         | $              | 140,042 |   |              | $       | 600,703 |       |   | $        |  |   |           | $         | 740,745 | 
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|Mandatorily redeemable preferred stock:                                             |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|Balance at July 1, 2003                                                             |                                                 | $                            | 379,138 |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|Reclassification of unamortized issuance costs on July 1,
    2003                  |                                                 |                              | 4,062   |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|Accrual of cumulative dividends from July 1, 2003 through
    December 31, 2003     |                                                 |                              | 27,539  |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|Balance at December 31, 2003                                                        |                                                 |                              | 410,739 |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|Accrual of cumulative dividends                                                     |                                                 |                              | 60,616  |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|Balance at December 31, 2004                                                        |                                                 | $                            | 471,355 |          |             |   |         |                |         |   |              |         |         |       |   |          |   |   |           |          
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  
|Aggregate liquidation preference and accumulated dividends at
    December 31, 2004 |                                                 | $                            | 471,355 |          |             | $ | 141,058 |                |         | $ | 600,703      |         |         | $     |  |          |   | $ | 1,213,116 |          
|                                                                                    |                                                 |                              |         |          |             |   |         |                |         |   |              |         |         |       |  

121/2%
Exchangeable Preferred Stock


1 2 1 2 1 2 1 4


F-35



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


141/4%
Junior Exchangeable Preferred Stock


1 4 1 4




|                                      |  |  |         |  
|------------------------------------- |  |  | ------- | -
|Twelve month period beginning May 15, |  | 
|                                      |  | 
|2004                                  |  |  | 103.313 | %
|2005 and thereafter                   |  |  | 100.000 | %

1 4


93/4% Convertible
Preferred Stock


3 4


3 4


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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                       |  |  |        |  
|-------------------------------------- |  |  | ------ | -
|Twelve month period beginning June 30, |  | 
|                                       |  | 
|2004                                   |  |  | 102.00 | %
|2005 and thereafter                    |  |  | 100.00 | %



16.2% Series B Convertible Preferred Stock








F-37



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














F-38



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | amending certain rights of the holders of the Series B
    preferred stock; and                            
|
| |  | issuing certain equity securities that rank on a parity with or
    senior to the Series B preferred stock.

Redemption Features of Preferred Stock




|     |  |                     |         |  |                       |   |                      |                 |  |   |         | 
|---- |  | ------------------- | ------- |  | --------------------- | - | -------------------- | --------------- |  | - | ------- | 
|     |  | Junior Exchangeable |         |  |                       |   | Series B Convertible |                
|     |  | Preferred Stock     |         |  | Convertible Preferred |   |                      | Preferred Stock | 
|     |  | 141/4%(1)           |         |  | Stock 93/4%(2)        |   |                      | 16.2%(3)        | 
|     |  |                     |         |  |                       |   |                      |                 | 
|2005 |  | $                   | 540,916 |  |                       | $ | 155,323              |                 |  | $ | 667,933 | 
|2006 |  |                     | 609,879 |  |                       |   | 171,029              |                 |  |   | 735,163 | 
|2007 |  |                     |        |  |                       |   |                     |                 |  |   | 802,393 | 
|2008 |  |                     |        |  |                       |   |                     |                 |  |   | 869,623 | 
|2009 |  |                     |        |  |                       |   |                     |                 |  |   | 936,853 | 






|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | Mandatorily redeemable on November 15, 2006; redeemable by
    the Company.

F-39



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mandatorily redeemable on December 31, 2006; redeemable by
    the Company.                                                                                                                                                                                                                                                                                                     
|   
|(3) | As further discussed above, on November 13, 2003, the
    Company received notice from NBC that NBC was exercising its
    right under its investment agreement with the Company to demand
    that the Company redeem or arrange for a third party to acquire,
    by payment in cash, all 41,500 outstanding shares of the
    Companys Series B preferred stock held by NBC.

Covenants Under Preferred Stock Terms






|    |                                       
|--- | --------------------------------------
|13. | COMMON STOCK AND COMMON STOCK WARRANTS











|    |                                    
|--- | -----------------------------------
|14. | FAIR VALUE OF FINANCIAL INSTRUMENTS



F-40



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses.


Investments in broadcast properties.


Long-term debt. 3 4 1 4 3 4 1 4


Mandatorily redeemable securities.


|                                         |  |   |           | 
|---------------------------------------- |  | - | --------- | 
|141/4%
    Junior Exchangeable Preferred |  | $ | 346,446   | 
|93/4% Convertible
    Preferred          |  |   | 77,582    | 
|16.2% Series B Convertible Preferred     |  |   | 600,703   | 
|                                         |  |   |          
|                                         |  | $ | 1,024,731 | 
|                                         |  |   |          



|    |                              
|--- | -----------------------------
|15. | COMMITMENTS AND CONTINGENCIES

Leases




|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 19,701  | 
|2006       |  |   | 17,516  | 
|2007       |  |   | 15,892  | 
|2008       |  |   | 14,679  | 
|2009       |  |   | 12,450  | 
|Thereafter |  |   | 107,160 | 
|           |  |   |        
|           |  | $ | 187,398 | 
|           |  |   |        





F-41



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Investment Commitments




Routine Litigation




NBC Legal Proceeding




F-42



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Exploration of Strategic Alternatives




Insurance Litigation




F-43



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                   
|--- | ----------------------------------
|16. | SUPPLEMENTAL CASH FLOW INFORMATION



|                                                        |                                                                                                                        |                          |   |        |      |  |   |        |  |  |   |        | 
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                        |                                                                                                                        | Years Ended December 31, |  
|                                                        |                                                                                                                        |                          |  
|                                                        |                                                                                                                        | 2004                     |   |        | 2003 |  |   | 2002   | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|Supplemental disclosures of cash flow information:      |                                                                                                                        |                          |   |        |      |  |   |        |  |  |   |       
|                                                        | Cash paid for interest                                                                                                 |                          | $ | 36,906 |      |  | $ | 41,883 |  |  | $ | 43,630 | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|                                                        | Cash paid for income taxes                                                                                             |                          | $ | 250    |      |  | $ | 1,053  |  |  | $ | 625    | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|Non-cash operating, investing and financing activities: |                                                                                                                        |                          |   |        |      |  |   |        |  |  |   |       
|                                                        | Programming received in a settlement                                                                                   |                          | $ |       |      |  | $ | 1,000  |  |  | $ |       | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|                                                        | Accretion of discount on Senior Subordinated Notes                                                                     |                          | $ | 49,172 |      |  | $ | 43,660 |  |  | $ | 37,480 | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|                                                        | Dividends accrued on redeemable and convertible preferred Stock                                                        |                          | $ | 56,175 |      |  | $ | 69,009 |  |  | $ | 88,373 | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|                                                        | Discount accretion on redeemable and convertible Securities                                                            |                          | $ | 503    |      |  | $ | 1,095  |  |  | $ | 21,726 | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|                                                        | Stock option exercise proceeds and withholding taxes remitted
    through withholding of shares received upon exercise |                          | $ |       |      |  | $ | 2,359  |  |  | $ |       | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 
|                                                        | Reduction of stock subscription notes receivable through offset
    of deferred and other compensation                 |                          | $ | 37     |      |  | $ | 770    |  |  | $ |       | 
|                                                        |                                                                                                                        |                          |   |        |      |  |   |        | 

F-44



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                             
|--- | --------------------------------------------
|17. | QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):



|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |   |      |   |            |   |      | 
|------------------------------------------------------------------------------- | -------------- | ---------------------------------------------- | ---------- | - | --------------- | - | ---------- | ------- | ---- | - | ----------- | - | ---- | - | ---------- | - | ---- | 
|                                                                                |                | For the 2004 Quarters Ended                    |           
|                                                                                |                |                                                |           
|                                                                                |                | December 31(2)(4)                              |            |   | September 30(3) |   |            | June 30 |      |   | March 31(2) |  
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|                                                                                |                | (In thousands except share and per share data) |           
|NET REVENUES                                                                    |                | $                                              | 69,587     |   |                 | $ | 65,872     |         |      | $ | 69,877      |   |      | $ | 71,294     |  
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|Expenses, excluding depreciation, amortization and stock-based
    compensation |                |                                                | 64,876     |   |                 |   | 56,515     |         |      |   | 59,375      |   |      |   | 60,954     |  
|Stock-based compensation                                                        |                |                                                | 2,507      |   |                 |   | 1,239      |         |      |   | 2,533       |   |      |   | 2,222      |  
|Depreciation and amortization                                                   |                |                                                | 11,440     |   |                 |   | 10,527     |         |      |   | 11,437      |   |      |   | 10,260     |  
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|Total expenses                                                                  |                |                                                | 78,823     |   |                 |   | 68,281     |         |      |   | 73,345      |   |      |   | 73,436     |  
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|(Loss) gain on sale or disposal of broadcast and other assets,
    net          |                |                                                | (1,164     | ) |                 |   | 42         |         |      |   | 6,067       |   |      |   | (109       | )
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|Operating (loss) income                                                         |                | $                                              | (10,400    | ) |                 | $ | (2,367     | )       |      | $ | 2,599       |   |      | $ | (2,251     | )
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|Net loss attributable to common stockholders                                    |                | $                                              | (78,694    | ) |                 | $ | (58,034    | )       |      | $ | (48,776     | ) |      | $ | (60,231    | )
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|Basic and diluted loss per common share                                         |                | $                                              | (1.15      | ) |                 | $ | (0.85      | )       |      | $ | (0.72       | ) |      | $ | (0.89      | )
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|Weighted average common shares outstanding                                      |                |                                                | 68,511,860 |   |                 |   | 68,372,183 |         |      |   | 68,134,814  |   |      |   | 67,540,702 |  
|                                                                                |                |                                                |            |   |                 |   |            |         |      |   |             |  
|                                                                                | Stock price(1) |                                                |            |   |                 |   |            |         |      |   |             |   |      |   |            |   |     
|                                                                                |                | High                                           |            | $ | 1.74            |   |            | $       | 3.30 |   |             | $ | 4.00 |   |            | $ | 4.60 | 
|                                                                                |                | Low                                            |            | $ | 0.90            |   |            | $       | 1.30 |   |             | $ | 2.15 |   |            | $ | 3.51 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Companys Class A common stock is listed on the
    American Stock Exchange under the symbol PAX.                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(2) | In first quarter of 2004, the Company recorded an insurance
    reimbursement of $1.1 million as insurance recoveries in
    other income in the consolidated statements of operations. In
    the fourth quarter of 2004, the Company reclassified the
    insurance recoveries received in the first quarter to selling,
    general and administrative expenses in order to offset 2004
    expenses incurred in connection with litigation over the extent
    of the Companys insurance coverage.
|   
|(3) | Includes a charge of $4.6 million for an adjustment of
    programming to net realizable value resulting from a change in
    estimated future advertising revenues expected to be generated
    by certain programming as a result of a change in expected usage
    of such programming, a $3.0 million reduction in music
    license fees resulting from the conclusion of a dispute and the
    commencement of a new agreement with a music                                                      

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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | license organization, and $1.1 million in costs incurred in
    connection with a required adjustment of the dividend rate with
    respect to the Companys Series B preferred stock held
    by NBC.                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(4) | In the fourth quarter of 2004, the Company recorded an
    adjustment in the amount of $4.0 million in order to
    recognize additional lease expense for lease arrangements that
    provided for escalating lease payments and a $4.9 million
    adjustment to recognize additional provisions for income taxes
    resulting from a change in the state income tax rate used to
    determine the provision and a $1.7 million amortization
    expense charge for certain leasehold improvements to adjust
    their amortization period to the shorter of their useful lives
    or the lease term.

|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |      |  |   |            |      | 
|------------------------------------------------------------------------------- | ---- | ---------------------------------------------- | ---------- | ---- | --------------- | - | ---------- | ---------- |  | - | ---------- | ---- |  | - | ---------- | ---- | 
|                                                                                |      | For the 2003 Quarters Ended                    |           
|                                                                                |      |                                                |           
|                                                                                |      | December 31                                    |            |      | September 30(3) |   |            | June 30(2) |  |   | March 31   |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|                                                                                |      | (In thousands except share and per share data) |           
|NET REVENUES                                                                    |      | $                                              | 70,282     |      |                 | $ | 64,195     |            |  | $ | 65,860     |      |  | $ | 70,602     |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Expenses, excluding depreciation, amortization and stock-based
    compensation |      |                                                | 59,930     |      |                 |   | 55,315     |            |  |   | 52,466     |      |  |   | 54,873     |     
|Stock-based compensation                                                        |      |                                                | 3,032      |      |                 |   | 1,223      |            |  |   | 1,097      |      |  |   | 7,414      |     
|Depreciation and amortization                                                   |      |                                                | 11,055     |      |                 |   | 10,018     |            |  |   | 7,340      |      |  |   | 14,570     |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Total expenses                                                                  |      |                                                | 74,017     |      |                 |   | 66,556     |            |  |   | 60,903     |      |  |   | 76,857     |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|(Loss) gain on sale or disposal of broadcast and other assets,
    net          |      |                                                | (3,089     | )    |                 |   | (243       | )          |  |   | 28,407     |      |  |   | 26,514     |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Operating (loss) income                                                         |      | $                                              | (6,824     | )    |                 | $ | (2,604     | )          |  | $ | 33,364     |      |  | $ | 20,259     |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Net loss attributable to common stockholders                                    |      | $                                              | (51,833    | )    |                 | $ | (54,024    | )          |  | $ | (17,013    | )    |  | $ | (23,447    | )   
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Basic and diluted loss per common share                                         |      | $                                              | (0.73      | )    |                 | $ | (0.80      | )          |  | $ | (0.25      | )    |  | $ | (0.35      | )   
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Weighted average common shares outstanding                                      |      |                                                | 71,305,999 |      |                 |   | 67,752,309 |            |  |   | 67,658,154 |      |  |   | 66,799,581 |     
|                                                                                |      |                                                |            |      |                 |   |            |            |  |   |            |     
|Stock price(1)                                                                  |      |                                                |            |      |                 |   |            |            |  |   |            |      |  |   |            |     
|                                                                                | High |                                                | $          | 6.07 |                 |   | $          | 6.48       |  |   | $          | 6.99 |  |   | $          | 2.65 | 
|                                                                                | Low  |                                                | $          | 3.62 |                 |   | $          | 3.70       |  |   | $          | 2.18 |  |   | $          | 1.91 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Companys Class A common stock is listed on the
    American Stock Exchange under the symbol PAX.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(2) | In the second quarter of 2003, the Company determined that it
    had over-amortized certain cable distribution agreements and
    recorded a $4.0 million reduction of its amortization
    expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(3) | In the third quarter of 2003, the Company determined that it had
    been over-amortizing certain satellite distribution agreements
    and certain other cable distribution agreements and recorded a
    $4.5 million reduction of its amortization expense.
    Additionally, in the third quarter of 2003, the Company recorded
    a reserve for state taxes in the amount of $2.9 million in
    connection with a tax liability related to certain states in
    which the Company has operations. Included in depreciation and
    amortization is a $3.7 million impairment charge recorded
    in the third quarter of 2003, in connection with a purchase
    option on a television station.

F-46



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                  
|--- | -----------------
|18. | SUBSEQUENT EVENTS







|    |                                              
|--- | ---------------------------------------------
|19. | CONDENSED CONSOLIDATING FINANCIAL INFORMATION





F-47



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING BALANCE SHEETS:


|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |          |          |   |   |            |           | 
|------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------- | - | ------------ | ------------ |  | ------------- | ----------- | ------- | ------------ | ----- | -------- | -------- | - | - | ---------- | --------- | 
|                                                                                                  |                                                                          | As of December 31, 2004                                                                                  |  
|                                                                                                  |                                                                          |                                                                                                          |  
|                                                                                                  |                                                                          |                                                                                                          |   | Wholly Owned |              |  | Consolidating |             |         | Consolidated |      
|                                                                                                  |                                                                          | Parent Company                                                                                           |   |              | Subsidiaries |  |               | Adjustments |         |              | Group |         
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | (In thousands)                                                                                           |  
|Assets                                                                                           
|                                                                                                  | Current assets                                                           |                                                                                                          | $ | 177,900      |              |  | $             | 11,561      |         |              | $     |         |          |   | $ | 189,461    |          
|                                                                                                  | Receivable from wholly owned subsidiaries                                |                                                                                                          |   | 891,601      |              |  |               |            |         |              |       | (891,601 | )        |   |   |           |          
|                                                                                                  | Intangible assets, net                                                   |                                                                                                          |   | 50,790       |              |  |               | 833,120     |         |              |       |         |          |   |   | 883,910    |          
|                                                                                                  | Investment in and advances to wholly owned subsidiaries                  |                                                                                                          |   | 33,837       |              |  |               |            |         |              |       | (33,837  | )        |   |   |           |          
|                                                                                                  | Property, equipment and other assets, net                                |                                                                                                          |   | 50,003       |              |  |               | 100,931     |         |              |       |         |          |   |   | 150,934    |          
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | Total assets                                                                                             |   | $            | 1,204,131    |  |               | $           | 945,612 |              |       | $        | (925,438 | ) |   | $          | 1,224,305 | 
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|Liabilities, Mandatorily Redeemable and Convertible Preferred
    Stock and Stockholders Deficit |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |          |          |   |   |           
|                                                                                                  | Current liabilities                                                      |                                                                                                          | $ | 102,792      |              |  | $             | 9,247       |         |              | $     |         |          |   | $ | 112,039    |          
|                                                                                                  | Deferred income taxes                                                    |                                                                                                          |   | 194,706      |              |  |               |            |         |              |       |         |          |   |   | 194,706    |          
|                                                                                                  | Senior secured and senior subordinated notes, net of current
    portion |                                                                                                          |   | 1,004,029    |              |  |               |            |         |              |       |         |          |   |   | 1,004,029  |          
|                                                                                                  | Notes payable to Parent Company                                          |                                                                                                          |   |             |              |  |               | 891,601     |         |              |       | (891,601 | )        |   |   |           |          
|                                                                                                  | Mandatorily redeemable preferred stock                                   |                                                                                                          |   | 471,355      |              |  |               |            |         |              |       |         |          |   |   | 471,355    |          
|                                                                                                  | Other long-term liabilities                                              |                                                                                                          |   | 17,845       |              |  |               | 10,927      |         |              |       |         |          |   |   | 28,772     |          
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | Total liabilities                                                                                        |   |              | 1,790,727    |  |               |             | 911,775 |              |       |          | (891,601 | ) |   |            | 1,810,901 | 
|                                                                                                  | Mandatorily redeemable and convertible preferred stock                   |                                                                                                          |   | 740,745      |              |  |               |            |         |              |       |         |          |   |   | 740,745    |          
|                                                                                                  | Commitments and contingencies Stockholders deficit                      |                                                                                                          |   | (1,327,341   | )            |  |               | 33,837      |         |              |       | (33,837  | )        |   |   | (1,327,341 | )        
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | Total liabilities, mandatorily redeemable and convertible
    preferred stock, and stockholders deficit |   | $            | 1,204,131    |  |               | $           | 945,612 |              |       | $        | (925,438 | ) |   | $          | 1,224,305 | 
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         

F-48



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:


|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |         |  |   |          |         |  
|------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------- | -------- | ------------ | ------------ | - | ------------- | ----------- | - | ------------ | ------- | ------- |  | - | -------- | ------- | -
|                                                                          |                                                             | Twelve Months Ended December 31, 2004 |         
|                                                                          |                                                             |                                       |         
|                                                                          |                                                             |                                       |          | Wholly Owned |              |   | Consolidating |             |   | Consolidated |        
|                                                                          |                                                             | Parent Company                        |          |              | Subsidiaries |   |               | Adjustments |   |              | Group   |        
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|                                                                          |                                                             | (In thousands)                        |         
|NET REVENUES                                                              |                                                             | $                                     | 168,252  |              |              | $ | 108,378       |             |   | $            |        |         |  | $ | 276,630  |        
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|Expenses:                                                                 |                                                             |                                       |          |              |              |   |               |             |   |              |         |         |  |   |          |        
|                                                                          | Programming and broadcast operations                        |                                       |          | 12,861       |              |   |               | 43,611      |   |              |         |        |  |   |          | 56,472  |  
|                                                                          | Program Rights Amortization                                 |                                       |          | 53,616       |              |   |               |            |   |              |         |        |  |   |          | 53,616  |  
|                                                                          | Selling, general and administrative                         |                                       |          | 60,721       |              |   |               | 61,114      |   |              |         |        |  |   |          | 121,835 |  
|                                                                          | Stock-based compensation                                    |                                       |          | 8,501        |              |   |               |            |   |              |         |        |  |   |          | 8,501   |  
|                                                                          | Adjustment of programming to net realizable value           |                                       |          | 4,645        |              |   |               |            |   |              |         |        |  |   |          | 4,645   |  
|                                                                          | Other operating expense                                     |                                       |          | 691          |              |   |               | 4,461       |   |              |         |        |  |   |          | 5,152   |  
|                                                                          | Depreciation and amortization                               |                                       |          | 13,545       |              |   |               | 30,119      |   |              |         |        |  |   |          | 43,664  |  
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|                                                                          | Total operating expenses                                    |                                       |          | 154,580      |              |   |               | 139,305     |   |              |         |        |  |   |          | 293,885 |  
|                                                                          | Gain on sale or disposal of broadcast and other assets, net |                                       |          | 817          |              |   |               | 4,019       |   |              |         |        |  |   |          | 4,836   |  
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|                                                                          | Operating income (loss)                                     |                                       |          | 14,489       |              |   |               | (26,908     | ) |              |         |        |  |   |          | (12,419 | )
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|Other income (Expense):                                                   |                                                             |                                       |          |              |              |   |               |             |   |              |         |         |  |   |          |        
|                                                                          | Interest expense                                            |                                       |          | 12,957       |              |   |               | (107,149    | ) |              |         |        |  |   |          | (94,192 | )
|                                                                          | Dividends on mandatorily redeemable preferred stock         |                                       |          | (60,616      | )            |   |               |            |   |              |         |        |  |   |          | (60,616 | )
|                                                                          | Other income, net                                           |                                       |          | 4,280        |              |   |               | 12          |   |              |         |        |  |   |          | 4,292   |  
|                                                                          | Loss on extinguishment of debt                              |                                       |          | (6,286       | )            |   |               |            |   |              |         |        |  |   |          | (6,286  | )
|                                                                          | Equity in losses of consolidated subsidiaries               |                                       |          | (134,045     | )            |   |               |            |   |              |         | 134,045 |  |   |          |        |  
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|(Loss) income before income taxes                                         |                                                             |                                       | (169,221 | )            |              |   | (134,045      | )           |   |              | 134,045 |         |  |   | (169,221 | )      
|Income tax provision                                                      |                                                             |                                       | (18,751  | )            |              |   |              |             |   |              |        |         |  |   | (18,751  | )      
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|Net (loss) income                                                         |                                                             |                                       | (187,972 | )            |              |   | (134,045      | )           |   |              | 134,045 |         |  |   | (187,972 | )      
|Dividends and accretion on redeemable and convertible preferred
    stock |                                                             |                                       | (57,763  | )            |              |   |              |             |   |              |        |         |  |   | (57,763  | )      
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        
|Net (loss) income attributable to common stockholders                     |                                                             | $                                     | (245,735 | )            |              | $ | (134,045      | )           |   | $            | 134,045 |         |  | $ | (245,735 | )      
|                                                                          |                                                             |                                       |          |              |              |   |               |             |   |              |         |        

F-49



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS:


|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |   |  |  |   |          |  
|------------------------------------- | ----------------------------------------------------------------- | ------------------------------------- | - | -------- | ------------ |  | - | ------------- | - | ------------ | - | - |  |  | - | -------- | -
|                                      |                                                                   | Twelve Months Ended December 31, 2004 |  
|                                      |                                                                   |                                       |  
|                                      |                                                                   |                                       |   | Wholly   |              |  |  
|                                      |                                                                   | Parent                                |   |          | Owned        |  |   | Consolidating |   | Consolidated |  
|                                      |                                                                   | Company                               |   |          | Subsidiaries |  |   | Adjustments   |   | Group        |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |  
|                                      |                                                                   | (In thousands)                        |  
|                                      | Net cash (used in) provided by operating activities               |                                       | $ | (21,411  | )            |  | $ | 11,694        |   |              | $ |  |  |  | $ | (9,717   | )
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Cash flows from investing activities:                             |                                       |   |          |              |  |   |               |   |              |   |   |  |  |   |          |  
|                                      | Decrease in short term investments                                |                                       |   | 6,955    |              |  |   |              |   |              |   |  |  |  |   | 6,955    |  
|                                      | Deposits for programming letters of credit                        |                                       |   | (24,603  | )            |  |   |              |   |              |   |  |  |  |   | (24,603  | )
|                                      | Purchases of property and equipment                               |                                       |   | (4,320   | )            |  |   | (11,525       | ) |              |   |  |  |  |   | (15,845  | )
|                                      | Proceeds from sales of broadcast properties                       |                                       |   | 9,988    |              |  |   |              |   |              |   |  |  |  |   | 9,988    |  
|                                      | Proceeds from sale of broadcast towers and property and equipment |                                       |   | 28       |              |  |   |              |   |              |   |  |  |  |   | 28       |  
|                                      | Other                                                             |                                       |   |         |              |  |   | (170          | ) |              |   |  |  |  |   | (170     | )
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Net cash used in investing activities                             |                                       |   | (11,952  | )            |  |   | (11,695       | ) |              |   |  |  |  |   | (23,647  | )
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|Cash flows from financing activities: |                                                                   |                                       |   |          |              |  |   |               |   |              |   |   |  |  |   |         
|                                      | Borrowings of long-term debt                                      |                                       |   | 365,000  |              |  |   |              |   |              |   |  |  |  |   | 365,000  |  
|                                      | Repayments of long-term debt                                      |                                       |   | (335,687 | )            |  |   |              |   |              |   |  |  |  |   | (335,687 | )
|                                      | Payments of loan origination costs                                |                                       |   | (11,441  | )            |  |   |              |   |              |   |  |  |  |   | (11,441  | )
|                                      | Proceeds from exercise of common stock options, net               |                                       |   | 3        |              |  |   |              |   |              |   |  |  |  |   | 3        |  
|                                      | Repayment of stock subscription notes receivable                  |                                       |   | 413      |              |  |   |              |   |              |   |  |  |  |   | 413      |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Net cash provided by financing activities                         |                                       |   | 18,288   |              |  |   |              |   |              |   |  |  |  |   | 18,288   |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Increase (decrease) in cash and cash equivalents                  |                                       |   | (15,075  | )            |  |   | (1            | ) |              |   |  |  |  |   | (15,076  | )
|                                      | Cash and cash equivalents, beginning of period                    |                                       |   | 97,090   |              |  |   | 33            |   |              |   |  |  |  |   | 97,123   |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Cash and cash equivalents, end of period                          |                                       | $ | 82,015   |              |  | $ | 32            |   |              | $ |  |  |  | $ | 82,047   |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  

F-50



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING BALANCE SHEETS:


|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |          |          |   |   |            |           | 
|------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------- | - | ------------ | ------------ |  | ------------- | ----------- | ------- | ------------ | ----- | -------- | -------- | - | - | ---------- | --------- | 
|                                                                                                  |                                                                          | As of December 31, 2003                                                                                  |  
|                                                                                                  |                                                                          |                                                                                                          |  
|                                                                                                  |                                                                          |                                                                                                          |   | Wholly Owned |              |  | Consolidating |             |         | Consolidated |      
|                                                                                                  |                                                                          | Parent Company                                                                                           |   |              | Subsidiaries |  |               | Adjustments |         |              | Group |         
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | (In thousands)                                                                                           |  
|Assets                                                                                           
|                                                                                                  | Current assets                                                           |                                                                                                          | $ | 184,612      |              |  | $             | 9,764       |         |              | $     |         |          |   | $ | 194,376    |          
|                                                                                                  | Receivable from wholly owned subsidiaries                                |                                                                                                          |   | 892,601      |              |  |               |            |         |              |       | (892,601 | )        |   |   |           |          
|                                                                                                  | Intangible assets, net                                                   |                                                                                                          |   | 61,486       |              |  |               | 832,468     |         |              |       |         |          |   |   | 893,954    |          
|                                                                                                  | Investment in and advances to wholly owned subsidiaries                  |                                                                                                          |   | 58,045       |              |  |               |            |         |              |       | (58,045  | )        |   |   |           |          
|                                                                                                  | Property, equipment and other assets, net                                |                                                                                                          |   | 71,404       |              |  |               | 123,943     |         |              |       |         |          |   |   | 195,347    |          
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | Total assets                                                                                             |   | $            | 1,268,148    |  |               | $           | 966,175 |              |       | $        | (950,646 | ) |   | $          | 1,283,677 | 
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|Liabilities, Mandatorily Redeemable and Convertible Preferred
    Stock and Stockholders Deficit |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |          |          |   |   |           
|                                                                                                  | Current liabilities                                                      |                                                                                                          | $ | 119,572      |              |  | $             | 7,672       |         |              | $     |         |          |   | $ | 127,244    |          
|                                                                                                  | Deferred income taxes                                                    |                                                                                                          |   | 175,281      |              |  |               |            |         |              |       |         |          |   |   | 175,281    |          
|                                                                                                  | Senior secured and senior subordinated notes, net of current
    portion |                                                                                                          |   | 925,547      |              |  |               |            |         |              |       |         |          |   |   | 925,547    |          
|                                                                                                  | Notes payable to Parent Company                                          |                                                                                                          |   |             |              |  |               | 892,601     |         |              |       | (892,601 | )        |   |   |           |          
|                                                                                                  | Mandatorily redeemable preferred stock                                   |                                                                                                          |   | 410,739      |              |  |               |            |         |              |       |         |          |   |   | 410,739    |          
|                                                                                                  | Other long-term liabilities                                              |                                                                                                          |   | 42,787       |              |  |               | 7,857       |         |              |       |         |          |   |   | 50,644     |          
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | Total liabilities                                                                                        |   |              | 1,673,926    |  |               |             | 908,130 |              |       |          | (892,601 | ) |   |            | 1,689,455 | 
|                                                                                                  | Mandatorily redeemable and convertible preferred stock                   |                                                                                                          |   | 684,067      |              |  |               |            |         |              |       |         |          |   |   | 684,067    |          
|                                                                                                  | Commitments and contingencies Stockholders deficit                      |                                                                                                          |   | (1,089,845   | )            |  |               | 58,045      |         |              |       | (58,045  | )        |   |   | (1,089,845 | )        
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         
|                                                                                                  |                                                                          | Total liabilities, mandatorily redeemable and convertible
    preferred stock, and stockholders deficit |   | $            | 1,268,148    |  |               | $           | 966,175 |              |       | $        | (950,646 | ) |   | $          | 1,283,677 | 
|                                                                                                  |                                                                          |                                                                                                          |   |              |              |  |               |             |         |              |       |         

F-51



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:


|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |        |   |   |          |         |         | 
|------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------- | -------- | ------- | ------------ | - | ------- | ------------- | ------- | - | ------------ | ------ | - | - | -------- | ------- | ------- | 
|                                                                          |                                                             | Twelve Months Ended December 31, 2003 |         
|                                                                          |                                                             |                                       |         
|                                                                          |                                                             |                                       |          | Wholly  |              |   |        
|                                                                          |                                                             | Parent                                |          |         | Owned        |   |         | Consolidating |         |   | Consolidated |       
|                                                                          |                                                             | Company                               |          |         | Subsidiaries |   |         | Adjustments   |         |   | Group        |       
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|                                                                          |                                                             | (In thousands)                        |         
|NET REVENUES                                                              |                                                             | $                                     | 169,086  |         |              | $ | 101,853 |               |         | $ |             |        |   | $ | 270,939  |        
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|Expenses:                                                                 |                                                             |                                       |          |         |              |   |         |               |         |   |              |        |   |   |          |        
|                                                                          | Programming and broadcast operations                        |                                       |          | 14,107  |              |   |         | 37,847        |         |   |              |       |   |   |          | 51,954  |        
|                                                                          | Program Rights Amortization                                 |                                       |          | 51,082  |              |   |         |              |         |   |              |       |   |   |          | 51,082  |        
|                                                                          | Selling, general and administrative                         |                                       |          | 49,881  |              |   |         | 61,095        |         |   |              |       |   |   |          | 110,976 |        
|                                                                          | Stock-based compensation                                    |                                       |          | 12,766  |              |   |         |              |         |   |              |       |   |   |          | 12,766  |        
|                                                                          | Other operating expense                                     |                                       |          | 4,056   |              |   |         | 4,516         |         |   |              |       |   |   |          | 8,572   |        
|                                                                          | Depreciation and amortization                               |                                       |          | 7,751   |              |   |         | 35,232        |         |   |              |       |   |   |          | 42,983  |        
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|                                                                          |                                                             | Total operating expenses              |          |         | 139,643      |   |         |               | 138,690 |   |              |        |  |   |          |         | 278,333 | 
|                                                                          | Gain on sale or disposal of broadcast and other assets, net |                                       |          | 9,921   |              |   |         | 41,668        |         |   |              |       |   |   |          | 51,589  |        
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|                                                                          | Operating income                                            |                                       |          | 39,364  |              |   |         | 4,831         |         |   |              |       |   |   |          | 44,195  |        
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|Other income (Expense):                                                   |                                                             |                                       |          |         |              |   |         |               |         |   |              |        |   |   |          |        
|                                                                          | Interest expense                                            |                                       |          | (91,698 | )            |   |         | (504          | )       |   |              |       |   |   |          | (92,202 | )      
|                                                                          | Dividends on mandatorily redeemable preferred stock         |                                       |          | (27,539 | )            |   |         |              |         |   |              |       |   |   |          | (27,539 | )      
|                                                                          | Other income, net                                           |                                       |          | 5,803   |              |   |         | 81            |         |   |              |       |   |   |          | 5,884   |        
|                                                                          | Equity in income of consolidated subsidiaries               |                                       |          | 4,408   |              |   |         |              |         |   |              | (4,408 | ) |   |          |        |        
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|(Loss) income before income taxes                                         |                                                             |                                       | (69,662  | )       |              |   | 4,408   |               |         |   | (4,408       | )      |   |   | (69,662  | )      
|Income tax provision                                                      |                                                             |                                       | (6,551   | )       |              |   |        |               |         |   |             |        |   |   | (6,551   | )      
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|Net (loss) income                                                         |                                                             |                                       | (76,213  | )       |              |   | 4,408   |               |         |   | (4,408       | )      |   |   | (76,213  | )      
|Dividends and accretion on redeemable and convertible preferred
    stock |                                                             |                                       | (70,104  | )       |              |   |        |               |         |   |             |        |   |   | (70,104  | )      
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       
|Net (loss) income attributable to common stockholders                     |                                                             | $                                     | (146,317 | )       |              | $ | 4,408   |               |         | $ | (4,408       | )      |   | $ | (146,317 | )      
|                                                                          |                                                             |                                       |          |         |              |   |         |               |         |   |              |       

F-52



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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS:


|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |   |  |  |   |         |  
|------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------- | - | ------- | ------------ |  | - | ------------- | - | ------------ | - | - |  |  | - | ------- | -
|                                      |                                                                           | Twelve Months Ended December 31, 2003 |  
|                                      |                                                                           |                                       |  
|                                      |                                                                           |                                       |   | Wholly  |              |  |  
|                                      |                                                                           | Parent                                |   |         | Owned        |  |   | Consolidating |   | Consolidated |  
|                                      |                                                                           | Company                               |   |         | Subsidiaries |  |   | Adjustments   |   | Group        |  
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |  
|                                      |                                                                           | (In thousands)                        |  
|                                      | Net cash (used in) provided by operating activities                       |                                       | $ | 7,517   |              |  | $ | 25,399        |   |              | $ |  |  |  | $ | 32,916  |  
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  
|                                      | Cash flows from investing activities:                                     |                                       |   |         |              |  |   |               |   |              |   |   |  |  |   |         |  
|                                      | Decrease in short term investments                                        |                                       |   | 4,125   |              |  |   |              |   |              |   |  |  |  |   | 4,125   |  
|                                      | Purchases of property and equipment                                       |                                       |   | (1,487  | )            |  |   | (25,245       | ) |              |   |  |  |  |   | (26,732 | )
|                                      | Proceeds from sales of broadcast properties                               |                                       |   | 83,332  |              |  |   |              |   |              |   |  |  |  |   | 83,332  |  
|                                      | Proceeds from sale of broadcast towers and property and equipment         |                                       |   | 360     |              |  |   |              |   |              |   |  |  |  |   | 360     |  
|                                      | Other                                                                     |                                       |   |        |              |  |   | (156          | ) |              |   |  |  |  |   | (156    | )
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  
|                                      | Net cash provided by (used in) investing activities                       |                                       |   | 86,330  |              |  |   | (25,401       | ) |              |   |  |  |  |   | 60,929  |  
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  
|Cash flows from financing activities: |                                                                           |                                       |   |         |              |  |   |               |   |              |   |   |  |  |   |        
|                                      | Borrowings of long-term debt                                              |                                       |   | 2,000   |              |  |   |              |   |              |   |  |  |  |   | 2,000   |  
|                                      | Repayments of long-term debt                                              |                                       |   | (20,152 | )            |  |   |              |   |              |   |  |  |  |   | (20,152 | )
|                                      | Payments of loan origination costs                                        |                                       |   | (2,259  | )            |  |   |              |   |              |   |  |  |  |   | (2,259  | )
|                                      | Proceeds from exercise of common stock options, net                       |                                       |   | 115     |              |  |   |              |   |              |   |  |  |  |   | 115     |  
|                                      | Payments of employee income taxes on exercise of common stock
    options |                                       |   | (2,335  | )            |  |   |              |   |              |   |  |  |  |   | (2,335  | )
|                                      | Repayment of stock subscription notes receivable                          |                                       |   | 144     |              |  |   |              |   |              |   |  |  |  |   | 144     |  
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  
|                                      | Net cash used in financing activities                                     |                                       |   | (22,487 | )            |  |   |              |   |              |   |  |  |  |   | (22,487 | )
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  
|                                      | Increase (decrease) in cash and cash equivalents                          |                                       |   | 71,360  |              |  |   | (2            | ) |              |   |  |  |  |   | 71,358  |  
|                                      | Cash and cash equivalents, beginning of period                            |                                       |   | 25,730  |              |  |   | 35            |   |              |   |  |  |  |   | 25,765  |  
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  
|                                      | Cash and cash equivalents, end of period                                  |                                       | $ | 97,090  |              |  | $ | 33            |   |              | $ |  |  |  | $ | 97,123  |  
|                                      |                                                                           |                                       |   |         |              |  |   |               |   |              |   |  

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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:


|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |         |   |   |          |         |         | 
|------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------- | -------- | -------- | ------------ | - | -------- | ------------- | ------- | - | ------------ | ------- | - | - | -------- | ------- | ------- | 
|                                                                          |                                                             | Twelve Months Ended December 31, 2002 |         
|                                                                          |                                                             |                                       |         
|                                                                          |                                                             |                                       |          | Wholly   |              |   |         
|                                                                          |                                                             | Parent                                |          |          | Owned        |   |          | Consolidating |         |   | Consolidated |        
|                                                                          |                                                             | Company                               |          |          | Subsidiaries |   |          | Adjustments   |         |   | Group        |        
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|                                                                          |                                                             | (In thousands)                        |         
|                                                                          | NET REVENUES                                                |                                       | $        | 178,800  |              |   | $        | 98,121        |         |   | $            |        |   |   | $        | 276,921 |        
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|Expenses:                                                                 |                                                             |                                       |          |          |              |   |          |               |         |   |              |         |   |   |          |        
|                                                                          | Programming and broadcast operations                        |                                       |          | 14,072   |              |   |          | 37,132        |         |   |              |        |   |   |          | 51,204  |        
|                                                                          | Program Rights Amortization                                 |                                       |          | 77,835   |              |   |          | 145           |         |   |              |        |   |   |          | 77,980  |        
|                                                                          | Selling, general and administrative                         |                                       |          | 67,215   |              |   |          | 65,090        |         |   |              |        |   |   |          | 132,305 |        
|                                                                          | Adjustment of programming to net realizable value           |                                       |          | 41,270   |              |   |          |              |         |   |              |        |   |   |          | 41,270  |        
|                                                                          | Other operating expenses                                    |                                       |          | 4,424    |              |   |          | 4,021         |         |   |              |        |   |   |          | 8,445   |        
|                                                                          | Depreciation and amortization                               |                                       |          | 23,824   |              |   |          | 34,705        |         |   |              |        |   |   |          | 58,529  |        
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|                                                                          |                                                             | Total operating expenses              |          |          | 228,640      |   |          |               | 141,093 |   |              |         |  |   |          |         | 369,733 | 
|                                                                          | Gain on sale or disposal of broadcast and other assets, net |                                       |          | 1,857    |              |   |          | 21,049        |         |   |              |        |   |   |          | 22,906  |        
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|                                                                          | Operating income                                            |                                       |          | (47,983  | )            |   |          | (21,923       | )       |   |              |        |   |   |          | (69,906 | )      
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|Other income (Expense):                                                   |                                                             |                                       |          |          |              |   |          |               |         |   |              |         |   |   |          |        
|                                                                          | Interest expense                                            |                                       |          | 16,203   |              |   |          | (101,417      | )       |   |              |        |   |   |          | (85,214 | )      
|                                                                          | Dividends on mandatorily redeemable preferred stock         |                                       |          |         |              |   |          |              |         |   |              |        |   |   |          |        |        
|                                                                          | Other income, net                                           |                                       |          | 5,313    |              |   |          | 446           |         |   |              |        |   |   |          | 5,759   |        
|                                                                          | Loss on extinguishment of debt                              |                                       |          | (17,552  | )            |   |          |              |         |   |              |        |   |   |          | (17,552 | )      
|                                                                          | Equity in losses of consolidated subsidiaries               |                                       |          | (122,894 | )            |   |          |              |         |   |              | 122,894 |   |   |          |        |        
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|(Loss) income before income taxes                                         |                                                             |                                       | (166,913 | )        |              |   | (122,894 | )             |         |   | 122,894      |         |   |   | (166,913 | )      
|Income tax provision                                                      |                                                             |                                       | (169,273 | )        |              |   |         |               |         |   |             |         |   |   | (169,273 | )      
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|Net (loss) income                                                         |                                                             |                                       | (336,186 | )        |              |   | (122,894 | )             |         |   | 122,894      |         |   |   | (336,186 | )      
|Dividends and accretion on redeemable and convertible preferred
    stock |                                                             |                                       | (110,099 | )        |              |   |         |               |         |   |             |         |   |   | (110,099 | )      
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        
|Net (loss) income attributable to common stockholders                     |                                                             | $                                     | (446,285 | )        |              | $ | (122,894 | )             |         | $ | 122,894      |         |   | $ | (446,285 | )      
|                                                                          |                                                             |                                       |          |          |              |   |          |               |         |   |              |        

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##### Table of Contents



PAXSON COMMUNICATIONS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS:


|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |   |  |  |   |          |  
|------------------------------------- | ----------------------------------------------------------------- | ------------------------------------- | - | -------- | ------------ |  | - | ------------- | - | ------------ | - | - |  |  | - | -------- | -
|                                      |                                                                   | Twelve Months Ended December 31, 2002 |  
|                                      |                                                                   |                                       |  
|                                      |                                                                   |                                       |   | Wholly   |              |  |  
|                                      |                                                                   | Parent                                |   |          | Owned        |  |   | Consolidating |   | Consolidated |  
|                                      |                                                                   | Company                               |   |          | Subsidiaries |  |   | Adjustments   |   | Group        |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |  
|                                      |                                                                   | (In thousands)                        |  
|                                      | Net cash (used in) provided by operating activities               |                                       | $ | (105,156 | )            |  | $ | 29,728        |   |              | $ |  |  |  | $ | (75,428  | )
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|Cash flows from investing activities: |                                                                   |                                       |   |          |              |  |   |               |   |              |   |   |  |  |   |         
|                                      | Increase in short term investments                                |                                       |   | (4,923   | )            |  |   |              |   |              |   |  |  |  |   | (4,923   | )
|                                      | Purchases of property and equipment                               |                                       |   | (2,180   | )            |  |   | (28,997       | ) |              |   |  |  |  |   | (31,177  | )
|                                      | Proceeds from sales of broadcast properties                       |                                       |   | 26,647   |              |  |   |              |   |              |   |  |  |  |   | 26,647   |  
|                                      | Proceeds from sale of broadcast towers and property and equipment |                                       |   | 143      |              |  |   |              |   |              |   |  |  |  |   | 143      |  
|                                      | Proceeds from insurance recoveries                                |                                       |   | 2,722    |              |  |   |              |   |              |   |  |  |  |   | 2,722    |  
|                                      | Other                                                             |                                       |   | (363     | )            |  |   | (738          | ) |              |   |  |  |  |   | (1,101   | )
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Net cash provided by (used in) investing activities               |                                       |   | 22,046   |              |  |   | (29,735       | ) |              |   |  |  |  |   | (7,689   | )
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|Cash flows from financing activities: |                                                                   |                                       |   |          |              |  |   |               |   |              |   |   |  |  |   |         
|                                      | Borrowings of long-term debt                                      |                                       |   | 336,338  |              |  |   |              |   |              |   |  |  |  |   | 336,338  |  
|                                      | Repayments of long-term debt                                      |                                       |   | (2,898   | )            |  |   |              |   |              |   |  |  |  |   | (2,898   | )
|                                      | Redemption of preferred stock                                     |                                       |   | (284,410 | )            |  |   |              |   |              |   |  |  |  |   | (284,410 | )
|                                      | Payments of loan origination costs                                |                                       |   | (10,886  | )            |  |   |              |   |              |   |  |  |  |   | (10,886  | )
|                                      | Debt extinguishment premium and costs                             |                                       |   | (14,302  | )            |  |   |              |   |              |   |  |  |  |   | (14,302  | )
|                                      | Proceeds from exercise of common stock options, net               |                                       |   | 1,182    |              |  |   |              |   |              |   |  |  |  |   | 1,182    |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Net cash used in financing activities                             |                                       |   | 25,024   |              |  |   |              |   |              |   |  |  |  |   | 25,024   |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Increase (decrease) in cash and cash equivalents                  |                                       |   | (58,086  | )            |  |   | (7            | ) |              |   |  |  |  |   | (58,093  | )
|                                      | Cash and cash equivalents, beginning of period                    |                                       |   | 83,816   |              |  |   | 42            |   |              |   |  |  |  |   | 83,858   |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  
|                                      | Cash and cash equivalents, end of period                          |                                       | $ | 25,730   |              |  | $ | 35            |   |              | $ |  |  |  | $ | 25,765   |  
|                                      |                                                                   |                                       |   |          |              |  |   |               |   |              |   |  

F-55



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##### Table of Contents



SCHEDULE II


PAXSON COMMUNICATIONS CORPORATION


VALUATION AND QUALIFYING ACCOUNTS


For the Three Years Ended December 31, 2004


|                                      |                                         |                |   |           |          |  |   |          |     |            |   |            |             |  |   |        |      |  |   |         | 
|------------------------------------- | --------------------------------------- | -------------- | - | --------- | -------- |  | - | -------- | --- | ---------- | - | ---------- | ----------- |  | - | ------ | ---- |  | - | ------- | 
|                                      |                                         | Column A       |   |           | Column B |  |   | Column C |     | Column D   |   |            | Column E    | 
|                                      |                                         |                |   |           |          |  |   |          |     |            |   |            |             | 
|                                      |                                         |                |   | Additions |          |  |   |          |     |            |  
|                                      |                                         |                |   | Charged   |          |  |   |          |     |            |  
|                                      |                                         | Balance at     |   |           | to Costs |  |   |          |     |            |   |           
|                                      |                                         | Beginning      |   |           | and      |  |   |          |     |            |   | Balance at |            
|                                      |                                         | of Year        |   |           | Expenses |  |   | Other    |     | Deductions |   |            | End of Year | 
|                                      |                                         |                |   |           |          |  |   |          |     |            |   |            |             | 
|                                      |                                         | (In thousands) |  
|For the year ended December 31, 2004: |                                         |                |   |           |          |  |   |          |     |            |   |            |             |  |   |        |      |  |   |        
|                                      | Allowance for doubtful accounts         |                | $ | 1,090     |          |  | $ | 155      |     |            | $ |           |             |  | $ | (597   | )(1) |  | $ | 648     | 
|                                      | Deferred tax assets valuation allowance |                | $ | 370,537   |          |  | $ | 63,525   | (2) |            | $ |           |             |  | $ |       |      |  | $ | 434,062 | 
|                                      | Restructuring reserves                  |                | $ | 145       |          |  | $ | (5       | )   |            | $ |           |             |  | $ | (138   | )(3) |  | $ | 2       | 
|For the year ended December 31, 2003: |                                         |                |   |           |          |  |   |          |     |            |   |            |             |  |   |        |      |  |   |        
|                                      | Allowance for doubtful accounts         |                | $ | 2,100     |          |  | $ | (418     | )   |            | $ |           |             |  | $ | (592   | )(1) |  | $ | 1,090   | 
|                                      | Deferred tax assets valuation allowance |                | $ | 348,110   |          |  | $ | 22,427   | (2) |            | $ |           |             |  | $ |       |      |  | $ | 370,537 | 
|                                      | Restructuring reserves                  |                | $ | 1,522     |          |  | $ | 48       |     |            | $ |           |             |  | $ | (1,425 | )(3) |  | $ | 145     | 
|For the year ended December 31, 2002: |                                         |                |   |           |          |  |   |          |     |            |   |            |             |  |   |        |      |  |   |        
|                                      | Allowance for doubtful accounts         |                | $ | 3,635     |          |  | $ | (126     | )   |            | $ |           |             |  | $ | (1,409 | )(1) |  | $ | 2,100   | 
|                                      | Deferred tax assets valuation allowance |                | $ | 124,428   |          |  | $ | 223,682  | (2) |            | $ |           |             |  | $ |       |      |  | $ | 348,110 | 
|                                      | Restructuring reserves                  |                | $ | 2,099     |          |  | $ | 2,173    |     |            | $ |           |             |  | $ | (2,750 | )(3) |  | $ | 1,522   | 






|    |                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------
|(1) | Write off of uncollectible receivables.                                                                                                 
|   
|(2) | Valuation allowance for net deferred tax assets due to
    uncertainty surrounding the Companys utilization of future
    tax benefits.
|   
|(3) | Cash payments of termination benefits and lease obligations.                                                                            

F-56