##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(MARK ONE)

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

For the quarterly period ending September 30, 2007



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

For the transition period from  to

Commission File Number: 000-51418



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Equity Media
Holdings Corporation

(Exact name of registrant as specified in its charter)



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

One Shackleford Drive, Suite 400

Little Rock, Arkansas 72211

(Address of principal executive offices,
including zip code)

(501) 219-2400

(Registrants telephone number, including area code)



---

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

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

Large accelerated
filer ̈Accelerated filer ̈Non-accelerated filer  x

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

As of November 14, 2007, 40,278,642 shares of the
Companys common stock, $0.0001 par value per share, were outstanding.



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##### Table of Contents

EQUITY MEDIA HOLDINGS CORPORATION

INDEX



|                                                                                                                          |  |     
|------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                          |  | Page
|PART IFINANCIAL INFORMATION                                                                                              |  |     
|                                                                                                                          | 
|Item 1. Financial Statements                                                                                              |  |     
|Condensed Consolidated Balance Sheets  As of September 30, 2007 (unaudited) and As of December 31, 2006                  |  | 3   
|Condensed Consolidated Statements of Operations (unaudited)  Three and Nine Months Ended September 30, 2007 and 2006     |  | 5   
|Condensed Consolidated Statements of Common Stockholders Equity (unaudited)  From January 1, 2006 to September 30, 2007 |  | 6   
|Condensed Consolidated Statements of Cash Flows (unaudited)  Nine Months Ended September 30, 2007 and 2006               |  | 7   
|Notes to Unaudited Condensed Consolidated Financial Statements                                                            |  | 9   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 22  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                        |  | 30  
|Item 4 and Item 4T. Controls and Procedures                                                                               |  | 30  
|                                                                                                                          | 
|PART IIOTHER INFORMATION                                                                                                 |  |     
|                                                                                                                          | 
|Item 1. Legal Proceedings                                                                                                 |  | 31  
|Item 1A. Risk Factors                                                                                                     |  | 31  
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                       |  | 31  
|Item 4. Submission of Matters to a Vote of Security Holders                                                               |  | 31  
|Item 5. Other Information                                                                                                 |  | 31  
|Item 6. Exhibits                                                                                                          |  | 32  
|Signatures                                                                                                                |  | 33  
|Exhibit Index                                                                                                             |  | 34  



2



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##### Table of Contents

PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EQUITY MEDIA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                          |  |                              |             |   |                  |   |             |  
|------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                          |  | September 30,2007(Unaudited) |             |   | December 31,2006 |  
|ASSETS                                                                    |  |                              |             |   |                  |   |             |  
|                                                                          |  |                             
|Current assets                                                            |  |                              |             |   |                  |   |             |  
|Cash and cash equivalents                                                 |  | $                            | 2,416,864   |   |                  | $ | 1,630,973   |  
|Certificate of deposit                                                    |  |                              | 110,093     |   |                  |   | 107,611     |  
|Trade accounts receivable, net of allowance for uncollectible accounts    |  |                              | 3,716,271   |   |                  |   | 3,893,887   |  
|Program broadcast rights                                                  |  |                              | 7,611,117   |   |                  |   | 5,104,685   |  
|Assets held for sale                                                      |  |                              | 15,020,570  |   |                  |   | 12,352,613  |  
|Other current assets                                                      |  |                              | 384,878     |   |                  |   | 811,231     |  
|Prepaid expenses  related party                                          |  |                              | 100,000     |   |                  |   |            |  
|                                                                          |  |                              |             |   |                  |   |             |  
|Total current assets                                                      |  |                              | 29,359,793  |   |                  |   | 23,901,000  |  
|                                                                          |  |                              |             |   |                  |   |             |  
|                                                                          |  |                             
|Property and equipment                                                    |  |                              |             |   |                  |   |             |  
|Land and improvements                                                     |  |                              | 2,008,630   |   |                  |   | 2,200,330   |  
|Buildings                                                                 |  |                              | 3,418,588   |   |                  |   | 2,348,475   |  
|Broadcast equipment                                                       |  |                              | 26,718,055  |   |                  |   | 23,354,491  |  
|Transportation equipment                                                  |  |                              | 265,951     |   |                  |   | 232,776     |  
|Furniture and fixtures                                                    |  |                              | 4,152,704   |   |                  |   | 3,337,654   |  
|Construction in progress                                                  |  |                              | 896,091     |   |                  |   | 203,816     |  
|                                                                          |  |                              |             |   |                  |   |             |  
|                                                                          |  |                              | 37,460,019  |   |                  |   | 31,677,542  |  
|Accumulated depreciation                                                  |  |                              | (14,593,100 | ) |                  |   | (12,161,846 | )
|                                                                          |  |                              |             |   |                  |   |             |  
|Net property and equipment                                                |  |                              | 22,866,919  |   |                  |   | 19,515,696  |  
|                                                                          |  |                              |             |   |                  |   |             |  
|                                                                          |  |                             
|Intangible assets                                                         |  |                              |             |   |                  |   |             |  
|Indefinite-lived assets, net                                              |  |                              |             |   |                  |   |             |  
|Broadcast licenses                                                        |  |                              | 61,981,890  |   |                  |   | 63,064,692  |  
|Goodwill                                                                  |  |                              | 1,940,282   |   |                  |   | 1,940,282   |  
|                                                                          |  |                              |             |   |                  |   |             |  
|Total indefinite-lived assets, net                                        |  |                              | 63,922,172  |   |                  |   | 65,004,974  |  
|                                                                          |  |                              |             |   |                  |   |             |  
|                                                                          |  |                             
|Other assets                                                              |  |                              |             |   |                  |   |             |  
|Cash restricted for acquisition of broadcast assets                       |  |                              | 5,684,739   |   |                  |   |            |  
|Broadcasting construction permits                                         |  |                              | 925,040     |   |                  |   | 926,000     |  
|Program broadcast rights                                                  |  |                              | 4,743,290   |   |                  |   | 4,120,753   |  
|Investment in joint ventures                                              |  |                              | 430,169     |   |                  |   | 681,605     |  
|Deposits and other assets                                                 |  |                              | 218,546     |   |                  |   | 302,630     |  
|Broadcasting station acquisition rights pursuant to assignment agreements |  |                              | 440,000     |   |                  |   |            |  
|                                                                          |  |                              |             |   |                  |   |             |  
|Total other assets                                                        |  |                              | 12,441,784  |   |                  |   | 6,030,988   |  
|                                                                          |  |                              |             |   |                  |   |             |  
|Total assets                                                              |  | $                            | 128,590,668 |   |                  | $ | 114,452,658 |  
|                                                                          |  |                              |             |   |                  |   |             |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------------ | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                                        |  | September 30,2007(Unaudited) |              |   | December 31,2006 |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                    |  |                              |              |   |                  |   |             |  
|                                                                                                                                                                                                        |  |                             
|Current liabilities                                                                                                                                                                                     |  |                              |              |   |                  |   |             |  
|Trade accounts payable                                                                                                                                                                                  |  | $                            | 3,609,025    |   |                  | $ | 1,980,509   |  
|Due to affiliates and related parties                                                                                                                                                                   |  |                              | 1,889,834    |   |                  |   | 1,338,557   |  
|Accrued expenses and other liabilities                                                                                                                                                                  |  |                              | 2,223,427    |   |                  |   | 1,455,526   |  
|Line of credit                                                                                                                                                                                          |  |                              | 998,987      |   |                  |   |            |  
|Deposits held for sales of broadcast licenses                                                                                                                                                           |  |                              | 1,024,601    |   |                  |   | 219,024     |  
|Deferred revenue                                                                                                                                                                                        |  |                              | 198,642      |   |                  |   | 212,299     |  
|Current portion of program broadcast rights obligations                                                                                                                                                 |  |                              | 2,195,947    |   |                  |   | 1,126,580   |  
|Current portion of deferred barter revenue                                                                                                                                                              |  |                              | 5,209,193    |   |                  |   | 3,903,770   |  
|Note payable to Univision                                                                                                                                                                               |  |                              | 15,000,000   |   |                  |   |            |  
|Current portion of notes payable                                                                                                                                                                        |  |                              | 48,793,758   |   |                  |   | 3,934,615   |  
|Current portion of capital lease obligations                                                                                                                                                            |  |                              | 6,910        |   |                  |   | 35,267      |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|Total current liabilities                                                                                                                                                                               |  |                              | 81,150,324   |   |                  |   | 14,206,147  |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|                                                                                                                                                                                                        |  |                             
|Non-current liabilities                                                                                                                                                                                 |  |                              |              |   |                  |   |             |  
|Notes payable, net of current portion                                                                                                                                                                   |  |                              | 7,418,824    |   |                  |   | 53,966,446  |  
|Capital lease obligations, net of current portion                                                                                                                                                       |  |                              | 5,506        |   |                  |   | 25,736      |  
|Program broadcast rights obligations, net of current portion                                                                                                                                            |  |                              | 1,236,616    |   |                  |   | 1,020,937   |  
|Deferred barter revenue, net of current portion                                                                                                                                                         |  |                              | 3,109,260    |   |                  |   | 2,889,424   |  
|Due to affiliates and related parties                                                                                                                                                                   |  |                              | 24,394       |   |                  |   | 51,499      |  
|Security and other deposits                                                                                                                                                                             |  |                              | 213,500      |   |                  |   | 1,024,601   |  
|Other liabilities                                                                                                                                                                                       |  |                              | 371,197      |   |                  |   |            |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|Total non-current liabilities                                                                                                                                                                           |  |                              | 12,379,297   |   |                  |   | 58,978,643  |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|Total liabilities                                                                                                                                                                                       |  |                              | 93,529,621   |   |                  |   | 73,184,790  |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|Commitments and Contingencies                                                                                                                                                                           |  |                              |             |   |                  |   |            |  
|Mandatorily redeemable preferred stock  $.0001 par value; 25,000,000 shares authorized; 2,050,519 issued and outstanding at
September 30, 2007                                                         |  |                              | 10,519,162   |   |                  |   |            |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|                                                                                                                                                                                                        |  |                             
|Stockholders Equity                                                                                                                                                                                    |  |                              |              |   |                  |   |             |  
|Common stock  $.0001 par value; 100,000,000 shares authorized; 40,278,642 and 25,371,332 issued and 40,278,382 and 25,371,332
outstanding at September 30, 2007 and at December 31, 2006, respectively |  |                              | 4,028        |   |                  |   | 2,537       |  
|Additional paid-in-capital                                                                                                                                                                              |  |                              | 135,868,823  |   |                  |   | 98,915,163  |  
|Accumulated deficit                                                                                                                                                                                     |  |                              | (111,329,614 | ) |                  |   | (57,649,832 | )
|Treasury stock, at cost  260 shares at September 30, 2007                                                                                                                                              |  |                              | (1,352       | ) |                  |   |            |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|Total stockholders equity                                                                                                                                                                              |  |                              | 24,541,885   |   |                  |   | 41,267,868  |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                              |  | $                            | 128,590,668  |   |                  | $ | 114,452,658 |  
|                                                                                                                                                                                                        |  |                              |              |   |                  |   |             |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

EQUITY MEDIA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|----------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                                      |  | Three Months ended September 30 |            |   | Nine Months ended September 30 |  
|                                                      |  | 2007                            |            |   | 2006                           |   |            | 2007 |  |   | 2006        |  
|Broadcast Revenue                                     |  | $                               | 7,508,138  |   |                                | $ | 7,147,597  |      |  | $ | 21,296,813  |   |  | $ | 23,075,959  |  
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Operating Expenses                                    |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Program, production & promotion                       |  |                                 | 3,696,863  |   |                                |   | 3,280,073  |      |  |   | 10,727,108  |   |  |   | 9,728,147   |  
|Selling, general & administrative                     |  |                                 | 7,271,801  |   |                                |   | 4,880,915  |      |  |   | 21,476,927  |   |  |   | 16,540,506  |  
|Selling, general & administrative  related party     |  |                                 | 199,796    |   |                                |   | 159,865    |      |  |   | 802,529     |   |  |   | 657,715     |  
|Management agreement settlement                       |  |                                 |           |   |                                |   |           |      |  |   | 8,000,000   |   |  |   |            |  
|Depreciation & amortization                           |  |                                 | 1,004,958  |   |                                |   | 842,091    |      |  |   | 2,852,317   |   |  |   | 2,486,395   |  
|Management fees  related party                       |  |                                 | 375,000    |   |                                |   | 377,620    |      |  |   | 1,172,581   |   |  |   | 1,226,466   |  
|Rent                                                  |  |                                 | 604,316    |   |                                |   | 530,810    |      |  |   | 1,836,611   |   |  |   | 1,590,836   |  
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Total operating expenses                              |  |                                 | 13,152,734 |   |                                |   | 10,071,374 |      |  |   | 46,868,073  |   |  |   | 32,230,065  |  
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Loss from operations                                  |  |                                 | (5,644,596 | ) |                                |   | (2,923,777 | )    |  |   | (25,571,260 | ) |  |   | (9,154,106  | )
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Other income (expense)                                |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Interest income                                       |  |                                 | 85,421     |   |                                |   | 33,848     |      |  |   | 117,931     |   |  |   | 44,719      |  
|Interest expense                                      |  |                                 | (1,819,741 | ) |                                |   | (2,021,606 | )    |  |   | (5,789,080  | ) |  |   | (5,700,827  | )
|Interest expense  related party                      |  |                                 | (262,500   | ) |                                |   |           |      |  |   | (525,000    | ) |  |   |            |  
|Gain (loss) on sale of assets                         |  |                                 |           |   |                                |   | (330,369   | )    |  |   | 453,753     |   |  |   | 262,290     |  
|Other income, net                                     |  |                                 | 212,324    |   |                                |   | 167,074    |      |  |   | 482,175     |   |  |   | 822,797     |  
|Losses from affiliates and joint ventures             |  |                                 | (226,660   | ) |                                |   | (130,596   | )    |  |   | (279,349    | ) |  |   | (479,854    | )
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Total other expense, net                              |  |                                 | (2,011,156 | ) |                                |   | (2,281,649 | )    |  |   | (5,539,570  | ) |  |   | (5,050,875  | )
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Loss before provision for income taxes                |  |                                 | (7,655,752 | ) |                                |   | (5,205,426 | )    |  |   | (31,110,830 | ) |  |   | (14,204,981 | )
|Provision for income taxes                            |  |                                 |           |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Net loss                                              |  |                                 | (7,655,752 | ) |                                |   | (5,205,426 | )    |  |   | (31,110,830 | ) |  |   | (14,204,981 | )
|Preferred dividend                                    |  |                                 | (185,598   | ) |                                |   |           |      |  |   | (12,506,140 | ) |  |   |            |  
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Net loss attributable to common shareholders          |  | $                               | (7,841,350 | ) |                                | $ | (5,205,426 | )    |  | $ | (43,616,970 | ) |  | $ | (14,204,981 | )
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Weighted average number of common shares outstanding: |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Basic and diluted                                     |  |                                 | 40,646,137 |   |                                |   | 25,371,332 |      |  |   | 35,104,786  |   |  |   | 25,371,332  |  
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Net loss available to common shareholders per share:  |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  
|Basic and diluted                                     |  | $                               | (0.19      | ) |                                | $ | (0.21      | )    |  | $ | (1.24       | ) |  | $ | (0.56       | )
|                                                      |  |                                 |            |   |                                |   |            |      |  |   |             |   |  |   |             |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

EQUITY MEDIA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN COMMON STOCKHOLDERS EQUITY

(UNAUDITED)



|                                                                                    |  |              |  |                                 |       |  |                     |             |   |                |        |              |       |  |      |   |  |   |        |   |  |   |             |  
|----------------------------------------------------------------------------------- |  | ------------ |  | ------------------------------- | ----- |  | ------------------- | ----------- | - | -------------- | ------ | ------------ | ----- |  | ---- | - |  | - | ------ | - |  | - | ----------- | -
|                                                                                    |  | Common Stock |  | Paid-in Capitalin Excess of Par |       |  | Accumulated Deficit |             |   | Treasury Stock |        |              | Total | 
|                                                                                    |  | Shares       |  | Amount                          |       |  |                     | Shares      |   |                | Amount |              |      
|Balance at January 1, 2006, as restated                                             |  | 25,371,332   |  | $                               | 2,537 |  | $                   | 98,915,163  |   |                | $      | (54,421,723  | )     |  |     |   |  | $ |       |   |  | $ | 44,495,977  |  
|Net loss for the year                                                               |  |             |  |                                 |      |  |                     |            |   |                |        | (3,228,109   | )     |  |      |   |  |   |        |   |  |   | (3,228,109  | )
|                                                                                    |  |              |  |                                 |       |  |                     |             |   |                |        |              |       |  |      |   |  |   |        |   |  |   |             |  
|Balance at December 31, 2006                                                        |  | 25,371,332   |  |                                 | 2,537 |  |                     | 98,915,163  |   |                |        | (57,649,832  | )     |  |     |   |  |   |       |   |  |   | 41,267,868  |  
|Retirement of preferred shareholders                                                |  |             |  |                                 |      |  |                     | (29,937,188 | ) |                |        | (10,062,812  | )     |  |     |   |  |   |       |   |  |   | (40,000,000 | )
|Shares issued per consulting agreement                                              |  | 43,860       |  |                                 | 4     |  |                     | (4          | ) |                |        |             |       |  |     |   |  |   |       |   |  |   |            |  
|Common stock issued as payment of preferred dividends                               |  | 314,966      |  |                                 | 32    |  |                     | 1,615,749   |   |                |        | (1,615,781   | )     |  |     |   |  |   |       |   |  |   |            |  
|Preferred shares issued as payment of preferred dividends                           |  |             |  |                                 |      |  |                     |            |   |                |        | (10,519,162  | )     |  |     |   |  |   |       |   |  |   | (10,519,162 | )
|Acquisition of net assets of Coconut Palm Acquisition Corporation                   |  | 12,091,089   |  |                                 | 1,209 |  |                     | 50,638,304  |   |                |        |             |       |  |     |   |  |   |       |   |  |   | 50,639,513  |  
|Charge to additional paid-in capital for prepaid merger costs                       |  |             |  |                                 |      |  |                     | (953,223    | ) |                |        |             |       |  |     |   |  |   |       |   |  |   | (953,223    | )
|Common stock portion of settlement to terminate Arkansas Media Management Agreement |  | 935,672      |  |                                 | 94    |  |                     | 4,799,906   |   |                |        |             |       |  |     |   |  |   |       |   |  |   | 4,800,000   |  
|Purchase of fractional shares                                                       |  |             |  |                                 |      |  |                     |            |   |                |        |             |       |  | (260 | ) |  |   | (1,352 | ) |  |   | (1,352      | )
|Share based compensation cost                                                       |  |             |  |                                 |      |  |                     | 1,658,678   |   |                |        |             |       |  |     |   |  |   |       |   |  |   | 1,658,678   |  
|Common shares issued in connection with private placement                           |  | 1,406,250    |  |                                 | 140   |  |                     | 8,999,860   |   |                |        |             |       |  |     |   |  |   |       |   |  |   | 9,000,000   |  
|Retirement of Equity Broadcasting Corporation dissenting shareholders               |  |             |  |                                 |      |  |                     | (368,410    | ) |                |        |             |       |  |     |   |  |   |       |   |  |   | (368,410    | )
|Common Stock issued as payment of note payable                                      |  | 115,473      |  |                                 | 12    |  |                     | 499,988     |   |                |        |             |       |  |     |   |  |   |       |   |  |   | 500,000     |  
|Accretion of preferred dividends                                                    |  |             |  |                                 |      |  |                     |            |   |                |        | (371,197     | )     |  |     |   |  |   |       |   |  |   | (371,197    | )
|Net loss for the nine months ended September 30, 2007                               |  |             |  |                                 |      |  |                     |            |   |                |        | (31,110,830  | )     |  |     |   |  |   |       |   |  |   | (31,110,830 | )
|                                                                                    |  |              |  |                                 |       |  |                     |             |   |                |        |              |       |  |      |   |  |   |        |   |  |   |             |  
|Balance at September 30, 2007                                                       |  | 40,278,642   |  | $                               | 4,028 |  | $                   | 135,868,823 |   |                | $      | (111,329,614 | )     |  | (260 | ) |  | $ | (1,352 | ) |  | $ | 24,541,885  |  
|                                                                                    |  |              |  |                                 |       |  |                     |             |   |                |        |              |       |  |      |   |  |   |        |   |  |   |             |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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EQUITY MEDIA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                            |  |                                |             |   |      |   |             |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                            |  | Nine Months Ended September 30 |            
|                                                                            |  | 2007                           |             |   | 2006 |  
|Cash flows from operating activities:                                       |  |                                |             |   |      |   |             |  
|Net loss                                                                    |  | $                              | (31,110,830 | ) |      | $ | (14,204,981 | )
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                                |             |   |      |   |             |  
|Provision for bad debts                                                     |  |                                | 1,030,315   |   |      |   | 377,941     |  
|Depreciation                                                                |  |                                | 2,811,832   |   |      |   | 2,388,796   |  
|Amortization of intangibles                                                 |  |                                | 40,485      |   |      |   | 97,599      |  
|Amortization of program broadcast rights                                    |  |                                | 5,451,169   |   |      |   | 4,362,862   |  
|Amortization of discounts on interest-free debt                             |  |                                | 29,723      |   |      |   |            |  
|Equity in losses of equity method subsidiaries and joint ventures           |  |                                | 279,349     |   |      |   | 479,854     |  
|(Gain) on sale of equipment                                                 |  |                                | (453,753    | ) |      |   | (28,523     | )
|(Gain) on sale of intangibles                                               |  |                                |            |   |      |   | (281,579    | )
|Stock issued to terminate management agreement                              |  |                                | 4,800,000   |   |      |   |            |  
|Share based compensation                                                    |  |                                | 1,658,678   |   |      |   |            |  
|Changes in operating assets and liabilities:                                |  |                                |             |   |      |   |             |  
|Trade accounts receivable                                                   |  |                                | (852,699    | ) |      |   | (1,093,521  | )
|Deposits and other assets                                                   |  |                                | (526,225    | ) |      |   | 197,338     |  
|Accounts payable and accrued expenses                                       |  |                                | (75,397     | ) |      |   | 857,064     |  
|Program broadcast rights                                                    |  |                                | (8,580,136  | ) |      |   | (4,790,193  | )
|Program broadcast obligations                                               |  |                                | 1,285,043   |   |      |   | (683,918    | )
|Deferred barter revenue                                                     |  |                                | 1,525,259   |   |      |   | 1,117,584   |  
|Security deposits                                                           |  |                                | (5,523      | ) |      |   |            |  
|Deposits held pending sale                                                  |  |                                |            |   |      |   | 10,625,955  |  
|Deferred income                                                             |  |                                | (13,657     | ) |      |   |            |  
|Other liabilities                                                           |  |                                |            |   |      |   | 5,000       |  
|                                                                            |  |                                |             |   |      |   |             |  
|Net cash used by operating activities                                       |  |                                | (22,706,367 | ) |      |   | (572,722    | )
|                                                                            |  |                                |             |   |      |   |             |  
|                                                                            |  |                               
|Cash flows from investing activities:                                       |  |                                |             |   |      |   |             |  
|Purchases of property and equipment                                         |  |                                | (6,398,509  | ) |      |   | (1,935,252  | )
|Proceeds from sale of property and equipment                                |  |                                | 621,462     |   |      |   | 92,250      |  
|Proceeds from sale of intangibles                                           |  |                                |            |   |      |   | 157,082     |  
|Proceeds from sale of broadcast stations                                    |  |                                |            |   |      |   | 3,060,121   |  
|Acquisition of broadcast assets                                             |  |                                | (1,625,000  | ) |      |   | (234,622    | )
|Restriction of cash for acquisitions                                        |  |                                | (5,684,739  | ) |      |   |            |  
|Purchase of certificate of deposit                                          |  |                                | (2,482      | ) |      |   | (2,837      | )
|Purchase of other intangible assets                                         |  |                                |            |   |      |   | (4,565      | )
|Net repayments from (advances to) affiliates                                |  |                                | 517,585     |   |      |   | (157,933    | )
|                                                                            |  |                                |             |   |      |   |             |  
|Net cash used in investing activities                                       |  |                                | (12,571,683 | ) |      |   | 974,244     |  
|                                                                            |  |                                |             |   |      |   |             |  
|                                                                            |  |                               
|Cash flows from financing activities:                                       |  |                                |             |   |      |   |             |  
|Borrowings under borrowing agreements                                       |  |                                | 19,084,389  |   |      |   | 18,122,376  |  
|Payments of notes payable                                                   |  |                                | (19,530,275 | ) |      |   | (19,976,235 | )
|Payments of capital lease obligations                                       |  |                                | (27,264     | ) |      |   | (21,839     | )
|Recapitalization through merger                                             |  |                                | 52,906,853  |   |      |   |            |  
|Purchase of common stock                                                    |  |                                | (1,352      | ) |      |   |            |  
|Purchase of preferred stock                                                 |  |                                | (25,000,000 | ) |      |   |            |  
|Issuance of common stock in private placement                               |  |                                | 9,000,000   |   |      |   |            |  
|Settlement with dissenting shareholders                                     |  |                                | (368,410    | ) |      |   |            |  
|                                                                            |  |                                |             |   |      |   |             |  
|Net cash provided by financing activities                                   |  |                                | 36,063,941  |   |      |   | (1,875,698  | )
|                                                                            |  |                                |             |   |      |   |             |  



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|                                                                                    |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|Net increase (decrease) in cash and cash equivalents                                |  |   | 785,891    |   |  |   | (1,474,176 | )
|Cash and cash equivalents  beginning of period                                     |  |   | 1,630,973  |   |  |   | 2,254,236  |  
|                                                                                    |  |   |            |   |  |   |            |  
|Cash and cash equivalents  end of period                                           |  | $ | 2,416,864  |   |  | $ | 780,060    |  
|                                                                                    |  |   |            |   |  |   |            |  
|Supplemental cash flow information:                                                 |  |   |            |   |  |   |            |  
|Cash paid during the period for interest                                            |  | $ | 5,196,589  |   |  | $ | 5,206,656  |  
|                                                                                    |  |  
|Supplemental non-cash activities:                                                   |  |   |            |   |  |   |            |  
|Issuance of note payable to redeem preferred stock                                  |  | $ | 15,000,000 |   |  |   |           |  
|Distribution to converting shareholders                                             |  | $ | 10,899,882 |   |  |   |           |  
|Issuance of mandatory redeemable preferred stock to pay accrued preferred dividends |  | $ | 10,519,162 |   |  |   |           |  
|Assumption of net liabilities of Coconut Palm Acquisition Corporation               |  | $ | (2,267,340 | ) |  |   |           |  
|Issuance of common stock to pay preferred dividends                                 |  | $ | 1,615,781  |   |  |   |           |  
|Charge to stockholders equity for prepaid merger costs                             |  | $ | 953,223    |   |  |   |           |  
|Issuance of common stock to retire debt                                             |  | $ | 500,000    |   |  |   |           |  
|Acquisition of real property through assumption of debt                             |  | $ | 205,347    |   |  |   |           |  
|Accretion of preferred dividends                                                    |  | $ | 371,197    |   |  |   |           |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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EQUITY MEDIA HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  ORGANIZATION AND BUSINESS OPERATIONS

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

The Company, headquartered in Little Rock, Arkansas, owns and operates television stations across the United
States and Retro Television Network (RTN). As of September 30, 2007 the Company owned 23 full power/network television stations, 38 Class A television stations and 57 low power television stations. As of September 30,
2007, RTN had 7 third-party affiliates under contract. The accompanying unaudited condensed consolidated financial statements also include the results of operations of a radio station operated by the Company pursuant to a local marketing agreement
(LMA).

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all
significant inter-company balances and transactions have been eliminated. The accounting policies followed by the Company and other pertinent information are set forth in the notes to EBCs financial statements for the fiscal year ended
December 31, 2006 included in the Form 8-K/A filed with the Securities and Exchange Commission on May 14, 2007 (the Form 8-K/A). The accompanying condensed consolidated balance sheet as of December 31, 2006, which has been
derived from audited consolidated financial statements, and the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2007 and 2006 included herein have been prepared in accordance with the
instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in conformity with
accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain only normal recurring adjustments necessary
to present fairly the Companys financial position as of September 30, 2007 and the results of its operations for the three and nine months ended September 30, 2007 and 2006 and cash flows for the nine months ended September 30,
2007 and 2006, except for the merger and recapitalization and related transactions as further discussed in Note 4  Merger Transaction. The results of operations for the three and nine months ended September 30, 2007 and 2006 are unaudited
and are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the financial statements and related footnotes included
in the Form 8-K/A.

NOTE 2  LIQUIDITY AND CAPITAL RESOURCES

The Company currently has a working capital deficit of approximately $51.8 million and has experienced losses from operations since inception. During the nine months ended September 30, 2007, the Company had a
net loss of approximately $43.6 million and experienced cash outflows from operations during the same period of approximately $22.7 million. In the past, the Company has relied on equity and debt financing and the sale of assets to provide the
necessary liquidity for the business to operate and will need to have access to substantial funds over the next twelve months in order to fund its operations. As of September 30, 2007, the Company has approximately $2.4 million of unrestricted
cash on hand, and as more fully discussed in Notes 10 and 11, the Company has access to a working capital line of credit provided to it from certain banking institutions (the Credit Facility) with a net availability of approximately
$13.0 million as of September 30, 2007. However, due to certain restrictions based on the value of the loan collateral the Company does not currently have access to $7.9 million of the $13.0 million. Additionally, a reserve against the
aggregate revolving commitment under the Credit Facility of $4.0 million was established as a component of the waiver letter signed on August 20, 2007 by the senior lenders thereunder and the Company. The Credit Facility, as well as certain
other notes outstanding, contains financial covenants, including among others, that the Company meet minimum revenue and EBITDA levels. At September 30, 2007, the Company was in default of these covenants. The Company requested and obtained a
waiver of these defaults from the lenders on November 7, 2007. However, the waiver is strictly limited to the defaults existing as of September 30, 2007 and does not extend to any future defaults, should they occur. In connection with the
waiver, the lenders released a $4.0 million reserve established pursuant to the waiver obtained by the Company for the previous fiscal quarter.



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The Company is negotiating certain amendments and modifications to the Credit Facility. In consideration
of the payment of certain fees, the lenders under the Credit Facility will commit to delivering an amended credit facility (the Amended Credit Facility) embodying these amendments and modifications so long as (i) the terms of the
Amended Credit Facility are substantially consistent with the terms of the currently proposed term sheet (Proposed Term Sheet) as may be revised upon agreement of the Company and the lenders, and (ii) upon execution of the Amended
Credit Facility, the Company accepts a currently existing offer to purchase one of its television stations subject to a definitive agreement having reasonably acceptable terms. The Proposed Term Sheet calls for a maximum facility amount of $53.0
million, comprised of an $8.0 million revolving credit facility and a $45.0 million term loan. The Amended Credit Facility would bear interest at LIBOR + 7.75% and would mature in 3 years. By entering into the Amended Credit Facility, the Company
would be subject to new covenants and restrictions that are more in line with the current business plan of the Company. Additionally, the Amended Credit Facility would provide additional liquidity by eliminating the availability restrictions of the
current Credit Facility. As proposed, the Amended Credit Facility would provide financing to retire the current Credit Facility of approximately $47.7 million, and provide liquidity of approximately $5.3 million.

There can be no certainty that the Amended Credit Facility will be entered into as proposed under the Proposed Term Sheet or at all. Even if entered
into, the additional funds provided by the Amended Credit Facility as proposed would not be sufficient to meet all of the anticipated liquidity needs to continue operations of the Company for the next twelve months. Accordingly, the Company will
have to sell non-core assets, raise additional capital or increase its debt within the next twelve months to continue operations. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on
favorable terms, management may be required to liquidate available assets, restructure the company or in the extreme event, cease operations. The financial statements do not include any adjustments that might result from the outcome of these
uncertainties.

NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Barter and trade transactions:Revenue and expenses associated with barter agreements in which broadcast time is exchanged for programming rights are recorded at the estimated average rate of the airtime
exchanged. Trade transactions, which represent the exchange of advertising time for goods or services, are recorded at the estimated fair value of the products or services received. Barter and trade revenue is recognized when advertisements are
broadcast. Merchandise or services received from airtime trade sales are charged to expense or capitalized and expensed when used. Barter revenues and expenses for the three and nine months ended September 30 were approximately $1.4 million and
$3.9 million in 2007 and $1.2 million and $3.4 million in 2006 respectively. Trade revenues and expenses for the three and nine months ended September 30 were approximately $1.1 million and $3.1 million in 2007 and $1.0 million
and $2.8 million in 2006 respectively.

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

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159
will be effective for the Company on January 1, 2008.



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The Company is currently evaluating the impact, if any, of adopting SFAS No. 159 on its financial position, cash flow and results of operations.

Reclassifications:Certain amounts in the 2006 consolidated financial statements have been reclassified to conform to the 2007
presentation.

NOTE 4  MERGER TRANSACTION

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

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

Additionally, the Company issued 3,187,134 options to purchase its common stock, where each outstanding option to purchase EBC Class A common stock
was converted into the right to receive options to purchase 1.461988 shares of the Companys common stock. The fair value of the options at the date of the merger was $4.7 million based on a Black-Scholes valuation on March 30, 2007,
the date of the Merger (see Note 15  Stock Option Plans).

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

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

In connection with the Merger Transaction, shareholders of EBC representing 66,500 shares of EBC Class A common stock elected to convert their shares to cash in accordance with Arkansas law. The Company recorded
a liability in the amount of $368,410 to convert the shares plus $8,983 of accrued interest based on a conversion rate of $5.54 per share plus interest accruing



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from the date of the Merger Transaction at the rate of 9.78% per annum. On July 10, 2007, the dissenting shareholders were paid $378,380 in cash
for the value of their shares including all interest accrued to date. Pursuant to Arkansas Code, the dissenting shareholders have contested the Companys valuation (see Note 17  Commitment and Contingencies).

NOTE 5  ARKANSAS MEDIA SETTLEMENT TRANSACTION

Immediately prior to the closing of the Merger Transaction (see Note 4  Merger Transaction), EBC entered into a settlement agreement, dated April 7, 2006, by and among EBC, Arkansas Media, a related party (see Note 18 
Related Party Transactions), Larry Morton, Gregory Fess and Max Hooper (the Arkansas Media Settlement Agreement) which provided for the resolution of the following matters between the parties:



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



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



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



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



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

NOTE 6 
ASSETS HELD FOR SALE

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

In connection with the merger the Company and Univision Television Group, preferred stock holders, entered into a one year $15.0 million promissory note
secured by two television stations located in Utah. In lieu of a cash repayment, the Company filed an application with the FCC on July 26, 2007 to transfer the television stations to Univision Television Group, Inc. in satisfaction of the
principal amount of the note. The television station assets include broadcast licenses with book values of $7,884,631 and broadcasting equipment with book values of $481,363, a total of $8,365,994, as of September 30, 2007. Accordingly, these
assets are classified as held for sale as of September 30, 2007. These assets were included in assets held for sale as of December 31, 2006 since as part of the Merger Transaction these assets were to be transferred to Univision Television
Group, Inc, as payment for their Series A preferred shares. The latter described transfer was exchanged for the $15 million promissory note at the Merger Closing.

Subsequent to September 30, 2007, the Company signed a non-binding letter of intent for the sale of certain television stations. Included in these stations are assets with net book values of $1,425,485 that were
included in assets held for sale as of December 31, 2006 under a separate asset purchase agreement which was terminated October 18, 2007. The remaining stations assets include broadcast licenses with book values of $2,310,990 and
broadcasting equipment with book values of $409,793, a total of $2,720,783 as of September 30, 2007, and the Company has classified them as additional assets held for sale.

The Company did not sell any assets during the three month period ended September 30, 2007. For the nine month period ended September 30, 2007,
the Company recognized a gain of $453,753 from the sale of land and a broadcast tower in



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Central Arkansas. For the three and nine month periods ended September 30, 2006, the Company recognized a loss of $330,369 from the sale of a station in
Alabama and gains of $262,290 which were primarily from the sale of certain low power television stations located in Idaho and Central Arkansas.

NOTE 7
 ASSET PURCHASE AGREEMENT

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

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

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

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

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

NOTE 8  CASH RESTRICTED FOR ACQUISITION OF BROADCAST ASSETS

The Company has set aside $5.6 million in cash which is restricted to the acquisition of broadcast assets. These funds are intended for payment of the assets being acquired pursuant to the Asset Purchase Agreement
described in Note 7  Asset Purchase Agreement. With lender approval, the Company could use these funds for other purposes.

NOTE 9 
INVESTMENT IN JOINT VENTURES

At September 30, 2007 and December 31, 2006, Investment in Joint Ventures consists of the
following:



|                             |  |                     |   |                   |         |         |                     |      |   |         |   |        
|---------------------------- |  | ------------------- | - | ----------------- | ------- | ------- | ------------------- | ---- | - | ------- | - | -------
|                             |  | September 30, 2007  |   | December 31, 2006
|                             |  | OwnershipPercentage |   |                   | Balance |         | OwnershipPercentage |      |   | Balance
|Little Rock TV 14, LLC       |  | 50.0                | % |                   | $       | 22,714  |                     | 50.0 | % |         | $ | 23,282 
|Spinner Network Systems, LLC |  | *                   | * |                   |         | 407,455 |                     | 33.0 | % |         |   | 658,323
|                             |  |                     |   |                   |         |         |                     |      |   |         |   |        
|                             |  |                     |   |                   | $       | 430,169 |                     |      |   |         | $ | 681,605
|                             |  |                     |   |                   |         |         |                     |      |   |         |   |        

---

|** |  A reorganization of Spinner Network Systems, LLC resulted in the reduction of the Companys ownership percentage in Spinner from 33% at
December 31, 2006 to 4% at September 30, 2007. Because the Company owns less than a 20% interest and exerts no influence over management or the operations of Spinner, the Company has changed from the equity method to the cost method to
account for its investment in Spinner Network Systems, LLC. Under the cost method of accounting for
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | investments, the Company will no longer record its proportionate share of Spinner income or loss, but will instead periodically evaluate the fair value of
its investment in Spinner and adjust the carrying amount accordingly. During the three month period ended September 30, 2007, the Company adjusted the carrying value of its investment in Spinner by $198,368 to reflect the fair value of its
investment. This loss in value is included in losses from affiliates and joint ventures in the consolidated statement of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 10  LINE OF CREDIT

At September 30, 2007, the Company had a $1,000,000 revolving line of credit with a
local financial institution expiring in January 2008, bearing interest at 8.25% payable monthly and secured by interests in certain real property. The outstanding balance of this line of credit as of September 30, 2007 was $998,987. The
Company intends to renew this credit facility with similar terms.

NOTE 11  NOTES PAYABLE

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

The Company has the Credit
Facility, which provides for secured revolving and term loan facilities in varying amounts at variable interest rates, maturing in June 2010. As of September 30, 2007, the Company has borrowings under the Credit Facility in the aggregate amount
of $45,194,394 and interest rates ranging from 12.5% to 15.8%. Also, as of September 30, 2007, the Company had access to approximately $1.1 million from the revolver component of the Credit Facility. An additional $7.9 million is available
under the Credit Facility if certain collateral restrictions are removed, and an additional $4.0 million is available under the Credit Facility if certain conditions are met, for a total availability of $13.0 million. The Company was in default of
certain covenants under the Credit Facility at September 30, 2007 and obtained a waiver respect to such defaults as described in Note 2- Liquidity and Capital Resources. Additionally, that waiver allowed for the release of the $4.0 million
restriction mentioned above.

NOTE 12  STOCKHOLDERS EQUITY

Private Placement

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

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

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

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



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Shares Issued to Retire Debt

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

Merger Transaction and Recapitalization

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

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

Initial Public Offering

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

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

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

Founding Stockholders Registration Rights

The initial capitalization from the Companys initial stockholder (the Founding Stockholder) of 2,500,000 issued and outstanding shares of common stock are entitled to registration rights. The
Founding Stockholder is entitled to make up to two demands that the Company register these shares. The holder of these shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares
of common stock are to be released from escrow. In addition, such stockholder has certain piggy-back registration rights with respect to registration statements filed subsequent to the date on which these shares of common stock are
released from escrow. The Company will bear the expenses incurred in connection with the filing of any such registration statements.



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NOTE 13  MANDATORILY REDEEMABLE SERIES A CONVERTIBLE NON-VOTING PREFERRED STOCK

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

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

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

In connection with the Private Placement, the Board of Directors determined that the fair value of the common stock component of the June
2007 Unit Offering (see note 12  Stockholders Equity) was greater than the issue prices of the Series A Convertible Non- Voting Preferred Stock of $5.13 per share. Additionally, the fair value of the warrants component combined with the
exercise price was determined to be greater than the original issue price of $5.13 for the Series A preferred. Accordingly, the conversion price of the Series A Non-Voting Preferred Stock was not reset in accordance with the provisions of EITF 98-5
Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27 Application of EITF 98-5 to Certain Convertible Instruments.

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

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

The Company believes that it is not probable
that the holders of the Series A Preferred would currently elect to convert their shares to common stock because the current trading price of the Companys common stock is lower than the conversion price. Therefore and under the guidance of
EITF D-98, the carrying value of the Series A Preferred Stock as of September 30, 2007 is its original issue amount and does not include any accreted dividends or any other adjustment.



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For the three and nine month period ended September 30, 2007, the Company accreted dividends in the
amount of $185,598 and $371,197, respectively. As of September 30, 2007 dividends payable to the Series A Preferred shareholders are $371,197 and included in other non current liabilities.

Univision Registration Rights

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

NOTE 14  SHARES HELD IN ESCROW

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

NOTE 15  STOCK OPTION PLANS

2007 Stock Incentive Plan

On March 29, 2007, the shareholders of the Company approved the adoption of the 2007 Stock Incentive Plan, which governs stock-based awards up to an aggregate of 12,274,853 shares of the Companys common stock,
including(i) 3,274,853 shares converted from existing EBC options assumed in the Merger Transaction (only 3,187,134 as of the date of the Merger Transaction), (ii) 2,000,000 and 250,000 shares underlying options issuable to Larry Morton
and Gregory Fess, respectively, under employment agreements entered in connection with the Merger Transaction, and (iii) 6,750,000 shares reserved for future grants. The purpose of the 2007 Stock Incentive Plan is to enable the Company to
attract, retain, reward and motivate officers, directors, employees and consultants of the Company, its subsidiaries or affiliates by providing them with an opportunity to acquire or increase a propriety interest in the Company. The 2007 Stock
Incentive Plan became effective upon the closing of the Merger Transaction and is administered by the Compensation Committee of the Board of Directors.

On May 9, 2007, the Compensation Committee of the Companys Board of Directors approved and granted 3,700,000 options under the 2007 Stock Incentive Plan including the options to Larry Morton (2,000,000
options) and Gregory Fess (250,000 options) referenced above, among other options granted to other executives of the Company. All of the above options expire seven years after the grant date and vest over three, four or five year periods, including
750,000 that vested the date of the grant. On June 13, 2007, the Compensation Committee granted 20,000 options each to the five independent members of the Board of Directors. All of the options granted to the board members vest equally on a
monthly basis over a five year period, and expire seven years from the date of the grant.

Stock-Based Compensation

Stock-based compensation expense for the three and nine months ended September 30, 2007 was $0.4 million and $1.7 million, respectively compared to
$0 in 2006. The total deferred tax benefit related thereto was $0 for the three and nine months ended September 30, 2007 compared to $0 during the same periods in 2006. As of September 30, 2007, there was $4.1 million of total
unrecognized compensation cost related to unvested share-based compensation awards granted under the 2007 Stock Incentive Plan, which does not include the effect of future grants of equity compensation, if any. Of the total $4.1 million, we
expect to recognize approximately 8.3% in the remaining interim period of 2007, and 91.7% in 2008 and beyond.

Prior Plans

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



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Accounting for Stock Option Plans

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

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

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

NOTE 16  INCOME TAXES

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

NOTE 17  COMMITMENT AND CONTINGENCIES

Stock options to underwriters

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



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Employment Agreements

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

Litigation

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

In addition to requesting unspecified compensatory damages, the plaintiff also requested injunctive relief to enjoin EBCs annual shareholder meeting and the vote on the merger. An injunction hearing was not held before EBCs
annual meeting regarding the merger so the meeting and shareholder vote proceeded as planned and EBCs shareholders approved the merger. On August 9, 2006, EBCs motion to dismiss the lawsuit was denied. On February 21, 2007, the
plaintiff filed a Motion to Enforce Settlement Agreement with the court alleging the parties reached an oral agreement to settle the lawsuit. The plaintiff subsequently filed a motion to withdraw the motion to settle and filed a
Third Amended Complaint on April 10, 2007. This motion added two additional plaintiffs and expanded on the issues recited in the previous complaints. On July 31, 2007, the plaintiff filed a Fourth Amended Complaint.
This motion added three new plaintiffs and three new defendants to the proceedings. The three additional defendants bear a fiduciary relationship to three previously named defendants.

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

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

EBC Dissenting Shareholders

In connection with the Merger Transaction (see Note 4  Merger Transaction) shareholders
of EBC representing 66,500 shares of EBC Class A common stock elected to convert their shares to cash in accordance with Arkansas law. The Company recorded a liability in the amount of $368,410 to convert the shares plus $8,983 of accrued
interest based on a conversion rate of $5.54 per share plus interest accruing from the date of the Merger Transaction at the rate of 9.78% per annum. On July 10, 2007, the dissenting shareholders were paid $378,380 in cash for the value of
their shares including all interest accrued to date. Pursuant to Arkansas Code, the dissenting shareholders exercised their right to contest the Companys valuation and have demanded payment of an additional $17.78 per share plus accrued
interest at 9.78% per annum. The Company has petitioned the court for a determination of the fair value of the shares and believes its valuation will prevail.



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Obligations

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

NOTE 18  RELATED PARTY TRANSACTIONS

Amounts due (to) from affiliates and related parties at September 30, 2007 and December 31, 2006 consist of the following:



|                                             |  |                   |            |   |                  |   |            |  
|-------------------------------------------- |  | ----------------- | ---------- | - | ---------------- | - | ---------- | -
|                                             |  | September 30,2007 |            |   | December 31,2006 |  
|Univision Communications, Inc.               |  | $                 | (1,818,798 | ) |                  | $ | (726,003   | )
|Arkansas Media, LLC and affiliates           |  |                   | 78,964     |   |                  |   | (86,462    | )
|Royal Palm Capital Management, LLP           |  |                   | (150,000   | ) |                  |   |           |  
|Little Rock TV 14, LLC                       |  |                   | (73,834    | ) |                  |   | (67,622    | )
|Actron, Inc.                                 |  |                   |           |   |                  |   | (526,092   | )
|Other                                        |  |                   | 49,440     |   |                  |   | 16,123     |  
|                                             |  |                   |            |   |                  |   |            |  
|Due (to) from affiliates and related parties |  |                   | (1,914,228 | ) |                  |   | (1,390,056 | )
|Less current portion                         |  |                   | (1,889,834 | ) |                  |   | (1,338,557 | )
|                                             |  |                   |            |   |                  |   |            |  
|Non  current portion                        |  | $                 | (24,394    | ) |                  | $ | (51,499    | )
|                                             |  |                   |            |   |                  |   |            |  

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

The Company incurred expenses related to management fees and commissions in the amount of $0 and, $422,581 for the three and nine months ended September 30, 2007 and $377,620 and $1,226,466 for the three and nine months ended
September 30, 2006, respectively, for services rendered to the Company by Arkansas Media, LLC and its affiliates. Additionally, the Company accrued expenses related to operating fees of $0, $24,000 for the three and nine months ended
September 30, 2007 and $24,000 and $72,000 for the three and nine months ended September 30, 2006, respectively, under LMAs with Arkansas Media, LLC Subsequent to the Arkansas Media Settlement, the Company determined that an
additional $37,416 in fees and commissions were due to Arkansas Media, LLC for services performed during the three month period ended March 31, 2007. These fees were paid in full on April 16, 2007.

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

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

Management Services Agreement

Upon the closing of the Merger Transaction, the Company entered into a management services agreement with Royal Palm Capital Management, LLP (Royal Palm). The agreement generally provides that Royal Palm will provide general
management and advisory services for an initial term of three years, subject to renewal thereafter on an annual basis by approval of a majority of the independent directors serving on the Companys Board of Directors. The services to be
provided include, but are not limited to, establishing certain office, accounting and administrative procedures, helping the Company obtain financing, advising the Company in securities matters and future acquisitions or dispositions, assisting the
Company in formulating risk management policies, coordinating public relations and investor relations efforts, and providing such other services as may be reasonably



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##### Table of Contents

requested by the Company and agreed to by Royal Palm. Royal Palm shall receive an annual management fee of $1,500,000, in addition to the reimbursement of
budgeted out-of -pocket costs and expenses incurred in the performance of Royal Palms management services. The management services agreement may be terminated upon the material failure of either party to comply with its stated duties and
obligations, subject to a 30-day cure period.

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

Management fees of $375,000 and $750,000 and general and administrative expenses of $19,319 and $40,545 were incurred by the Company for the three and
nine month periods ended September 30, 2007, respectively, for services rendered by Royal Palm Partners, LLC. As of September 30, 2007, the Company has recorded prepaid expenses of $100,000 representing amounts advanced to Royal Palm
pursuant to the management services agreement.

Univision Affiliation Agreement

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

Univision also acts as the national sales agent for the Companys Spanish-language television stations. The Company pays Univision a 15% commission
on those sales. The Company also operates its Salt Lake City Univision television station, KUTH through a local marketing agreement (LMA) with Univision. The Company incurred expenses related to commissions in the amounts of $160,856 and $534,392
for the three and nine months ended September 30, 2007 and $76,186 and $373,435 for the three and nine months ended September 30, 2006, respectively for sales made on behalf of the Company by Univision. Additionally, the Company accrued
expenses related to operating fees of $19,621 and $203,591 for the three and nine months ended September 30, 2007 and $59,678 and $212,280 for the three and nine months ended September 30, 2006, respectively under the LMA with Univision.

RTN Intellectual Property Agreement

Prior to the Merger Transaction, the Company entered into an intellectual property agreement with Retro Television Network, Inc., a company controlled by Larry Morton, the President and CEO of the Company. Under the
terms of the agreement, Retro Television Network, Inc. assigned 100% of the creative and intellectual rights for the Retro Television Network (RTN) to the Company in exchange for a ten (10) percent royalty fee to be paid solely from
the revenues of non-Company owned stations that utilize the RTN concept and/or affiliate with RTN. The agreement also provides that in the event the Company were to sell its assigned rights in RTN to an unrelated third party, Retro Television
Network, Inc., at its option, may convert the royalty fee to a twenty (20) percent interest of the sales proceeds. As of September 30, 2007, no royalty fees have been accrued, and no royalty fees were paid to Retro Television Network, Inc.
for the three and nine month periods ended September 30, 2007 or 2006, respectively.



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

The
following is a discussion of the Companys financial condition and results of operations comparing the interim periods ended September 30, 2007 and September 30, 2006. You should read this section together with the Companys
consolidated financial statements including the notes to those financial statements, as applicable, for the years and periods mentioned above.

Overview

Equity Media Holdings Corporation (the Company) was incorporated in Delaware on April 29, 2005 as
Coconut Palm Acquisition Corp. (Coconut Palm). On March 30, 2007, the Company merged with Equity Broadcasting Corporation (EBC), with the Company remaining as the surviving corporation. Immediately following the merger,
the Company changed its name to Equity Media Holdings Corporation, and continued with the operations of EBC.

As of September 30,
2007, the Company has built and aggregated a total of 121 full and low power permits, licenses and applications that it owns or has contracts to acquire. The Companys FCC license asset portfolio includes 23 full power stations, 38 Class A
stations and 59 low power stations, including two metropolitan New York City low power stations that the Company is currently under contract to purchase. The Companys English and Spanish-language stations are in 41 markets that represent more
than 32% of the U.S. population.

While the Company originally targeted small to medium-sized markets for development, it has been able to
leverage its original properties into stations in larger metropolitan markets, including Denver, Detroit, Salt Lake City, Minneapolis and Oklahoma City. The Companys stations are affiliated with broadcast networks as follows: 20 of the
stations are affiliated with LAT TV, 16 are affiliated with Univision, 12 are affiliated with the Companys Retro Television Network (RTN), five are affiliated with MyNetworkTV, four are affiliated with FOX, three are affiliated
with TeleFutura, two are affiliated with MTV Tr3s and one is affiliated with ABC.

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

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

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

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

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

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



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



| |  |  | continued growth of the RTN affiliate base in key U.S. television markets;
| | - |  | --------------------------------------------------------------------------



| |  |  | focusing on growing national business;
| | - |  | --------------------------------------



| |  |  | addition of experienced managers in local markets;
| | - |  | --------------------------------------------------



| |  |  | upgrading / increasing sales staffs in local markets;
| | - |  | -----------------------------------------------------



| |  |  | establishing market appropriate rate cards;
| | - |  | -------------------------------------------



| |  |  | upgrading local news (where available) and expanding local programming;
| | - |  | -----------------------------------------------------------------------



| |  |  | upgrading syndicated programming; and
| | - |  | -------------------------------------



| |  |  | enhancing cable and satellite distribution
| | - |  | ------------------------------------------

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

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

Acquisition and Expansion Activity

On
August 17, 2007, the Company announced that it had entered into a definitive asset purchase agreement to acquire two low power television stations in the metropolitan New York City market (WMBQ-CA, Channel 46 and WBQM-LP, Channel 3) from Renard
Communications. On August 21, 2007, the Company announced that it will launch an MTV Tr3s affiliate on WMBQ.

During the three months
ended September 30, 2007, the Companys classic television network, RTN, announced seven new affiliates. Several of these new affiliations are in the nations top-50 television markets, including San Francisco and Detroit. In
addition, the Company announced that the RTN affiliates in Savannah, GA and Myrtle Beach / Florence, SC had renewed their affiliation agreements for another year.

RESULTS OF OPERATIONS  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006

Revenue

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



|                        |  |                                         |       |      |                                        |        |  |   |         |   |  |       |   |      |   |        |  |   |         |  |   |        |   |  |       |  
|----------------------- |  | --------------------------------------- | ----- | ---- | -------------------------------------- | ------ |  | - | ------- | - |  | ----- | - | ---- | - | ------ |  | - | ------- |  | - | ------ | - |  | ----- | -
|                        |  | For the Three Months Ended September 30 |       |      | For the Nine Months Ended September 30 |       
|                        |  | (In Thousands)                          |       |      | (In Thousands)                         |       
|                        |  | 2007                                    |       | 2006 |                                        | Change |  |   | %Change |   |  | 2007  |   | 2006 |   | Change |  |   | %Change | 
|Broadcast Revenues      |  |                                         |       |      |                                        |        |  |   |         |   |  |       |   |      |   |        |  |   |         |  |   |        |   |  |       |  
|Local                   |  | $                                       | 2,554 |      | $                                      | 2,675  |  | $ | (121    | ) |  | (4.5  | ) |      | $ | 7,482  |  | $ | 9,184   |  | $ | (1,702 | ) |  | (18.5 | )
|National                |  |                                         | 2,170 |      |                                        | 1,795  |  |   | 375     |   |  | 20.9  |   |      |   | 6,067  |  |   | 6,266   |  |   | (199   | ) |  | (3.2  | )
|Other                   |  |                                         | 273   |      |                                        | 545    |  |   | (272    | ) |  | (49.9 | ) |      |   | 766    |  |   | 1,482   |  |   | (716   | ) |  | (48.3 | )
|Trade & Barter Revenue  |  |                                         | 2,511 |      |                                        | 2,133  |  |   | 378     |   |  | 17.7  |   |      |   | 6,982  |  |   | 6,144   |  |   | 838    |   |  | 13.6  |  
|                        |  |                                         |       |      |                                        |        |  |   |         |   |  |       |   |      |   |        |  |   |         |  |   |        |   |  |       |  
|Total Broadcast Revenue |  | $                                       | 7,508 |      | $                                      | 7,148  |  | $ | 360     |   |  | 5.0   |   |      | $ | 21,297 |  | $ | 23,076  |  | $ | (1,779 | ) |  | (7.7  | )
|                        |  |                                         |       |      |                                        |        |  |   |         |   |  |       |   |      |   |        |  |   |         |  |   |        |   |  |       |  



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

For the three months ended September 30, 2007, total Broadcast Revenue
increased $360,000, or 5.0%, to $7.5 million. The increase is the net effect of an increase in revenue from national advertisers, and an increase in trade and barter revenue offset by lower direct local sales, JSA income and uplink services.
Total Broadcast revenue for the quarter ended September 30, 2007 was also affected by the sale of KPOU-TV, Portland, OR, a Univision affiliate, on November 1, 2006, which had revenues (JSA Income) of $210,000 in the same quarterly period
in 2006. Therefore, total broadcast revenue, excluding the decrease due to KPOU, increased by $0.57 million, or 8.22%. Broadcast revenue from national advertisers increased $375,000 primarily in the Companys Spanish-language stations.
Local revenues decreased by $121,000 primarily in the Companys English-language stations. Local agency revenue increased by $150,000 which was offset by decreases in direct sales to local advertisers of $171,000 and a decrease in local paid
programming of $89,000. Other revenues were affected by the disposal of KPOU which accounted for the total variance in JSA income of $210,000. Total local and national revenue from the Companys Spanish-language stations, excluding KPOU,
increased $0.5 million, or 22%. This increase was offset by a decrease of $270,000 in local and national revenue from the Companys English-language stations. Also during the third quarter, trade and barter revenue increased $380,000, or
15%, as compared to the same period in 2006. This increase is due primarily to the continued growth in Companys investment in syndicated programming as it continues its commitment to reduce the amount of shopping and long-form commercials and
move to more traditional programming.

For the nine months ended September 30, 2007, total Broadcast Revenue decreased
$1.8 million, or 7.7%, to $21.3 million. The primary reason for this decrease is due to the sale by the Company of KPOU-TV, Portland, OR, a Univision affiliate, on November 1, 2006 which accounts for $1.9 million of the variance.
Total Broadcast Revenue, excluding the decrease due to KPOU, increased $0.15 million, or 0.4%. Total local and national revenue from the Companys Spanish-language stations, excluding KPOU, increased $1.2 million, or 18% during the
period. This increase was offset by a decrease of $1.1 million in local and national revenue from the Companys English-language stations. The decrease in other revenue is attributed to lower JSA income of $210,000, due to the disposition
of KPOU, lower uplink shared services revenue of $227,000, and lower time brokerage income of $370,000; offset by higher network compensation revenue of $83,000. Also, during the nine months ended September 30 trade and barter revenue increased
$0.8 million, or 13.6%, as compared to the same period in 2006. This increase is due primarily to the continued growth in Companys investment in syndicated programming as it continues its commitment to reduce the amount of shopping and
long-form commercials and move to more traditional programming.

Results of Operations

The following table sets forth the Companys operating results for the three and nine month periods ended September 30, 2007, as compared to the
three and nine month periods ended September 30, 2006:



|                                  |  |                                         |        |                                        |      |   |        |        |  |   |         |   |      |        |  |      |         |   |        |   |        |         |  |   |         |   |  |       |  
|--------------------------------- |  | --------------------------------------- | ------ | -------------------------------------- | ---- | - | ------ | ------ |  | - | ------- | - | ---- | ------ |  | ---- | ------- | - | ------ | - | ------ | ------- |  | - | ------- | - |  | ----- | -
|                                  |  | For the Three Months Ended September 30 |        | For the Nine Months Ended September 30 |     
|                                  |  | (In Thousands)                          |        | (In Thousands)                         |     
|                                  |  | 2007                                    |        |                                        | 2006 |   |        | Change |  |   | %Change |   | 2007 |        |  | 2006 |         |   | Change |   |        | %Change | 
|Broadcast Revenue                 |  | $                                       | 7,508  |                                        |      | $ | 7,148  |        |  | $ | 360     |   |      | 5.0    |  | $    | 21,297  |   |        | $ | 23,076 |         |  | $ | (1,779  | ) |  | (7.7  | )
|Program, production & promotion   |  |                                         | 3,697  |                                        |      |   | 3,280  |        |  |   | 417     |   |      | 12.7   |  |      | 10,727  |   |        |   | 9,728  |         |  |   | 999     |   |  | 10.3  |  
|Selling, general & administrative |  |                                         | 7,847  |                                        |      |   | 5,418  |        |  |   | 2,429   |   |      | 44.8   |  |      | 23,452  |   |        |   | 18,425 |         |  |   | 5,027   |   |  | 27.3  |  
|Management agreement settlement   |  |                                         |       |                                        |      |   |       |        |  |   |        |   |      |       |  |      | 8,000   |   |        |   |       |         |  |   | 8,000   |   |  |       |  
|Depreciation expense              |  |                                         | 1,005  |                                        |      |   | 842    |        |  |   | 163     |   |      | 19.4   |  |      | 2,852   |   |        |   | 2,486  |         |  |   | 366     |   |  | 14.7  |  
|Rent                              |  |                                         | 604    |                                        |      |   | 531    |        |  |   | 73      |   |      | 13.8   |  |      | 1,837   |   |        |   | 1,591  |         |  |   | 246     |   |  | 15.4  |  
|                                  |  |                                         |        |                                        |      |   |        |        |  |   |         |   |      |        |  |      |         |   |        |   |        |         |  |   |         |   |  |       |  
|Operating (loss)                  |  |                                         | (5,645 | )                                      |      |   | (2,923 | )      |  |   | (2,722  | ) |      | 93.1   |  |      | (25,571 | ) |        |   | (9,154 | )       |  |   | (16,417 | ) |  | 179.3 |  
|Interest income                   |  |                                         | 85     |                                        |      |   | 34     |        |  |   | 51      |   |      | 150.0  |  |      | 118     |   |        |   | 45     |         |  |   | 73      |   |  | 163.7 |  
|Interest expense                  |  |                                         | (2,082 | )                                      |      |   | (2,022 | )      |  |   | (60     | ) |      | 3.0    |  |      | (6,314  | ) |        |   | (5,701 | )       |  |   | (613    | ) |  | 10.8  |  
|Gain (loss) on sale of assets     |  |                                         |       |                                        |      |   | (330   | )      |  |   | 330     |   |      | (100.0 |  |      | )454    |   |        |   | 262    |         |  |   | 191     |   |  | 73.0  |  
|Other income, net                 |  |                                         | (14    | )                                      |      |   | 36     |        |  |   | (50     | ) |      | 139.3  |  |      | 203     |   |        |   | 343    |         |  |   | (140    | ) |  | (40.9 | )
|                                  |  |                                         |        |                                        |      |   |        |        |  |   |         |   |      |        |  |      |         |   |        |   |        |         |  |   |         |   |  |       |  



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|                                                    |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |            |   |  |   |         |   |  |      
|--------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | - |  | - | ------ | - |  | ---- |  | - | ---------- | - |  | - | ---------- | - |  | - | ------- | - |  | -----
|(Loss) before income taxes                          |  |   | (7,656     | ) |  |   | (5,205     | ) |  |   | (2,451 | ) |  | 47.1 |  |   | (31,111    | ) |  |   | (14,205    | ) |  |   | (16,906 | ) |  | 119.0
|Income taxes                                        |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |           |   |  |   |         |   |  |      
|                                                    |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |            |   |  |   |         |   |  |      
|Net (loss)                                          |  |   | (7,656     | ) |  |   | (5,205     | ) |  |   | (2,451 | ) |  | 47.1 |  |   | (31,111    | ) |  |   | (14,205    | ) |  |   | (16,906 | ) |  | 119.0
|Preferred dividend                                  |  |   | (186       | ) |  |   |           |   |  |   | (186   | ) |  |      |  |   | (12,506    | ) |  |   |           |   |  |   | (12,506 | ) |  |     
|                                                    |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |            |   |  |   |         |   |  |      
|Net loss attributable to common shareholders        |  | $ | (7,842     | ) |  | $ | (5,205     | ) |  | $ | (2,637 | ) |  | 50.6 |  | $ | (43,617    | ) |  | $ | (14,205    | ) |  | $ | (29,412 | ) |  | 207.0
|                                                    |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |            |   |  |   |         |   |  |      
|Basic net (loss) per common share                   |  | $ | (0.19      | ) |  | $ | (0.21      | ) |  | $ | 0.02   |   |  |      |  | $ | (1.24      | ) |  | $ | (0.56      | ) |  | $ | (0.56   | ) |  |      
|                                                    |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |            |   |  |   |         |   |  |      
|Basic shares used in earnings per share calculation |  |   | 40,646,137 |   |  |   | 25,371,332 |   |  |   |        |   |  |      |  |   | 35,104,786 |   |  |   | 25,371,332 |   |  |   |         |   |  |      
|                                                    |  |   |            |   |  |   |            |   |  |   |        |   |  |      |  |   |            |   |  |   |            |   |  |   |         |   |  |      

Program, production and promotion expenses

Program, production and promotion expense was $3.7 million in the three month period ended September 30, 2007, as compared to $3.3 million
in the three month period ended September 30, 2006, an increase of $0.4 or 12.7%. The variance was primarily due to an increase in Syndicated Programming expense of $547,000 net of a decrease in promotion expenses of $134,000.

Program, production and promotion expense was $10.7 million in the nine month period ended September 30, 2007, as compared to $9.7 million in
the nine month period ended September 30, 2006, an increase of $1.0 million, or 10.3%. The variance was primarily due to an increase in Syndicated Programming expense of $1.3 million net of a decrease in promotion expenses of $227,000.

Selling, general and administrative

Selling, general and administrative expense was $7.8 million in the three month period ended September 30, 2007, as compared to $5.4 million in the three month period ended September 30, 2006, an
increase of $2.4 million, or 44.8%. Contributing to this increase were increases in: labor costs of $1.3 million, and professional fees of $0.7 million, partially offset with a reduction in LMA and JSA expense of $0.1 million. The increase in
labor costs included a non-cash charge of $0.4 million from Share Based Compensation due to the issuance to stock options. (See footnote disclosure elsewhere in this report.)

Selling, general and administrative expense was $23.4 million in the nine month period ended September 30, 2007, as compared to
$18.4 million in the nine month period ended September 30, 2006, an increase of $5.0 million, or 27.3%. Contributing to this increase were increases in labor costs of $4.0 million, professional fees of $1.0 million, bad debt expense
of $0.7million, partially offset with a reduction in LMA and JSA expense of $1.1 million.

Depreciation and Amortization

Depreciation and amortization was $1.0 million in the three month period ended September 30, 2007, as compared to
$.84 million in the three month period ended September 30, 2006, an increase of $0.16 million or 19.3%.

Depreciation and
amortization was $2.9 million in the nine month period ended September 30, 2007, as compared to $2.5 million in the nine month period ended September 30, 2006, an increase of $0.4 million or 14.7%. This increase is primarily
attributed to the continuing investment in broadcast equipment.

Rent

Rent expense was $0.6 million in the three month period ended September 30, 2007, as compared to $0.5 million in the three month period
ended September 30, 2006, an increase of $0.1 million, or 13.8%. An increase in tower rent expense was the primary factor.

Rent
expense was $1.8 million in the nine month period ended September 30, 2007, as compared to $1.6 million in the nine month period ended September 30, 2006, an increase of $0.2 million, or 15.4%. An increase in tower rent
expense was the primary factor.



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Interest Expense, net

Interest expense was $2.0 million in the three month period ended September 30, 2007, as compared to $2.0 million in the three month period
ended September 30, 2006, or no net change for the period.

Interest expense was $6.2 million in the nine month period ended
September 30, 2007, as compared to $5.6 million in the nine month period ended September 30, 2006, an increase of $0.6 million, or 9.6%. This increase is primarily attributable to higher average interest rates in 2007. The
combined average interest rates on the Companys senior credit facility were 13.3% and 12.0% for the nine months ended September 30, 2007 and 2006, respectively.

Gain on sale of assets

There
were no sales of assets in the three months ended September 30, 2007. However, in the three months ended September 30, 2006 there were sales from which $0.3 million in losses were recognized. The recognized loss from asset sales in this
three month period in 2006 included, primarily, losses arising from the sale of a television station located in Alabama.

The gain on sale
of assets was $0.5 million in the nine month period ended September 30, 2007, as compared to a gain of $0.3 million in the nine month period ended September 30, 2006, an increase of $0.2 million. The Company sold land and a
broadcast tower in 2007; the net gain on sale in 2006 included gains from the sale of several low power television stations located both in Idaho and in Central Arkansas net of a loss arising from the sale of a station in Alabama.

Other income, net

Other
income, net was an expense of approximately $14,000 for the three months ended September 30, 2007 as compared to approximately $36,000 in income for the three months ended September 30, 2006, a decrease of $51,000. The net expense in the
third quarter of 2007 includes $227,000 in losses from subsidiaries and joint ventures compared to $131,000 in the same period in 2007.

Other income, net was approximately $203,000 for the nine months ended September 30, 2007 as compared to approximately $343,000 for the nine months ended September 30, 2006, a decrease of $140,000. The Company received $275,000 in
2006 as a partial settlement in a lawsuit, which contributed to the decline as compared to 2007.

Liquidity and Capital Resources

General

The following table
and discussion presents data the Company believes is helpful in evaluating it liquidity and capital resources:



|                                                             |  |                   |        |                  |   |       
|------------------------------------------------------------ |  | ----------------- | ------ | ---------------- | - | ------
|                                                             |  | As of            
|                                                             |  | September 30,2007 |        | December 31,2006
|                                                             |  | (In thousands)   
|Cash and cash equivalents                                    |  | $                 | 2,417  |                  | $ | 1,631 
|Long term debt including current portion and lines of credit |  | $                 | 57,224 |                  | $ | 57,962
|Available credit under revolving lines of credit             |  | $                 | 1,160  |                  | $ | 5,440 

The principal ongoing uses of cash that affect the Companys liquidity position include the
following: the acquisition of and payments under syndicated programming contracts, capital and operational expenditures and interest payments on the Companys debt. It should be noted that no principal is due on the existing senior credit
facility until June 2010.

The Company currently has a working capital deficit of approximately $51.8 million and has experienced losses
from operations since inception. During the nine months ended September 30, 2007, the Company had a net loss of approximately $43.6 million and experienced cash outflows from operations during the same period of approximately $22.7 million. In
the past, the Company has relied on equity and debt financing and the sale of assets to provide the necessary liquidity for the business to operate and will need to have access to substantial funds over the next twelve months in order to fund its
operations. As of September 30, 2007, the Company has approximately $2.4 million of unrestricted cash on hand, and as more fully discussed in Notes 10 and 11, the Company has access to a working capital line of credit provided to it from
certain banking institutions (the Credit Facility) with a net availability of approximately $13.0 million as of September 30, 2007. However, due to certain



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restrictions based on the value of the loan collateral the Company does not currently have access to $7.9 million of the $13.0 million. Additionally, a
reserve against the aggregate revolving commitment under the Credit Facility of $4.0 million was established as a component of the waiver letter signed on August 20, 2007 by the senior lenders thereunder and the Company. The Credit Facility, as
well as certain other notes outstanding, contains financial covenants, including among others, that the Company meet minimum revenue and EBITDA levels. At September 30, 2007, the Company was in default of these covenants. The Company requested
and obtained a waiver of these defaults from the lenders on November 7, 2007. However, the waiver is strictly limited to the defaults existing as of September 30, 2007 and does not extend to any future defaults, should they occur. In
connection with the waiver, the lenders released a $4.0 million reserve established pursuant to the waiver obtained by the Company for the previous fiscal quarter.

The Company is negotiating certain amendments and modifications to the Credit Facility. In consideration of the payment of certain fees, the lenders under the Credit Facility will commit to delivering an amended
credit facility (the Amended Credit Facility) embodying these amendments and modifications so long as (i) the terms of the Amended Credit Facility are substantially consistent with the terms of the currently proposed term sheet
(Proposed Term Sheet) as may be revised upon agreement of the Company and the lenders, and (ii) upon execution of the Amended Credit Facility, the Company accepts a currently existing offer to purchase one of its television stations
subject to a definitive agreement having reasonably acceptable terms. The Proposed Term Sheet calls for a maximum facility amount of $53.0 million, comprised of an $8.0 million revolving credit facility and a $45.0 million term loan. The Amended
Credit Facility would bear interest at LIBOR + 7.75% and would mature in 3 years. By entering into the Amended Credit Facility, the Company would be subject to new covenants and restrictions that are more in line with the current business plan of
the Company. Additionally, the Amended Credit Facility would provide additional liquidity by eliminating the availability restrictions of the current Credit Facility. As proposed, the Amended Credit Facility would provide financing to retire the
current Credit Facility of approximately $47.7 million, and provide liquidity of approximately $5.3 million.

There can be no certainty
that the Amended Credit Facility will be entered into as proposed under the Proposed Term Sheet or at all. Even if entered into, the additional funds provided by the Amended Credit Facility as proposed would not be sufficient to meet all of the
anticipated liquidity needs to continue operations of the Company for the next twelve months. Accordingly, the Company will have to raise additional capital or increase its debt within the next twelve months to continue operations. If the Company is
unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to liquidate available assets, restructure the company or in the extreme event, cease operations. The
financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The Company has set aside
$5.6 million in cash which is restricted for acquisition of broadcast assets. The Company entered into an asset purchase agreement on August 21, 2007 for the acquisition of two television stations in metropolitan New York City. The acquisition
of these two stations would be financed with the available cash restricted for the acquisition of assets and a $2.0 million note. (See Note 7  Asset Purchase Agreement). With lender approval, the Company could use these funds for other
purposes.

Sources and Uses of Cash



|                                                     |  |                                        |         |   |      |   |        |  
|---------------------------------------------------- |  | -------------------------------------- | ------- | - | ---- | - | ------ | -
|                                                     |  | For the Nine MonthsEnded September 30, |        
|                                                     |  | 2007                                   |         |   | 2006 |  
|                                                     |  | (In thousands)                         |        
|Net cash( used) by operating activities              |  | $                                      | (22,706 | ) |      | $ | (573   | )
|Net cash (used) provided by investing activities     |  |                                        | (12,572 | ) |      |   | 974    |  
|Net cash provided (used) by financing activities     |  |                                        | 36,064  |   |      |   | (1,876 | )
|                                                     |  |                                        |         |   |      |   |        |  
|Net increase (decrease) in cash and cash equivalents |  | $                                      | 786     |   |      | $ | (1,474 | )
|                                                     |  |                                        |         |   |      |   |        |  

Operating Activities

Net cash used in operating activities for the nine month periods ending September 30, 2007 and 2006 was $22.7 million and $0.6 million,
respectively. The increase in net cash used by operating activities of $22.1 million was due primarily to an increase in the net loss of $16.9 million net of increases in Management Agreement Settlement expense of $4.8 million, and Share
Based Compensation expense of $1.7 million, both non-cash operating expenses; and a decrease of deposits held pending sale of assets in the amount of $10.6 million received in 2006.



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Investing Activities

Net cash used by investing activities was $12.6 million in the nine month period ended September 30, 2007, an increase in the use of cash of $13.6 million compared to the nine month period ended
September 30, 2006, when $1.0 million was provided by investing activities. The increase in use was largely due to the acquisition of three low power television stations located in Oklahoma and Arkansas, including KLRA, the Univision
affiliate in Little Rock, Arkansas for $1.3, an increase in the investment of property and equipment, primarily in Little Rock for the expansion of our master control facilities in the amount of $5.3 million, the setup of a restricted cash fund for
acquisition of broadcast assets of $5.6 million and a decrease in the proceeds from the sale of broadcast assets from $3.0 million in 2006 as compared to $0 in 2007.

Financing Activities

Net cash provided by financing activities was $36.0 million in the nine
month period ended September 30, 2007, compared to uses of $1.9 million in the nine month period ended September 30, 2006, an increase of $37.9 million. During the nine month period ended September 30, 2007, the Company
completed its merger with EBC. As part of the Merger Transaction, the Company contributed pre-merger assets and liabilities to the surviving accounting entity, including operating cash of $22.8 million and $10.9 million of funds held in trust
for the retirement of the stock held by the Company shareholders who elected not to participate in the merger. The funds held in trust were paid out by the trustee subsequent to the merger and before September 30, 2007, to these shareholders
for their shares of the Company. Also, as part of the merger transaction, the Company re-purchased its outstanding preferred stock for $25 million in cash and the issuance of a note payable of $15 million. In June 2007, the Company completed a sale
of Common Stock shares through a private placement which resulted in net proceeds of $9.0 million. The Companys net decrease in debt was $0.4 million for the nine months ended September 30, 2007 as compared to a net decrease of $1.9
million during the nine months ended September 30, 2006.

Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return and such state and local tax returns as are required. Based on the net
operating loss carry forwards the Company does not expect to pay any significant amount of income taxes in the next several years.

Debt Instruments and Related Covenants

The Companys Credit Facility is collateralized by substantially all of
the assets, including real estate, of the Company and its subsidiaries. The Credit Facility contains certain restrictive provisions which include, but are not limited to, requiring the Company to achieve certain revenue and earnings goals, limiting
the amount of annual capital investments, incur additional indebtedness, make certain acquisitions and investments, sell assets or make other restricted payments, including dividends (all are as defined in the loan agreement and subsequent
amendments.)

As of September 30, 2007, the applicable margins for base rate advances and LIBOR advances under the revolver component
of the Credit Facility were 6% and 7%, respectively. The amount outstanding under the Credit Facility as of September 30, 2007 was $45.2 million and is allocated as follows: term loan facility of $20.0 million, term loan D of $12.3 million
and a revolving loan of $12.9 million. At September 30, 2007, $13.0 million was available to borrow under the revolver component of the Credit Facility. However, due to certain restrictions based on the value of the loan collateral, the
Company does not currently have access to $7.9 million of the $13.0 million. An additional $4.0 million of restricted availability was released and made available to fund operations on November 7, 2007, with the receipt of the waiver letter
from the Lenders (as further described in Note 2  Liquidity and Capital Resources).

Inflation

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

Off-Balance Sheet Arrangements

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



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Related Party Transactions

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

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

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

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

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

Critical Accounting Policies and Estimates

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

The Company believes its application of accounting policies, and the estimates inherently required therein, are reasonable.

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

The Securities and Exchange Commission has defined a
companys critical accounting policies as the ones that are most important to the portrayal of the companys financial condition and results of operation, and which require the company to make its most difficult and subjective judgments,
often as the result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies and estimates include the estimates used to determine the recoverability of indefinite-lived assets, including goodwill, the
recoverability of long-lived tangible assets, the value of television broadcast rights, the amount of allowance of doubtful accounts, the existence and accounting for variable interest entities and the amount of stock-based compensation. For a
detailed discussion of our critical accounting policies and estimates, please refer to our 2006 audited financial statements as reported in our Form 8-K/A filed on May 14, 2007 with the Securities and Exchange Commission. There have been no
material changes in the application of our critical accounting policies and estimates subsequent to that report.



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Recent Accounting Pronouncements

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

In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. SFAS No. 159 will be effective for the Company on January 1, 2008. The Company is currently evaluating the impact of adopting SFAS No. 159 on its financial position, cash flow and
results of operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as may, should, could, would, expect, plan, anticipate, believe, estimate,
continue, or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. The Company undertakes no obligation to
update such forward-looking statements to reflect subsequent events or circumstances, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

The Company is exposed to market risk from changes in domestic and international interest rates (i.e. prime and LIBOR). This market risk represents the
risk of loss that may impact the financial position, results of operations and/or cash flows of the Company due to adverse changes in interest rates. This exposure is directly related to our normal funding activities. The Company does not use
financial instruments for trading and, as of September 30, 2007, was not a party to any interest-rate derivative agreements.

Interest Rates

At September 30, 2007, the entire outstanding balance under our credit agreement, approximately
63% of the Companys total outstanding debt (credit agreement, lines of credit, asset purchase loans, real estate mortgage, etc.) bears interest at variable rates. The fair value of the Companys fixed rate debt is estimated based on
current rates offered to the Company for debt of similar terms and maturities and is not estimated to vary materially from its carrying value.

Based on amounts outstanding at September 30, 2007, if the interest rate on the Companys variable debt were to increase by 1.0%, its annual interest expense would be higher by approximately $0.45 million.

ITEM 4 and ITEM 4T. CONTROLS AND PROCEDURES

The Companys Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end of the period covered by this quarterly report (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures
are effective.

Since the Evaluation Date, there were no changes in the Companys internal control over financial reporting that
occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

In addition to requesting unspecified compensatory damages, the plaintiff also requested injunctive relief
to enjoin EBCs annual shareholder meeting and the vote on the merger. An injunction hearing was not held before EBCs annual meeting regarding the merger so the meeting and shareholder vote proceeded as planned and EBCs shareholders
approved the merger. On August 9, 2006, EBCs motion to dismiss the lawsuit was denied. On February 21, 2007, the plaintiff filed a Motion to Enforce Settlement Agreement with the court alleging the parties reached an oral
agreement to settle the lawsuit. The plaintiff subsequently filed a motion to withdraw the motion to settle and filed a Third Amended Complaint on April 10, 2007. This motion added two additional plaintiffs and expanded on the
issues recited in the previous complaints. On July 31, 2007, the plaintiff filed a Fourth Amended Complaint. This motion added three new plaintiffs and three new defendants to the proceedings. The three additional defendants bear a
fiduciary relationship to three previously named defendants.

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

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

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors during the fiscal quarter
ended September 30, 2007 from those previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

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

None

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

None

ITEM 5. OTHER INFORMATION

On November 8, 2007, the Board of Directors of Equity Media Holdings
Corporation (the Corporation) approved an amendment to the Corporations Amended and Restated Bylaws to facilitate direct share registration of the Corporations common stock in response to American Stock Exchange Rules
requiring all traded stock be eligible for direct share registration on or before January 1, 2008. Direct Share Registration allows a shareholder to be registered directly on the books of the transfer agent without the need of a physical
certificate to evidence the security ownership and allows shareholders to electronically transfer securities to broker-dealers in order to effect transactions without the risks and delays associated with transferring physical certificates. The
Corporations Amended and Restated Bylaws, as amended by the Corporations Board of Directors and effective on November 8, 2007, are attached hereto as Exhibit 3.1.



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ITEM 6. EXHIBITS

Exhibits



|     |  |                                                                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated By-laws of the Company                                                                                                                                                   
|     | 
|31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|32.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            
|     | 
|32.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |                                   |  |                                             
|----------------------- |  | --------------------------------- |  | --------------------------------------------
|                        |  | EQUITY MEDIA HOLDINGS CORPORATION
|                        |  |                                  
|Date: November 14, 2007 |  | By:                               |  | /s/ Larry Morton                            
|                        |  |                                   |  | Chief Executive Officer and President       
|                        |  |                                   |  | (principal executive officer)               
|                        |  |                                  
|Date: November 14, 2007 |  | By:                               |  | /s/ Glenn Charlesworth                      
|                        |  |                                   |  | Interim Chief Financial Officer             
|                        |  |                                   |  | (principal financial and accounting officer)



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EXHIBIT INDEX



|     |  |                                                                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated By-laws of the Corporation                                                                                                                                               
|     | 
|31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|32.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            
|     | 
|32.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            



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