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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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



For the quarterly period ended September 30, 2005



OR



| ̈ | 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: 333-62916-02



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MISSION BROADCASTING, INC.

(Exact name of registrant as specified in its charter)



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|                                         |  |                                  
|---------------------------------------- |  | ---------------------------------
|Delaware                                 |  | 51-0388022                       
|(State of Organization or Incorporation) |  | (IRS Employer Identification No.)



|                                                             |  |                                                     
|------------------------------------------------------------ |  | ----------------------------------------------------
|7650 Chippewa Road, Suite 305 Brecksville, Ohio 44141        |  | (440) 526-2227                                      
|(Address of Principal Executive Offices, including Zip Code) |  | (Registrants Telephone Number, Including Area Code)



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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that it 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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  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 June 30, 2004, Mission Broadcasting, Inc. had one shareholder, David S. Smith. Mr. Smith held all 1,000 shares of the outstanding common stock of Mission Broadcasting, Inc. at June 30, 2004.



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##### Table of Contents

TABLE OF CONTENTS



|              |  |                                                                                                    |  |     
|------------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|              |  |                                                                                                    |  | Page
|PART I        |  | FINANCIAL INFORMATION                                                                              |  |     
|              |  |                                                                                                   
|ITEM 1.       |  | Financial Statements (Unaudited)                                                                   |  |     
|              |  |                                                                                                   
|              |  | Condensed Balance Sheets at September 30, 2005 and December 31, 2004                               |  | 1   
|              |  |                                                                                                   
|              |  | Condensed Statements of Operations for the three and nine months ended September 30, 2005 and 2004 |  | 2   
|              |  |                                                                                                   
|              |  | Condensed Statements of Cash Flows for the nine months ended September 30, 2005 and 2004           |  | 3   
|              |  |                                                                                                   
|              |  | Notes to Condensed Financial Statements                                                            |  | 4   
|              |  |                                                                                                   
|ITEM 2.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |  | 13  
|              |  |                                                                                                   
|ITEM 3.       |  | Quantitative and Qualitative Disclosures about Market Risk                                         |  | 22  
|              |  |                                                                                                   
|ITEM 4.       |  | Controls and Procedures                                                                            |  | 22  
|              |  |                                                                                                   
|PART II       |  | OTHER INFORMATION                                                                                  |  |     
|              |  |                                                                                                   
|ITEM 1.       |  | Legal Proceedings                                                                                  |  | 23  
|              |  |                                                                                                   
|ITEM 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                        |  | 23  
|              |  |                                                                                                   
|ITEM 3.       |  | Defaults Upon Senior Securities                                                                    |  | 23  
|              |  |                                                                                                   
|ITEM 4.       |  | Submission of Matters to a Vote of Security Holders                                                |  | 23  
|              |  |                                                                                                   
|ITEM 5.       |  | Other Information                                                                                  |  | 23  
|              |  |                                                                                                   
|ITEM 6.       |  | Exhibits                                                                                           |  | 23  
|              | 
|EXHIBIT INDEX |  | 23                                                                                                



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##### Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1. Financial Statements



MISSION BROADCASTING, INC.



CONDENSED BALANCE SHEETS

(in thousands, except share information)



|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                          |  | September 30, 2005 |         |   | December 31, 2004 |  
|                                                                                                                                          |  | (Unaudited)        |        
|ASSETS                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Current assets:                                                                                                                           |  |                    |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                 |  | $                  | 1,522   |   |                   | $ | 6,981   |  
|Accounts receivable (allowance for doubtful accounts of $0 and $0, respectively)                                                          |  |                    | 370     |   |                   |   | 415     |  
|Current portion of broadcast rights                                                                                                       |  |                    | 3,388   |   |                   |   | 3,701   |  
|Prepaid expenses and other current assets                                                                                                 |  |                    | 176     |   |                   |   | 142     |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Total current assets                                                                                                                      |  |                    | 5,456   |   |                   |   | 11,239  |  
|                                                                                                                                          |  |                   
|Property and equipment, net                                                                                                               |  |                    | 21,460  |   |                   |   | 22,574  |  
|Broadcast rights                                                                                                                          |  |                    | 891     |   |                   |   | 1,700   |  
|Goodwill, net                                                                                                                             |  |                    | 16,665  |   |                   |   | 16,307  |  
|Intangible assets, net                                                                                                                    |  |                    | 77,742  |   |                   |   | 82,443  |  
|Other noncurrent assets                                                                                                                   |  |                    | 638     |   |                   |   | 631     |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Total assets                                                                                                                              |  | $                  | 122,852 |   |                   | $ | 134,894 |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                                                     |  |                    |         |   |                   |   |         |  
|Current liabilities:                                                                                                                      |  |                    |         |   |                   |   |         |  
|Current portion of debt                                                                                                                   |  | $                  | 1,727   |   |                   | $ | 1,520   |  
|Current portion of broadcast rights payable                                                                                               |  |                    | 3,559   |   |                   |   | 4,044   |  
|Accounts payable                                                                                                                          |  |                    | 103     |   |                   |   | 108     |  
|Accrued expenses                                                                                                                          |  |                    | 540     |   |                   |   | 884     |  
|Taxes payable                                                                                                                             |  |                    | 3       |   |                   |   | 14      |  
|Interest payable                                                                                                                          |  |                    | 28      |   |                   |   | 21      |  
|Deferred revenue                                                                                                                          |  |                    | 590     |   |                   |   | 192     |  
|Due to Nexstar Broadcasting, Inc.                                                                                                         |  |                    | 21,845  |   |                   |   | 20,922  |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Total current liabilities                                                                                                                 |  |                    | 28,395  |   |                   |   | 27,705  |  
|                                                                                                                                          |  |                   
|Debt                                                                                                                                      |  |                    | 170,973 |   |                   |   | 171,220 |  
|Broadcast rights payable                                                                                                                  |  |                    | 1,187   |   |                   |   | 1,997   |  
|Deferred tax liabilities                                                                                                                  |  |                    | 4,173   |   |                   |   | 3,163   |  
|Deferred revenue                                                                                                                          |  |                    | 63      |   |                   |   |        |  
|Deferred gain on sale of assets                                                                                                           |  |                    | 2,475   |   |                   |   | 2,604   |  
|Other liabilities                                                                                                                         |  |                    | 2,416   |   |                   |   | 2,273   |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Total liabilities                                                                                                                         |  |                    | 209,682 |   |                   |   | 208,962 |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Commitments and contingencies                                                                                                             |  |                    |         |   |                   |   |         |  
|                                                                                                                                          |  |                   
|Minority interest in consolidated entity                                                                                                  |  |                    |        |   |                   |   | 5,719   |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Shareholders deficit:                                                                                                                    |  |                    |         |   |                   |   |         |  
|Common stock, $1 par value; 1,000 shares authorized; 1,000 shares issued and outstanding at both September 30, 2005 and December 31,
2004 |  |                    | 1       |   |                   |   | 1       |  
|Subscription receivable                                                                                                                   |  |                    | (1      | ) |                   |   | (1      | )
|Accumulated deficit                                                                                                                       |  |                    | (86,830 | ) |                   |   | (79,787 | )
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Total shareholders deficit                                                                                                               |  |                    | (86,830 | ) |                   |   | (79,787 | )
|                                                                                                                                          |  |                    |         |   |                   |   |         |  
|Total liabilities and shareholders deficit                                                                                               |  | $                  | 122,852 |   |                   | $ | 134,894 |  
|                                                                                                                                          |  |                    |         |   |                   |   |         |  



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



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##### Table of Contents

MISSION BROADCASTING, INC.



CONDENSED STATEMENTS OF OPERATIONS

(in thousands)



|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                  |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                                                                                                  |  | 2005                            |        |   | 2004                           |   |        | 2005 |  |   | 2004   |  
|                                                                                                                  |  | (Unaudited)                     |        |   | (Unaudited)                    |  
|Revenue (excluding trade and barter)                                                                              |  | $                               | 557    |   |                                | $ | 4,172  |      |  | $ | 1,831  |   |  | $ | 14,183 |  
|Less: commissions                                                                                                 |  |                                 |       |   |                                |   | (551   | )    |  |   |       |   |  |   | (1,912 | )
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Net broadcast revenue (excluding trade and barter)                                                                |  |                                 | 557    |   |                                |   | 3,621  |      |  |   | 1,831  |   |  |   | 12,271 |  
|Trade and barter revenue                                                                                          |  |                                 | 584    |   |                                |   | 590    |      |  |   | 1,885  |   |  |   | 1,720  |  
|Revenue from Nexstar Broadcasting, Inc.                                                                           |  |                                 | 6,847  |   |                                |   | 5,059  |      |  |   | 20,812 |   |  |   | 12,650 |  
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Total net revenue                                                                                                 |  |                                 | 7,988  |   |                                |   | 9,270  |      |  |   | 24,528 |   |  |   | 26,641 |  
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Operating expenses (income):                                                                                      |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Direct operating expenses (exclusive of depreciation and amortization shown separately below)                     |  |                                 | 1,151  |   |                                |   | 1,023  |      |  |   | 3,272  |   |  |   | 3,103  |  
|Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below) |  |                                 | 541    |   |                                |   | 1,198  |      |  |   | 1,560  |   |  |   | 3,564  |  
|Selling, general and administrative expenses paid to Nexstar Broadcasting, Inc.                                   |  |                                 | 2,850  |   |                                |   | 3,302  |      |  |   | 8,550  |   |  |   | 9,877  |  
|Gain on asset disposal (including deferred gain recognition), net                                                 |  |                                 | (43    | ) |                                |   | (43    | )    |  |   | (76    | ) |  |   | (128   | )
|Amortization of broadcast rights                                                                                  |  |                                 | 1,169  |   |                                |   | 1,228  |      |  |   | 3,402  |   |  |   | 3,381  |  
|Amortization of intangible assets                                                                                 |  |                                 | 1,528  |   |                                |   | 1,354  |      |  |   | 4,700  |   |  |   | 3,946  |  
|Depreciation                                                                                                      |  |                                 | 699    |   |                                |   | 532    |      |  |   | 2,099  |   |  |   | 1,897  |  
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses, net                                                                                     |  |                                 | 7,895  |   |                                |   | 8,594  |      |  |   | 23,507 |   |  |   | 25,640 |  
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Income from operations                                                                                            |  |                                 | 93     |   |                                |   | 676    |      |  |   | 1,021  |   |  |   | 1,001  |  
|Interest expense, including amortization of debt financing costs                                                  |  |                                 | (2,391 | ) |                                |   | (1,488 | )    |  |   | (6,558 | ) |  |   | (4,242 | )
|Loss on extinguishment of debt                                                                                    |  |                                 |       |   |                                |   | (1,094 | )    |  |   | (508   | ) |  |   | (1,094 | )
|Interest income                                                                                                   |  |                                 | 8      |   |                                |   | 3      |      |  |   | 18     |   |  |   | 11     |  
|Other income, net                                                                                                 |  |                                 |       |   |                                |   | 11     |      |  |   |       |   |  |   | 4      |  
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Loss before income taxes                                                                                          |  |                                 | (2,290 | ) |                                |   | (1,892 | )    |  |   | (6,027 | ) |  |   | (4,320 | )
|                                                                                                                  |  |                                 |        |  
|Income tax expense                                                                                                |  |                                 | (331   | ) |                                |   | (268   | )    |  |   | (1,016 | ) |  |   | (805   | )
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Loss before minority interest in consolidated entity                                                              |  |                                 | (2,621 | ) |                                |   | (2,160 | )    |  |   | (7,043 | ) |  |   | (5,125 | )
|                                                                                                                  |  |                                 |        |  
|Minority interest in consolidated entity                                                                          |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   | 158    |  
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Net loss                                                                                                          |  | $                               | (2,621 | ) |                                | $ | (2,160 | )    |  | $ | (7,043 | ) |  | $ | (4,967 | )
|                                                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  



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



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##### Table of Contents

MISSION BROADCASTING, INC.



CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                           |  |                                |          |   |      |   |          |  
|------------------------------------------------------------------------------------------ |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                           |  | Nine Months EndedSeptember 30, |         
|                                                                                           |  | 2005                           |          |   | 2004 |  
|                                                                                           |  | (Unaudited)                    |         
|Cash flows from operating activities:                                                      |  |                                |          |   |      |   |          |  
|Net loss                                                                                   |  | $                              | (7,043   | ) |      | $ | (4,967   | )
|Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |  |                                |          |   |      |   |          |  
|Deferred income taxes                                                                      |  |                                | 1,010    |   |      |   | 784      |  
|Depreciation of property and equipment                                                     |  |                                | 2,099    |   |      |   | 1,897    |  
|Amortization of intangible assets                                                          |  |                                | 4,700    |   |      |   | 3,946    |  
|Amortization of debt financing costs                                                       |  |                                | 67       |   |      |   | 127      |  
|Amortization of broadcast rights, excluding barter                                         |  |                                | 1,517    |   |      |   | 1,966    |  
|Payments for broadcast rights                                                              |  |                                | (1,688   | ) |      |   | (1,519   | )
|Loss on asset disposal, net                                                                |  |                                | 54       |   |      |   | 2        |  
|Loss on extinguishment of debt                                                             |  |                                | 508      |   |      |   | 1,094    |  
|Minority interest in consolidated entity                                                   |  |                                |         |   |      |   | (158     | )
|Changes in operating assets and liabilities, net of acquisitions:                          |  |                                |          |   |      |   |          |  
|Accounts receivable                                                                        |  |                                | 78       |   |      |   | 1,232    |  
|Prepaid expenses and other current assets                                                  |  |                                | (31      | ) |      |   | (166     | )
|Other noncurrent assets                                                                    |  |                                | 211      |   |      |   | 104      |  
|Taxes payable                                                                              |  |                                | (11      | ) |      |   | (6       | )
|Accounts payable and accrued expenses                                                      |  |                                | (349     | ) |      |   | (306     | )
|Interest payable                                                                           |  |                                | 7        |   |      |   | (4       | )
|Deferred revenue                                                                           |  |                                | 461      |   |      |   | 107      |  
|Other noncurrent liabilities and deferred gain on sale of assets                           |  |                                | 14       |   |      |   | 101      |  
|Due to Nexstar Broadcasting, Inc.                                                          |  |                                | 923      |   |      |   | (6,592   | )
|                                                                                           |  |                                |          |   |      |   |          |  
|Net cash provided by (used for) operating activities                                       |  |                                | 2,527    |   |      |   | (2,358   | )
|                                                                                           |  |                                |          |   |      |   |          |  
|Cash flows from investing activities:                                                      |  |                                |          |   |      |   |          |  
|Additions to property and equipment                                                        |  |                                | (1,024   | ) |      |   | (178     | )
|Proceeds from sale of assets                                                               |  |                                | 16       |   |      |   | 1        |  
|Acquisition of broadcast properties and related transaction costs                          |  |                                | (6,143   | ) |      |   | (6,780   | )
|Change in restricted cash                                                                  |  |                                |         |   |      |   | 800      |  
|                                                                                           |  |                                |          |   |      |   |          |  
|Net cash used for investing activities                                                     |  |                                | (7,151   | ) |      |   | (6,157   | )
|                                                                                           |  |                                |          |   |      |   |          |  
|Cash flows from financing activities:                                                      |  |                                |          |   |      |   |          |  
|Proceeds from debt issuance                                                                |  |                                | 172,700  |   |      |   | 152,000  |  
|Repayment of long-term debt                                                                |  |                                | (172,740 | ) |      |   | (152,380 | )
|Proceeds from revolver draws                                                               |  |                                |         |   |      |   | 9,000    |  
|Payments for debt financing costs                                                          |  |                                | (795     | ) |      |   | (328     | )
|                                                                                           |  |                                |          |   |      |   |          |  
|Net cash provided by (used for) financing activities                                       |  |                                | (835     | ) |      |   | 8,292    |  
|                                                                                           |  |                                |          |   |      |   |          |  
|Net decrease in cash and cash equivalents                                                  |  |                                | (5,459   | ) |      |   | (223     | )
|                                                                                           |  |                               
|Cash and cash equivalents at beginning of period                                           |  |                                | 6,981    |   |      |   | 1,857    |  
|                                                                                           |  |                                |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                                 |  | $                              | 1,522    |   |      | $ | 1,634    |  
|                                                                                           |  |                                |          |   |      |   |          |  
|Supplemental schedule of cash flow information:                                            |  |                                |          |   |      |   |          |  
|Cash paid for interest, net                                                                |  | $                              | 6,570    |   |      | $ | 4,109    |  
|                                                                                           |  |                               
|Cash paid for income taxes, net                                                            |  | $                              | 17       |   |      | $ | 8        |  



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



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS



1. Organization and
Business Operations



Mission Broadcasting, Inc.
(Mission or the Company) owns and operates 15 television stations, 14 of which are affiliated with the NBC, ABC, CBS, Fox or UPN television networks and one independent television station, in markets located in New York,
Pennsylvania, Illinois, Indiana, Missouri, Texas and Montana. Through local service agreements, Nexstar Broadcasting, Inc. (Nexstar) provides sales and operating services to all of the Mission television stations (see Note 4).



The Company is highly vulnerable to changes in general
economic conditions because of its high level of debt. The Companys ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond its control.



2. Summary of Significant Accounting Policies



Interim Financial Statements



The condensed financial statements as of September 30, 2005 and for the
three and nine months ended September 30, 2005 and 2004 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement
of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission. The
preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the
full year. These financial statements should be read in conjunction with the financial statements and related notes included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2004. The balance sheet at
December 31, 2004 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.



Recent Accounting Pronouncements



In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 (SFAS No. 153). SFAS No. 153 requires that exchanges of nonmonetary assets be accounted for at fair value of the
assets exchanged, unless the exchange lacks commercial substance. A nonmonetary exchange has commercial substance when the future cash flows of the entity are expected to change significantly as a result of the exchange. This new Standard eliminates
a provision in APB Opinion No. 29 that exempted nonmonetary exchanges of similar productive assets from fair value accounting. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. Therefore, SFAS No. 153 was effective for the Company on July 1, 2005. The adoption of this new Standard did not have a material impact on the Companys financial position or results of operations.



In March 2005, the FASB issued Financial Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143 (FIN No. 47). FIN No. 47 clarifies that an entity must record a liability for a conditional asset retirement
obligation if the fair value of the obligation can be reasonably estimated. A conditional asset retirement obligation is a term used in Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations, that refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN No. 47
is effective no later than the end of fiscal years ending after December 15, 2005, which is the Companys current fiscal year ending December 31, 2005. Management is currently evaluating the impact the adoption of FIN No. 47 will
have on the Companys financial position or results of operations.



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)



2. Summary of Significant Accounting Policies(Continued)



In May 2005, the FASB issued Statement of Financial Accounting Standards
No. 154, Accounting Changes and Error Corrections - a replacement of APB No. 20 and FASB Statement No. 3 (SFAS No. 154). SFAS No. 154 requires entities that voluntarily make a change in accounting
principle to apply that change retrospectively to all prior period financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Previously under APB Opinion No. 20,
Accounting Changes, most voluntary changes in accounting principle were recognized by including in net income of the period of change the cumulative effect of changing to the new accounting principle. In addition to voluntary changes,
this new Standard establishes retrospective application as the required method for adopting a newly issued accounting pronouncement when the pronouncement does not include specific transition provisions. SFAS No. 154 also requires that a change
in method of depreciation, amortization, or depletion for long-lived, nonfinancial assets, be accounted for as a change in accounting estimate affected by a change in accounting principle, the effects of which are to be applied prospectively in the
period of change and future periods. This Statement also makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. SFAS
No. 154 applies to accounting changes and error corrections that are made in fiscal years beginning after December 15, 2005. The Company will adopt the provisions of SFAS No. 154, as applicable, beginning in fiscal 2006.



3. Acquisitions



During the nine months ended September 30, 2005, the Company consummated the acquisition listed below. This acquisition
has been accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to assets acquired based on their estimated fair value on the acquisition date. The excess of the purchase price over the fair values
assigned to the assets acquired is recorded as goodwill. The financial statements include the operating results of the business from November 1, 2004, the date on which Mission commenced programming the station under a TBA.



|        |  |                     |  |                    |  |                   
|------- |  | ------------------- |  | ------------------ |  | ------------------
|Station |  | Network Affiliation |  | Market             |  | Date Acquired     
|WTVO    |  | ABC                 |  | Rockford, Illinois |  | January 4, 2005(1)

---

|(1) | The Company commenced operations under a TBA on November 1, 2004 which terminated on the date of acquisition.
|--- | -------------------------------------------------------------------------------------------------------------



WTVO



On October 4, 2004, Mission entered into a purchase agreement and a TBA
with Young Broadcasting, Inc. and Winnebago Television Corporation, which owned WTVO, the ABC affiliate in Rockford, Illinois. Mission commenced operations under the TBA on November 1, 2004 which terminated upon the purchase of the station. On
January 4, 2005, Mission completed the acquisition of WTVO for total consideration of $20.75 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, Mission made an initial payment of $15.0 million against the
purchase price on November 1, 2004, to acquire substantially all of the assets of WTVO, except for its FCC license and certain transmission equipment. Mission paid the remaining $5.75 million on January 4, 2005, exclusive of transaction
costs, for the purchase of WTVOs FCC license and certain transmission equipment.



The following table summarizes the estimated fair values of the assets acquired. Mission obtained third-party valuations of certain acquired intangible assets (in thousands).



|                       |  |   |       
|---------------------- |  | - | ------
|Property and equipment |  | $ | 7,161 
|Intangible assets      |  |   | 10,279
|Goodwill               |  |   | 3,658 
|                       |  |   |       
|Assets acquired        |  | $ | 21,098
|                       |  |   |       



5



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)



3. Acquisitions(Continued)



Of the $10.3 million of acquired intangible assets, $2.9 million was
assigned to FCC licenses that are not subject to amortization and $6.7 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $0.7 million of acquired intangible assets have an estimated useful life
of approximately 1 year. Goodwill of $3.7 million is expected to be deductible for tax purposes.



The following unaudited pro forma information has been presented as if the acquisition of WTVO had occurred on January 1, 2004:



|                                                   |  |                                       |        |   |                                      |   |        |  
|-------------------------------------------------- |  | ------------------------------------- | ------ | - | ------------------------------------ | - | ------ | -
|                                                   |  | Three Months Ended September 30, 2004 |        |   | Nine Months Ended September 30, 2004 |  
|                                                   |  | (in thousands)                        |       
|Net broadcast revenue (excluding trade and barter) |  | $                                     | 4,979  |   |                                      | $ | 16,435 |  
|Total net revenue                                  |  |                                       | 10,641 |   |                                      |   | 30,831 |  
|Income from operations                             |  |                                       | 334    |   |                                      |   | 112    |  
|Net loss                                           |  | $                                     | (2,747 | ) |                                      | $ | (6,639 | )



The above selected
unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of results of operations in future periods or results that would have been achieved had the Company owned the acquired station during the
specified period. There is no pro forma information presented for the comparable periods in fiscal year 2005 since the acquisition was consummated near the beginning of the year and the pro forma results would not be materially different from the
Companys results of operations as reported.



4. Local Service
Agreements with Nexstar



Mission has entered into local
service agreements with Nexstar to provide sales and operating services to all the Mission stations. Under the terms of a shared services agreement (SSA), the Nexstar station in the market bears the costs of certain services including
news production, technical maintenance and security, in exchange for monthly payments to Nexstar. For each station that Mission has entered into an SSA, it has also entered into a joint sales agreement (JSA). Under the JSA, Nexstar sells
the Mission stations advertising time and retains a percentage of the revenue it generates in return for monthly payments to Mission of the remaining percentage of net revenue. Under the terms of a time brokerage agreement (TBA),
Nexstar programs most of the stations broadcast time, sells the stations advertising time and retains the advertising revenue it generates in exchange for monthly payments to Mission. JSA and TBA fees generated from, and SSA fees
incurred by Nexstar under the agreements described in the table below are reported as Revenue from Nexstar Broadcasting, Inc. and Selling, general, and administrative expenses paid to Nexstar Broadcasting, Inc. in the
accompanying statement of operations.



In order for both
Nexstar and Mission to comply with the Federal Communications Commission (FCC) rules regarding ownership limits in television markets, Mission maintains complete responsibility for and control over programming, finances, personnel and
operations of its stations.



6



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)



4. Local Service Agreements with Nexstar(Continued)



The following table summarizes the various local service agreements Mission has with Nexstar as of September 30, 2005:



|                     |  |                              |  |             |  |                  |  |                  |  |                                                                                                                      
|-------------------- |  | ---------------------------- |  | ----------- |  | ---------------- |  | ---------------- |  | ---------------------------------------------------------------------------------------------------------------------
|Station              |  | Market                       |  | Affiliation |  | Type ofAgreement |  | Expiration       |  | Consideration received from or paid to Nexstar                                                                       
|WFXP                 |  | Erie, PA                     |  | Fox         |  | TBA              |  | 8/16/06          |  | Monthly payments received from Nexstar                                                                               
|                     |  |                              |  |             | 
|KJTL and KJBO-LP     |  | Wichita Falls, TX-Lawton, OK |  | Fox UPN     |  | SSA JSA          |  | 5/31/095/31/09   |  | $70 thousand per month paid to Nexstar 70% of the
KJTL/KJBO-LP net revenue collected each month received from Nexstar
|                     |  |                              |  |             | 
|WYOU                 |  | Wilkes Barre-Scranton, PA    |  | CBS         |  | SSA JSA          |  | 1/4/089/30/14    |  | $200 thousand per month paid to Nexstar(1) 70% of the WYOU net revenue collected each month received from
Nexstar    
|                     |  |                              |  |             | 
|KODE                 |  | Joplin, MO-Pittsburg, KS     |  | ABC         |  | SSA JSA          |  | 3/31/129/30/14   |  | $100 thousand per month paid to Nexstar(1) 70% of the KODE net revenue collected each month received from Nexstar    
|                     |  |                              |  |             | 
|KRBC                 |  | Abilene-Sweetwater, TX       |  | NBC         |  | SSA JSA          |  | 6/12/136/30/14   |  | $100 thousand per month paid to Nexstar 70% of the KRBC
net revenue collected each month received from Nexstar       
|                     |  |                              |  |             | 
|KSAN                 |  | San Angelo, TX               |  | NBC         |  | SSA JSA          |  | 5/31/145/31/14   |  | $50 thousand per month paid to Nexstar 70% of the KSAN
net revenue collected each month received from Nexstar        
|                     |  |                              |  |             | 
|WFXW (formerly WBAK) |  | Terre Haute, IN              |  | Fox         |  | SSA JSA          |  | 5/8/135/8/13     |  | $10 thousand per month paid to Nexstar(1) 70% of the WFXW net revenue collected each month received from Nexstar     
|                     |  |                              |  |             | 
|KCIT and KCPN-LP     |  | Amarillo, TX                 |  | Fox        |  | SSA JSA          |  | 4/30/094/30/09   |  | $60 thousand per month paid to Nexstar 70% of the
KCIT/KCPN-LP net revenue collected each month received from Nexstar
|                     |  |                              |  |             | 
|KHMT                 |  | Billings, MT                 |  | Fox         |  | TBA              |  | 12/13/09         |  | Monthly payments received from Nexstar                                                                               
|                     |  |                              |  |             | 
|KAMC                 |  | Lubbock, TX                  |  | ABC         |  | SSA JSA          |  | 2/15/092/15/09   |  | $100 thousand per month paid to Nexstar(1) 70% of the KAMC net revenue collected each month received from Nexstar    
|                     |  |                              |  |             | 
|KOLR                 |  | Springfield, MO              |  | CBS         |  | SSA JSA          |  | 2/15/092/15/09   |  | $150 thousand per month paid to Nexstar 70% of the KOLR
net revenue collected each month received from Nexstar       
|                     |  |                              |  |             | 
|WUTR                 |  | Utica, NY                    |  | ABC         |  | SSA JSA          |  | 3/31/143/31/14   |  | $10 thousand per month paid to Nexstar 70% of the WUTR
net revenue collected each month received from Nexstar        
|                     |  |                              |  |             | 
|WTVO                 |  | Rockford, IL                 |  | ABC         |  | SSA JSA          |  | 10/31/1410/31/14 |  | $100 thousand per month paid to Nexstar(1) 70% of the WTVO net revenue collected each month received from Nexstar    

---

|(1) | Effective January 1, 2005
|--- | -------------------------



Under these agreements, Mission is responsible for certain operating expenses of its stations and therefore may have unlimited exposure to any potential
operating losses. Mission will continue to operate its stations under the SSAs and JSAs or TBAs until the termination of such agreements. The SSAs and JSAs generally have a term of ten years. Nexstar indemnifies Mission from Nexstars
activities pursuant to the local service agreement to which Nexstar is a party.



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)



5. Intangible Assets and Goodwill



Intangible assets and goodwill consisted of the following:



|                                                   |  |                       |  |                |         |   |              |   |         |  
|-------------------------------------------------- |  | --------------------- |  | -------------- | ------- | - | ------------ | - | ------- | -
|                                                   |  | Estimated useful life |  | September 30,  |         |   | December 31, |  
|                                                   |  | (years)               |  | 2005           |         |   | 2004         |  
|                                                   |  |                       |  | (in thousands) |        
|Network affiliation agreements                     |  | 15                    |  | $              | 66,744  |   |              | $ | 66,744  |  
|FCC licenses                                       |  | indefinite            |  |                | 33,538  |   |              |   | 33,538  |  
|Other intangible assets                            |  | 1-15                  |  |                | 14,835  |   |              |   | 15,296  |  
|                                                   |  |                       |  |                |         |   |              |   |         |  
|                                                   |  |                       |  |                | 115,117 |   |              |   | 115,578 |  
|Less: accumulated amortization                     |  |                       |  |                | (37,375 | ) |              |   | (33,135 | )
|                                                   |  |                       |  |                |         |   |              |   |         |  
|Intangible assets, net of accumulated amortization |  |                       |  |                | 77,742  |   |              |   | 82,443  |  
|Goodwill, net                                      |  | indefinite            |  |                | 16,665  |   |              |   | 16,307  |  
|                                                   |  |                       |  |                |         |   |              |   |         |  
|Intangible assets and goodwill, net                |  |                       |  | $              | 94,407  |   |              | $ | 98,750  |  
|                                                   |  |                       |  |                |         |   |              |   |         |  



Total amortization
expense from definite-lived intangibles for the three months ended September 30, 2005 and 2004 was $1.5 million and $1.4 million, respectively, and for the nine months ended September 30, 2005 and 2004 was $4.7 million and $3.9 million,
respectively. The Companys estimate of amortization expense for definite-lived intangible assets recorded on its books as of September 30, 2005 is approximately $6 million for each year for the years of 2006 through 2010.



The carrying value of indefinite-lived intangible assets, consisting of FCC
licenses and goodwill, at September 30, 2005 and December 31, 2004 was $45.4 million and $45.0 million, respectively (net of accumulated amortization of approximately $7.0 million). Indefinite-lived intangible assets are not subject to
amortization, but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. As of September 30, 2005, the Company did not identify any events that would trigger an impairment
assessment.



The change in the carrying amount of goodwill for
the nine months ended September 30, 2005 was as follows (in thousands):



|                                 |  |   |       
|-------------------------------- |  | - | ------
|Balance as of January 1, 2005    |  | $ | 16,307
|Acquisitions                     |  |   | 358   
|                                 |  |   |       
|Balance as of September 30, 2005 |  | $ | 16,665
|                                 |  |   |       



The consummation of
the acquisition of WTVO during the nine months ended September 30, 2005 increased goodwill by approximately $0.4 million.



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)



6. Debt



Long-term debt consisted of the following:



|                          |  |                    |         |   |                   |   |         |  
|------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                          |  | September 30, 2005 |         |   | December 31, 2004 |  
|                          |  | (in thousands)     |        
|Term loans                |  | $                  | 172,700 |   |                   | $ | 151,240 |  
|Revolving credit facility |  |                    |        |   |                   |   | 21,500  |  
|                          |  |                    |         |   |                   |   |         |  
|                          |  |                    | 172,700 |   |                   |   | 172,740 |  
|Less: current portion     |  |                    | (1,727  | ) |                   |   | (1,520  | )
|                          |  |                    |         |   |                   |   |         |  
|                          |  | $                  | 170,973 |   |                   | $ | 171,220 |  
|                          |  |                    |         |   |                   |   |         |  



Senior Secured
Credit Facility



On April 1, 2005, Mission
entered into a new senior secured credit facility agreement with a group of commercial banks which replaced its previous credit facility that had provided for a $152.0 million term loan and a $30.0 million revolving loan. Missions new senior
secured credit facility consists of a $172.7 million term loan and a $47.5 million revolving loan. All borrowings outstanding under this new credit facility are due to mature in 2012. The term loan, which matures in October 2012, is payable in
consecutive quarterly installments amortized at 0.25% quarterly commencing on December 31, 2005, with the remaining 93.25% due at maturity. The term loan bears interest at either the higher of the prevailing prime rate or the Federal Funds Rate
plus 0.50% (the Base Rate), plus an applicable margin of 0.50%; or LIBOR plus 1.75%. The revolving loan bears interest at either the Base Rate plus an applicable margin ranging between 0.00% and 0.75%; or LIBOR plus an applicable margin
ranging between 0.75% and 2.00%. The credit facility is collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and Mission. Missions credit facility agreement does not contain
financial covenant ratio requirements, but does provide for default in the event Nexstar does not adequately comply with all covenants contained in its credit agreement. Nexstar Broadcasting Group, Inc. and its subsidiaries (Nexstar
Broadcasting Group) guarantee full payment of all obligations under Missions senior secured credit facility in the event of Missions default.



As of September 30, 2005 and December 31, 2004, Mission had $172.7 million and $151.2 million, respectively, outstanding under its term loan
and no borrowings and $21.5 million, respectively, were outstanding under its revolving loan.



As of September 30, 2005, there was approximately $47.5 million of total unused commitments under Missions senior secured credit facility. Based on covenant calculations, as of September 30, 2005, there was
approximately $6 million of total available borrowings that could be drawn under Nexstars and Missions senior secured credit facilities.



Loss on Extinguishment of Debt



The refinancing of Missions senior secured credit facility in April 2005 resulted in the write off of $0.1 million of previously capitalized debt
financing costs and $0.4 million of transaction costs during the second quarter of 2005. These amounts comprise loss on extinguishment of debt for the nine months ended September 30, 2005.



9



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)



7. Income Taxes



The Companys provision for income taxes is primarily comprised of deferred income taxes created by an increase in the deferred tax liabilities
position during the year resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. These deferred tax liabilities do not reverse on a
scheduled basis and are not used to support the realization of deferred tax assets. The Companys deferred tax assets primarily result from net operating loss carryforwards (NOLs). The Companys NOLs are available to reduce
future taxable income if utilized before their expiration. Utilization of NOLs in the future may be limited if changes in the Companys ownership occurs. The Company provides a full valuation allowance for net deferred tax assets as it believes
that it is more likely than not that the deferred tax assets will not be realized.



8. Management Agreement



The Companys
sole shareholder and his spouse are parties to a management services agreement. Under this agreement, the Company pays its sole shareholder up to $0.375 million per year for certain management services and pays his spouse by the hour for certain
management services. Pursuant to the management services agreement, the Company paid compensation to its sole shareholder in the amount of $0.1 million for each of the three months ended September 30, 2005 and 2004, and $0.2 million for each of
the nine months ended September 30, 2005 and 2004, which is included in selling, general and administrative expenses.



9. FCC Regulatory Matters



Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the Communications Act).
The Communications Act prohibits the operation of television broadcasting stations, except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke and modify broadcasting licenses, determine the location of
television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations.



Some of the more significant FCC regulatory matters impacting the
Companys operations are discussed below.



Cable
Retransmission Consent Rights



The Communications Act
grants television broadcasters retransmission consent rights in connection with the carriage of their stations signal by cable companies. If a broadcaster chooses to exercise retransmission consent rights, a cable television system which is
subject to that election may not carry a stations signal without the broadcasters consent. This generally requires the cable system operator and the television broadcaster to negotiate the terms under which the broadcaster will consent
to the cable systems carriage of its stations signal. Mission has elected to exercise retransmission consent rights for all of its stations where it has a legal right to do so. Mission is in the process of negotiating these
retransmission agreements and is unable to predict the outcome of these negotiations.



On October 20, 2005, the Company reached an agreement with Cox Communications, Inc. (Cox) for the retransmission of its stations in Abilene-Sweetwater, San Angelo, Lubbock and Amarillo, Texas;
Springfield and Joplin, Missouri and Pittsburg, Kansas. Under this agreement, Cox now carries KRBC on its cable system in Abilene, Texas. KRBC had previously been off Coxs cable system when a retransmission consent agreement expired on
December 31, 2004. In connection with the agreement, Cox has withdrawn a complaint it had submitted to the FCC against the Company.



On December 31, 2004, retransmission consent agreements with Cable One, Inc. (Cable One) expired for television stations KRBC (Abilene)
and KODE (Joplin). As a result, Cable One is no longer permitted by law to carry these stations signals. The Company has requested that Cable One pay a cash per subscriber fee in exchange for the right to carry the stations signals under
new agreements. Cable One has informed the Company that it will not pay any cash fees for the carriage of the stations on its cable systems. If the Company does not reach new agreements with Cable One, these stations could lose audience share which
may impact the stations revenue. The Company is currently unable to determine the ultimate outcome of this matter, but does not believe it will have a material effect on the Companys financial condition or results of operations.



10



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)



9. FCC Regulatory Matters(Continued)



Digital Television Conversion



All commercial television stations in the United States were required to commence digital television (DTV)
transmission operations by May 1, 2002, in addition to continuing their analog operations. The conversion to digital transmission required an average initial capital expenditure of $0.2 million per station for low-power transmission of a
digital signal. Digital conversion expenditures were $0.6 million and $32 thousand for the nine months ended September 30, 2005 and 2004, respectively.



Stations may broadcast both analog and digital signals until at least December 31, 2006. After December 31, 2006, on a date determined by
Congress or the FCC, stations will operate with digital only facilities. The digital transmissions may initially be low-power, but as discussed below, full-power transmission will be required.



The FCCs ongoing rule making proceeding concerning implementation of
the transition from analog to digital television broadcasts is likely to have a significant impact on the television industry and the operation of the Companys stations.



Full-Power DTV Facilities Construction



On August 4, 2004, the FCC released rules setting the dates by which all television stations must be broadcasting a
full-power DTV signal. Under these rules, stations affiliated with the four largest networks (ABC, CBS, NBC and Fox) in the top-100 markets were required to construct full-power DTV facilities by July 1, 2005. All other stations are required to
construct full-power DTV facilities by July 1, 2006. Management estimates that it will require an average capital expenditure of approximately $1.5 million per station (for 11 stations) to modify Missions stations DTV transmitters
for full-power digital signal transmission, including costs for the transmitter, transmission line, antenna and installation, and estimated costs for tower upgrades and/or modifications. The Company anticipates these expenditures will be funded
through available cash on hand and cash generated from operations as incurred in future years. Stations that fail to meet these build-out deadlines will lose interference protection for their signals outside their low-power coverage areas. As of
September 30, 2005, only Missions stations WUTR and WTVO are transmitting full-power digital signals.



The FCC will accept requests for extensions of the applicable deadlines for stations that cannot meet the full-power DTV deadlines due to severe financial
constraints or circumstances beyond licensee control (such as zoning issues). Mission has filed a request for extension of time to construct full power DTV facilities for its top four network affiliates in the top one hundred market stations, but
the FCC has not yet acted on this request.



Additional
DTV Requirements



The FCC also adopted additional
Program System and Information Protocol (PSIP) requirements. The equipment and related installation necessary to meet the PSIP requirements cost approximately $0.4 million in total for all of the television stations the Company owns and
operates. These expenditures were funded in 2005 through available cash on hand and cash generated from operations.



10. Commitments and Contingencies



Guarantees of Nexstar Debt



Mission is a guarantor of and has pledged substantially all its assets, excluding FCC licenses, to guarantee Nexstars bank credit facility.
Nexstars bank credit facility, which matures in 2012, consists of a $175.8 million term loan and a $50.0 million revolving loan.



Mission is also a guarantor of $200.0 million of 7% senior subordinated notes (7% Notes) due 2014 issued by Nexstar. The 7% Notes are general
unsecured senior subordinated obligations subordinated to all of Missions senior debt. Mission was a guarantor of $160.0 million of 12% senior subordinated notes (12% Notes) issued by Nexstar. The 12% Notes were redeemed by Nexstar
on April 1, 2005.



Mission guarantees full payment of all
obligations incurred under Nexstars bank credit facility agreement and senior subordinated notes. In the event that Nexstar is unable to repay amounts due under these debt obligations, Mission will be obligated to repay such amounts. The
maximum potential amount of future payments that Mission would be required to make under these guarantees would be generally limited to the amount of borrowings outstanding under Nexstars bank credit facility and the 7% Notes. At
September 30, 2005, Nexstar has issued an aggregate principal amount of $200.0 million of senior subordinated notes and had $175.8 million outstanding under its bank credit facility.



11



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##### Table of Contents

MISSION BROADCASTING, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)



10. Commitments and Contingencies(Continued)



Purchase Options Granted to Nexstar



In consideration of Nexstar Broadcasting Groups guarantee of Missions bank credit facility, Missions sole
shareholder has granted Nexstar a purchase option to acquire the assets and liabilities of each Mission station, subject to FCC consent, for consideration equal to the greater of (i) seven times the stations broadcast cash flow as defined
in the option agreement less the amount of its indebtedness as defined in the option agreement or (ii) the amount of its indebtedness. Broadcast cash flow is defined as income or loss from operations, plus depreciation and amortization
(including amortization of broadcast rights), interest income, non-cash trade and barter expenses, nonrecurring expenses (including time brokerage agreement fees), network compensation payments received or receivable and corporate management fees,
less payments for broadcast rights, non-cash trade and barter revenue and network compensation revenue. These option agreements are freely exercisable or assignable by Nexstar without consent or approval by Missions sole shareholder.



Indemnification Obligations



In connection with certain agreements that the Company enters into in the
normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third party to such arrangement
from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future
payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been immaterial and the Company has not incurred significant costs to defend
lawsuits or settle claims related to these indemnification agreements.



Litigation



From time to time, the
Company is involved with claims that arise out of the normal course of business. In the opinion of management, any resulting liability with respect to these claims would not have a material adverse effect on the Companys financial position or
results of operations.



11. Subsequent Events



As discussed in Note 9, on October 20, 2005, the Company reached an
agreement with Cox Communications, Inc. for the retransmission of its stations in Abilene-Sweetwater, San Angelo, Lubbock and Amarillo, Texas; Springfield and Joplin, Missouri and Pittsburg, Kansas.



12



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##### Table of Contents

ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



The following discussion and analysis should be read in conjunction with the unaudited condensed balance sheet as of September 30, 2005, unaudited
condensed statements of operations and other unaudited condensed financial statements for the three and nine months ended September 30, 2005 and 2004, and related notes included elsewhere in this Quarterly Report on Form 10-Q.



We make references throughout our Managements Discussion and
Analysis of Financial Condition and Results of Operations to comparisons on a same station basis in order to provide a more meaningful comparison of annual growth from internal operations which may be masked by growth from
acquisitions. Same station basis refers to the television markets in which we owned a television station at the beginning and end of a particular period. Television markets in the United States of America are generally recognized as Designated
Market Areas, or DMAs, as reported by the A.C. Nielsen Company. In particular, references to a comparison on a same station basis for the three months ended September 30, 2005 versus the three months ended September 30, 2004 and the nine
months ended September 30, 2005 versus the nine months ended September 30, 2004, include the following stations: WYOU, WFXP, KJTL, KJBO-LP, KODE, KOLR, KCIT, KCPN-LP, KAMC, KHMT, KSAN and KRBC. As used in the report, unless the context
indicates otherwise, Mission refers to Mission Broadcasting, Inc., and all references to we, our, and us refer to Mission.



Executive Summary



Overview of Operations



As of September 30, 2005, we own and operate 15 television stations. We have local service agreements with certain television stations of Nexstar
Broadcasting, Inc. (Nexstar), through which Nexstar provides various programming, sales or other services to our television stations. In order for both Nexstar and us to comply with Federal Communication Commission (FCC)
regulations, we maintain complete responsibility for and control over programming, finances, personnel and operations of our stations.



The following table summarizes the various local service agreements our stations have implemented as of September 30, 2005 with Nexstar-owned
stations:



|                   |  |                                                                                                      
|------------------ |  | -----------------------------------------------------------------------------------------------------
|Service Agreements |  | Stations                                                                                             
|TBA (1)            |  | WFXP and KHMT                                                                                        
|                   | 
|SSA & JSA (2)      |  | KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW (formerly WBAK), WYOU, KODE and WTVO

---

|(1) | We have a time brokerage agreement (TBA) for each of these stations which allows Nexstar to program most of each stations broadcast time, sell each stations
advertising time and retain the advertising revenue generated in exchange for monthly payments to us.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | We have both a shared services agreement (SSA) and a joint services agreement (JSA) for each of these stations. The SSA allows the sharing of services
including news production, technical maintenance and security, in exchange for Nexstars right to receive certain payments from us as described in the SSAs. The JSAs permit Nexstar to sell and retain a percentage of the net revenue from the
stations advertising time in return for monthly payments to us of the remaining percentage of the net revenue, as described in the JSAs.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The arrangements under the SSAs and JSAs have had the effect of Nexstar receiving substantially all of the available cash, after debt service costs,
generated by the stations listed above. The arrangements under the TBAs have the effect of Nexstar receiving substantially all of the available cash generated by the TBA stations listed above. Mission anticipates that Nexstar will continue to
receive substantially all of Missions available cash, after payments for debt service costs, generated by the stations listed above. For more information about our local service agreements with Nexstar, refer to Note 4 of our condensed
financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.



Nexstar Broadcasting Group, Inc. and its subsidiaries (Nexstar Broadcasting Group) guarantee the obligations incurred under our senior credit facility. We are a guarantor of the senior credit facility
entered into by Nexstar and the senior subordinated notes issued by Nexstar. In consideration of Nexstars guarantee of our senior credit facility, our sole shareholder has granted Nexstar purchase options to acquire the assets and liabilities
of each of our television stations, subject to FCC consent. These option agreements are freely exercisable or assignable by Nexstar without consent or approval by our sole shareholder.



The operating revenue of our stations is derived primarily from broadcast advertising revenue sold and collected by Nexstar
and paid to us under the JSAs. Broadcast advertising revenue is affected by a number of factors, including the economic conditions of the markets in which we operate, the demographic makeup of those markets and the marketing strategy employed in
each market. Advertising revenue is positively affected by strong local economies, national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. Because television broadcast stations rely on
advertising revenue, declines in advertising budgets, particularly in recessionary periods, adversely affect the broadcast industry, and as a result may contribute to a decrease in the revenue of broadcast television stations. The stations
advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In
addition, advertising revenue is generally higher during even-numbered years resulting from political advertising and advertising aired during the Olympic Games.



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Each of our stations, except for KCPN-LP, has a network affiliation agreement pursuant to which the
network provides programming to the station during specified time periods, including prime time. Each of NBC, CBS and ABC compensates our affiliated stations for distributing the networks programming over the air and for allowing the network
to keep a portion of advertising inventory during those time periods. The affiliation agreements with Fox and UPN do not provide for compensation.



Each station acquires licenses to broadcast programming in non-news and non-network time periods. The licenses are either purchased from a program
distributor for cash or the program distributor is allowed to sell some of the advertising inventory as compensation to eliminate or reduce the cash cost for the license. The latter practice is referred to as barter broadcast rights. The station
records the estimated fair market value of the licenses, including any advertising inventory given to the program distributor, as a broadcast right asset and liability. Barter broadcast rights are recorded at managements estimate of the value
of the advertising time exchanged using historical advertising rates, which approximates the fair value of the program material received. The assets are amortized as a component of amortization of broadcast rights. Amortization is computed using the
straight-line method based on the license period or usage, whichever yields the greater expense. The cash broadcast rights liabilities are reduced by monthly payments while the barter liability is amortized over the life of the contract as barter
revenue.



Our primary operating expense consists of fixed
monthly SSA fees paid to Nexstar for news production and technical and other services. To a lesser extent our operating expenses include employee compensation and related benefits. A large percentage of the costs involved in the operation of our
stations remain fixed.



Acquisition of WTVO



On January 4, 2005, we completed our acquisition
of WTVO, the ABC affiliate in Rockford, Illinois for total consideration of $20.75 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, we made an initial payment of $15.0 million against the purchase price on
November 1, 2004, to acquire substantially all of the assets of WTVO, except for its FCC license and certain transmission equipment. We paid the remaining $5.75 million on January 4, 2005, exclusive of transaction costs, for the purchase
of WTVOs FCC license and certain transmission equipment. Prior to our acquisition of the station, we had been operating WTVO under a TBA.



Refinancing of Senior Credit Facilities



On April 1, 2005, we entered into a new senior credit facility agreement which replaced our previous credit facility. Our new senior credit facility
consists of a $172.7 million term loan and a $47.5 million revolving loan. All borrowings outstanding under this new credit facility are due to mature in 2012. The term loan, which matures in October 2012, is payable in consecutive quarterly
installments amortized at 0.25% quarterly commencing on December 31, 2005, with the remaining 93.25% due at maturity. Borrowings under the new credit facility bear interest at either a base rate plus an applicable margin or, at our option,
LIBOR plus an applicable margin. Under the new credit facility agreement, the applicable margin component of the revolving loan was decreased by 100 basis points, representing one percent. For a discussion of interest rates and financial covenant
requirements of the new credit facility, we refer you to Note 6 of our condensed financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.



Nexstar also entered into a new senior credit facility agreement on April 1, 2005 which replaced its previous credit
facility. Nexstars new credit facility consists of a $175.8 million term loan and a $50.0 million revolving loan. Terms of the new Nexstar credit facility, including maturity and interest rates, are the same as the terms of our new credit
facility.



Nexstar Broadcasting Group guarantees full payment
of all obligations under Nexstars and our new credit facilities. In addition, we guarantee full payment of all obligations under Nexstars new credit facility.



Guarantee of Nexstars 7% Notes



On April 1, 2005, Nexstar issued 7% senior subordinated notes due 2014 (7% Notes) pursuant to a
Supplemental Indenture, dated April 1, 2005, among Nexstar Broadcasting Group, Nexstar, us and The Bank of New York, as trustee, in the aggregate principal amount of $75.0 million. The 7% Notes were issued as an add-on to the $125.0 million
aggregate principal amount of 7% Notes previously issued by Nexstar. We and Nexstar Broadcasting Group guarantee the obligations under the 7% Notes in the aggregate principal amount of $200.0 million.



Cable Television Retransmission



On December 31, 2004, retransmission consent agreements with Cable One,
Inc. (Cable One) expired for our television stations KRBC (Abilene) and KODE (Joplin). As a result, Cable One is no longer permitted by law to carry these stations signals. We have requested that Cable One pay a cash per subscriber
fee in exchange for the right to carry the stations signals under new agreements. Cable One has informed us that they will not pay any cash fees for the carriage of the stations signals on its cable systems. If we do not reach new
agreements with the Cable One, these stations could lose audience share which may impact the stations revenue. We are currently unable to determine the ultimate outcome of this matter, but do not believe it will have a material effect on our
financial position or results of operations.



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Recent Developments



On October 20, 2005, we reached an agreement with Cox Communications, Inc. (Cox) for the retransmission of
our stations in Abilene-Sweetwater, San Angelo, Lubbock and Amarillo, Texas; Springfield and Joplin, Missouri and Pittsburg, Kansas. Under this agreement, Cox now carries KRBC on its cable system in Abilene, Texas. KRBC had previously been off
Coxs cable system when a retransmission consent agreement expired on December 31, 2004. In connection with the agreement, Cox has withdrawn a complaint it had submitted to the FCC against us.



Historical Performance



Revenue



The following table sets forth the principal types of revenue received by our stations for the periods indicated and each type of revenue (other than
trade and barter, and revenue from Nexstar Broadcasting, Inc.) as a percentage of total gross revenue, as well as agency and national sales representative commissions:



|                                                     |  |                                    |       |                                    |       |        |   |       |  |        |  |   |        |        |       |   |   |        |  |      
|---------------------------------------------------- |  | ---------------------------------- | ----- | ---------------------------------- | ----- | ------ | - | ----- |  | ------ |  | - | ------ | ------ | ----- | - | - | ------ |  | -----
|                                                     |  | Three Months Ended September 30,   |       | Nine Months Ended September 30,   
|                                                     |  | 2005                               |       | 2004                               |       | 2005   |   | 2004 
|                                                     |  | Amount                             |       | %                                  |       | Amount |   | %     |  | Amount |  | % |        | Amount |       | %
|                                                     |  | (in thousands, except percentages) |       | (in thousands, except percentages)
|Local                                                |  | $                                  |      |                                    |      |        | $ | 1,849 |  | 44.3   |  | $ |       |        |      |   | $ | 7,428  |  | 52.4 
|National                                             |  |                                    |      |                                    |      |        |   | 1,062 |  | 25.4   |  |   |       |        |      |   |   | 3,880  |  | 27.3 
|Political                                            |  |                                    |      |                                    |      |        |   | 667   |  | 16.0   |  |   |       |        |      |   |   | 1,289  |  | 9.1  
|Network compensation                                 |  |                                    | 344   |                                    | 61.8  |        |   | 437   |  | 10.5   |  |   | 1,247  |        | 68.1  |   |   | 1,320  |  | 9.3  
|Other                                                |  |                                    | 213   |                                    | 38.2  |        |   | 157   |  | 3.8    |  |   | 584    |        | 31.9  |   |   | 266    |  | 1.9  
|                                                     |  |                                    |       |                                    |       |        |   |       |  |        |  |   |        |        |       |   |   |        |  |      
|Total gross revenue                                  |  |                                    | 557   |                                    | 100.0 |        |   | 4,172 |  | 100.0  |  |   | 1,831  |        | 100.0 |   |   | 14,183 |  | 100.0
|Less: Agency and national representative commissions |  |                                    |      |                                    |      |        |   | 551   |  | 13.2   |  |   |       |        |      |   |   | 1,912  |  | 13.5 
|                                                     |  |                                    |       |                                    |       |        |   |       |  |        |  |   |        |        |       |   |   |        |  |      
|Net broadcast revenue                                |  |                                    | 557   |                                    | 100.0 |        |   | 3,621 |  | 86.8   |  |   | 1,831  |        | 100.0 |   |   | 12,271 |  | 86.5 
|Trade and barter revenue                             |  |                                    | 584   |                                    |       |        |   | 590   |  |        |  |   | 1,885  |        |       |   |   | 1,720  |  |      
|Revenue from Nexstar Broadcasting, Inc.              |  |                                    | 6,847 |                                    |       |        |   | 5,059 |  |        |  |   | 20,812 |        |       |   |   | 12,650 |  |      
|                                                     |  |                                    |       |                                    |       |        |   |       |  |        |  |   |        |        |       |   |   |        |  |      
|Total net revenue                                    |  | $                                  | 7,988 |                                    |       |        | $ | 9,270 |  |        |  | $ | 24,528 |        |       |   | $ | 26,641 |  |      
|                                                     |  |                                    |       |                                    |       |        |   |       |  |        |  |   |        |        |       |   |   |        |  |      



Results of
Operations



The following table sets forth a summary
of our operations for the periods indicated and their percentages of total net revenue:



|                                                                                |  |                                    |       |   |                                    |       |   |        |   |       |      |  |       |        |  |   |        |   |  |        |   |  |   |        |   |  |       |  
|------------------------------------------------------------------------------- |  | ---------------------------------- | ----- | - | ---------------------------------- | ----- | - | ------ | - | ----- | ---- |  | ----- | ------ |  | - | ------ | - |  | ------ | - |  | - | ------ | - |  | ----- | -
|                                                                                |  | Three Months Ended September 30,   |       |   | Nine Months Ended September 30,    |      
|                                                                                |  | 2005                               |       |   | 2004                               |       |   | 2005   |   |       | 2004 | 
|                                                                                |  | Amount                             |       |   | %                                  |       |   | Amount |   |       | %    |  |       | Amount |  |   | %      |   |  | Amount |   |  | % |       
|                                                                                |  | (in thousands, except percentages) |       |   | (in thousands, except percentages) |      
|Total net revenue                                                               |  | $                                  | 7,988 |   |                                    | 100.0 |   |        | $ | 9,270 |      |  | 100.0 |        |  | $ | 24,528 |   |  | 100.0  |   |  | $ | 26,641 |   |  | 100.0 |  
|Operating expenses (income):                                                    |  |                                    |       |   |                                    |       |   |        |   |       |      |  |       |        |  |   |        |   |  |        |   |  |   |        |   |  |       |  
|Corporate expenses                                                              |  |                                    | 159   |   |                                    | 2.0   |   |        |   | 154   |      |  | 1.7   |        |  |   | 505    |   |  | 2.1    |   |  |   | 384    |   |  | 1.4   |  
|Station direct operating expenses, net of trade                                 |  |                                    | 1,151 |   |                                    | 14.4  |   |        |   | 965   |      |  | 10.4  |        |  |   | 3,272  |   |  | 13.3   |   |  |   | 2,877  |   |  | 10.8  |  
|Selling, general and administrative expenses                                    |  |                                    | 382   |   |                                    | 4.8   |   |        |   | 1,044 |      |  | 11.3  |        |  |   | 1,055  |   |  | 4.3    |   |  |   | 3,180  |   |  | 11.9  |  
|Selling, general and administrative expenses paid to Nexstar Broadcasting, Inc. |  |                                    | 2,850 |   |                                    | 35.7  |   |        |   | 3,302 |      |  | 35.6  |        |  |   | 8,550  |   |  | 34.9   |   |  |   | 9,877  |   |  | 37.1  |  
|Gain on asset disposal (including deferred gain recognition), net               |  |                                    | (43   | ) |                                    | (0.5  | ) |        |   | (43   | )    |  | (0.5  | )      |  |   | (76    | ) |  | (0.3   | ) |  |   | (128   | ) |  | (0.5  | )
|Trade and barter expense                                                        |  |                                    | 584   |   |                                    | 7.3   |   |        |   | 579   |      |  | 6.2   |        |  |   | 1,885  |   |  | 7.7    |   |  |   | 1,641  |   |  | 6.2   |  
|Depreciation and amortization                                                   |  |                                    | 2,227 |   |                                    | 27.9  |   |        |   | 1,886 |      |  | 20.3  |        |  |   | 6,799  |   |  | 27.7   |   |  |   | 5,843  |   |  | 21.9  |  
|Amortization of broadcast rights, excluding barter                              |  |                                    | 585   |   |                                    | 7.3   |   |        |   | 707   |      |  | 7.6   |        |  |   | 1,517  |   |  | 6.2    |   |  |   | 1,966  |   |  | 7.4   |  
|                                                                                |  |                                    |       |   |                                    |       |   |        |   |       |      |  |       |        |  |   |        |   |  |        |   |  |   |        |   |  |       |  
|Income from operations                                                          |  | $                                  | 93    |   |                                    |       |   |        | $ | 676   |      |  |       |        |  | $ | 1,021  |   |  |        |   |  | $ | 1,001  |   |  |       |  
|                                                                                |  |                                    |       |   |                                    |       |   |        |   |       |      |  |       |        |  |   |        |   |  |        |   |  |   |        |   |  |       |  



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##### Table of Contents

Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004.



Revenue



Total net revenue for the three months ended September 30, 2005,
decreased by $1.3 million, or 13.8% from the same period of 2004. On a same station basis, total net revenue for the three months ended September 30, 2005, decreased by $2.1 million, or 24.6% from the same period in 2004. As of January 1,
2005, we receive no advertising revenue because Nexstar sells all of the advertising time of our stations.



Local, national and political advertising revenue for the three months ended September 30, 2005, decreased by $3.6 million, or 100.0% compared to the
same period in 2004. This decrease was attributed to the JSA effective in October 2004 at each of WYOU and KODE.



Revenue from Nexstar for the three months ended September 30, 2005, increased by $1.8 million, or 35.3% over the same period in 2004. Of the $1.8
million increase, $0.7 million was primarily attributed to our acquisition of WTVO and the related JSAs with Nexstar. On a same station basis, revenue from Nexstar increased $1.1 million as a result of the JSA effective in October 2004 at each of
WYOU and KODE.



Operating Expenses



Corporate expenses, related to costs associated with the centralized
management of our stations, were $0.2 million for both the three months ended September 30, 2005 and 2004.



Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses, net of
trade, decreased by $0.5 million, or 23.7% for the three months ended September 30, 2005, compared to the same period in 2004. The $0.5 million decrease was primarily attributed to a reduction in salary expense for production, technical and
administrative personnel for services that are now provided by Nexstar under the SSAs.



Selling, general and administrative expenses paid to Nexstar relate to the fees as designated by the SSAs for services provided in the production of newscasts, technical maintenance, promotional and administrative
support. For the three months ended September 30, 2005, these expenses decreased $0.5 million, or 13.7% from the same period in 2004. An increase of $0.3 million was attributed to the SSA of WTVO that was not in place during the three months
ended September 30, 2004, offset by a decrease of $0.3 million of SSA fees resulting from the amendment of the SSA of WFXW effective January 1, 2005. On a same station basis, a $0.5 million decrease was primarily attributed to a lower
amount of net SSA fees resulting from the amendment of four SSAs effective January 1, 2005.



Amortization of broadcast rights, excluding barter, for the three months ended September 30, 2005, decreased by $0.1 million, or 17.3% from the same
period in 2004. The decrease was primarily attributed to an increased use of barter programming during the three months ended September 30, 2005 as compared to cash programming, partially offset by an increase in amortization of broadcast
rights from newly acquired television station WTVO.



Amortization of intangible assets for the three months ended September 30, 2005, increased by $0.2 million, or 12.9% over the same period in 2004. The increase was primarily the result of the newly acquired television station WTVO.



Depreciation of property and equipment for the three months
ended September 30, 2005, increased by $0.2 million, or 31.4%, compared to the same period in 2004. The increase was primarily the result of the newly acquired television station WTVO.



Income from Operations



Income from operations was $0.1 million for the three months ended
September 30, 2005, compared to $0.7 million for the same period of 2004, a decrease of $0.6 million, or 86.2%. The decrease in income from operations for the three months ended September 30, 2005 was primarily attributed to the decrease
in total net revenue, partially offset by decreases in certain expenses, as discussed above.



Interest Expense



Interest expense, including amortization of debt financing costs, increased by $0.9 million, or 60.7%, for the three months ended September 30, 2005, compared to the same period in 2004. The increase in interest expense was primarily
attributed to higher interest rates and greater amount of debt outstanding in 2005 under our senior credit facility.



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##### Table of Contents

Loss on Extinguishment of Debt



Loss on extinguishment of debt of $1.1 million for the three months ended
September 30, 2004 consisted of the write off of $0.8 million of previously capitalized debt financing costs and $0.3 million of transaction costs related to the amending of our senior secured credit facility in August 2004.



Income Taxes



Income taxes for both the three months ended September 30, 2005 and
2004 were $0.3 million. Our provision for income taxes is primarily created by an increase in the deferred tax liabilities position during the year arising from the amortization of goodwill and other indefinite-lived intangible assets for income tax
purposes which are not amortized for financial reporting purposes. This expense has no impact on our cash flows. Based primarily on our recent history of net operating losses, we do not consider the realization of our net deferred tax assets to be
more likely than not. Accordingly, we have provided a valuation allowance for net deferred tax assets excluding deferred tax liabilities attributable to goodwill and indefinite-lived intangible assets. No tax benefit was recorded with respect to the
losses for 2005 and 2004, as the utilization of such losses is not likely to be realized in the foreseeable future.



Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004.



Revenue



Total net revenue for the nine months ended September 30, 2005,
decreased by $2.1 million, or 7.9% from the same period of 2004. On a same station basis, total net revenue for the nine months ended September 30, 2005, decreased by $5.5 million, or 21.6% from the same period in 2004. As of January 1,
2005, we receive no advertising revenue because Nexstar sells all of the advertising time of our stations.



Local, national and political advertising revenue for the nine months ended September 30, 2005, decreased by $12.6 million, or 100.0% compared to the
same period in 2004. This decrease was attributed to the JSA effective in June 2004 at KSAN, the JSA effective in July 2004 at KRBC and the JSA effective in October 2004 at each of WYOU and KODE.



Revenue from Nexstar for the nine months ended September 30, 2005,
increased by $8.2 million, or 64.5% over the same period in 2004. Of the $8.2 million increase, $2.8 million was primarily attributed to our acquisitions of WUTR and WTVO and the related JSAs with Nexstar. On a same station basis, revenue from
Nexstar increased $5.4 million as a result of the JSA effective in June 2004 at KSAN, the JSA effective in July 2004 at KRBC and the JSA effective in October 2004 at each of WYOU and KODE.



Operating Expenses



Corporate expenses, related to costs associated with the centralized
management of our stations, were $0.5 million for the nine months ended September 30, 2005, compared to $0.4 million for the nine months ended September 30, 2004, an increase of $0.1 million, or 31.5%. The increase was primarily attributed
to semi-annual bonuses paid during the second quarter of 2005 and an increase in salary expense and personnel related costs associated with the employment of our chief operating officer since October 2004.



Station direct operating expenses, consisting primarily of news, engineering
and programming, and selling, general and administrative expenses, net of trade, decreased by $1.7 million, or 28.6% for the nine months ended September 30, 2005, compared to the same period in 2004. The $1.7 million decrease was primarily
attributed to a reduction in salary expense for production, technical and administrative personnel for services that are now provided by Nexstar under the SSAs.



Selling, general and administrative expenses paid to Nexstar relate to the fees as designated by the SSAs for services provided in the production of
newscasts, technical maintenance, promotional and administrative support. For the nine months ended September 30, 2005, these expenses decreased $1.3 million, or 13.4% compared to the same period in 2004. A net increase of $0.1 million was
attributed to the SSAs of WUTR and WTVO that were not in place or only partially in place during the nine months ended September 30, 2004, partially offset by a lower amount of SSA fees resulting from the amendment of the SSA of WFXW effective
January 1, 2005. On a same station basis, a $1.4 million decrease was primarily attributed to a lower amount of net SSA fees resulting from the amendment of four SSAs effective January 1, 2005.



Amortization of broadcast rights, excluding barter, for the nine months ended
September 30, 2005, decreased by $0.4 million, or 22.8% from the same period in 2004. The decrease was primarily attributed to an increased use of barter programming during the first nine months of 2005 as compared to cash programming,
partially offset by an increase in amortization of broadcast rights from newly acquired television stations WUTR and WTVO.



Amortization of intangible assets for the nine months ended September 30, 2005, increased by $0.8 million, or 19.1% over the same period in 2004. The
increase was primarily the result of the newly acquired television stations WUTR and WTVO.



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Depreciation of property and equipment for the nine months ended September 30, 2005, increased by
$0.2 million, or 10.7%, compared to the same period in 2004. The increase was primarily the result of the newly acquired television stations WUTR and WTVO.



Income from Operations



Income from operations was $1.0 million for both the nine months ended September 30, 2005 and 2004.



Interest Expense



Interest expense, including amortization of debt financing costs, increased
by $2.3 million, or 54.6%, for the nine months ended September 30, 2005, compared to the same period in 2004. The increase in interest expense was primarily attributed to higher interest rates and greater amount of debt outstanding in 2005
under our senior credit facility.



Loss on Extinguishment
of Debt



Loss on extinguishment of debt of $0.5
million for the nine months ended September 30, 2005 consisted of the write off of $0.1 million of previously capitalized debt financing costs and $0.4 million of transaction costs related to the refinancing of our senior secured credit
facility in April 2005. Loss on extinguishment of debt of $1.1 million for the nine months ended September 30, 2004 consisted of the write off of $0.8 million of previously capitalized debt financing costs and $0.3 million of transaction costs
related to the amending of our senior secured credit facility in August 2004.



Income Taxes



Income taxes for the nine months ended September 30, 2005 were $1.0 million, compared to $0.8 million for the same period in 2004, an increase of $0.2 million. Our provision for income taxes is primarily created by an increase in the
deferred tax liabilities position during the year arising from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. This expense has no impact on
our cash flows. Based primarily on our recent history of net operating losses, we do not consider the realization of our net deferred tax assets to be more likely than not. Accordingly, we have provided a valuation allowance for net deferred tax
assets excluding deferred tax liabilities attributable to goodwill and indefinite-lived intangible assets. No tax benefit was recorded with respect to the losses for 2005 and 2004, as the utilization of such losses is not likely to be realized in
the foreseeable future.



Minority Interest in
Consolidated Entity



The minority interest of $0.2
million for the nine months ended September 30, 2004, related to the recognition of $0.2 million of expenses in station WFXW (formerly WBAK) prior to the consummation of its acquisition as a result of the application of FIN No. 46.



Liquidity and Capital Resources



We are highly leveraged, which makes us vulnerable to changes in general
economic conditions. Our ability to meet the future cash requirements described below depends on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other conditions,
many of which are beyond our control. On March 22, 2005, Nexstar represented to us that it will provide necessary financial support to enable us to continue to operate as a going concern through the continuation of various local service
agreements under which Nexstar provides sales and other services to our television stations. Taken together with Nexstars pledge of financial support, we believe that our available cash, anticipated cash flow from operations and available
borrowings under our senior credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from September 30, 2005,
enabling us to continue to operate as a going concern. In order to meet future cash needs we may, from time to time, borrow under our available credit facility. We will continue to evaluate the best use of our operating cash flow among capital
expenditures, acquisitions and debt reduction.



18



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##### Table of Contents

Overview



The following tables present summarized financial information management believes is helpful in evaluating the
Companys liquidity and capital resources:



|                                                     |  |                                |         |   |                   |   |         |  
|---------------------------------------------------- |  | ------------------------------ | ------- | - | ----------------- | - | ------- | -
|                                                     |  | Nine Months EndedSeptember 30, |        
|                                                     |  | 2005                           |         |   | 2004              |  
|                                                     |  | (in thousands)                 |        
|Net cash provided by (used for) operating activities |  | $                              | 2,527   |   |                   | $ | (2,358  | )
|Net cash used for investing activities               |  |                                | (7,151  | ) |                   |   | (6,157  | )
|Net cash provided by (used for) financing activities |  |                                | (835    | ) |                   |   | 8,292   |  
|                                                     |  |                                |         |   |                   |   |         |  
|Net decrease in cash and cash equivalents            |  | $                              | (5,459  | ) |                   | $ | (223    | )
|                                                     |  |                                |         |   |                   |   |         |  
|Cash paid for interest, net                          |  | $                              | 6,570   |   |                   | $ | 4,109   |  
|Cash paid for income taxes, net                      |  | $                              | 17      |   |                   | $ | 8       |  
|                                                     |  |                               
|                                                     |  | September 30, 2005             |         |   | December 31, 2004 |  
|                                                     |  | (in thousands)                 |        
|Cash and cash equivalents                            |  | $                              | 1,522   |   |                   | $ | 6,981   |  
|Long-term debt including current portion             |  | $                              | 172,700 |   |                   | $ | 172,740 |  
|Unused commitments under senior credit facility      |  | $                              | 47,500  |   |                   | $ | 8,500   |  



On April 1, 2005,
we refinanced the borrowings outstanding under our senior credit facility. In connection with the refinancing, we increased the borrowings under the term loan to our senior credit facility and also increased the total borrowings available to us
under the revolving loan to the credit facility.



Cash
Flows  Operating Activities



The comparative net
cash flows from operating activities increased by $4.9 million during the nine months ended September 30, 2005 compared to the same period in 2004. The increase was primarily due to the timing of payments made to Nexstar.



Cash paid for interest increased by $2.5 million during the nine months ended
September 30, 2005 compared to the same period in 2004. The increase was due to higher interest rates and a greater amount of debt outstanding in 2005 under our senior credit facility.



Due to our recent history of net operating losses, we currently do not
pay any federal income taxes. These net operating losses may be carried forward, subject to expiration and certain limitations, and used to reduce taxable earnings in future years. Through the use of available loss carryforwards, it is possible that
we may not pay significant amounts of federal income taxes in the foreseeable future.



Cash Flows  Investing Activities



The comparative net cash used for investing activities increased by $1.0 million during the nine months ended September 30, 2005 compared to the same period in 2004. Cash flows from investing activities consist
primarily of cash used for capital additions and station acquisitions. The increase was due to a net increase in purchases of property and equipment and acquisition related payments.



Capital expenditures were $1.0 million and $0.2 million for the nine months ended September 30, 2005 and 2004,
respectively.



Cash used for station acquisitions was $6.1
million for the nine months ended September 30, 2005, compared to $6.8 million for the nine months ended September 30, 2004. Acquisition related payments for the nine months ended September 30, 2005 included the remaining payment of
$5.75 million, exclusive of transaction costs, for the acquisition of WTVO. Acquisition related payments for the nine months ended September 30, 2004 included the $3.7 million purchase price, exclusive of transaction costs, for the acquisition
of WUTR and the remaining $1.5 million payment, exclusive of transaction costs, for the acquisition of WFXW (formerly WBAK).



Cash Flows  Financing Activities



The comparative net cash flows from financing activities decreased by $9.1 million during the nine months ended September 30, 2005 compared to the
same period in 2004. The decrease was primarily due to a decrease in the amount of net proceeds received from refinancing our long-term debt obligations in the current year compared to the net amounts received from the prior years financing
activities combined with an increase in payments for debt financing costs made in connection with the refinancing of our senior credit facility.



The April 1, 2005 refinancing of our senior credit facility provided net cash proceeds of $0.3 million, before the payment of transaction fees and
expenses, consisting of gross proceeds obtained under senior credit facility term loans of $172.7 million and the



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repayments of previous senior credit facility term and revolving borrowings of $172.4 million. The August 2004 amending of our senior credit facility
provided net cash proceeds of $0.7 million, before the payment of transaction fees and expenses, consisting of gross proceeds obtained under senior credit facility term loans of $152.0 million and the repayments of previous senior credit facility
term and revolving borrowings of $151.3 million. The net amount of cash received from financing activities for the nine months ended September 30, 2004 was primarily the result of additional borrowings under our senior credit facility revolving
loan of $9.0 million and senior credit facility term loan repayments of $1.1 million.



Although our senior credit facility now allows for the payment of cash dividends, we do not currently intend to declare or pay a cash dividend.



Future Sources of Financing and Debt Service Requirements



As of September 30, 2005, we had debt of $172.7 million, which
represented 201.1% of our total capitalization. Our high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt which will reduce the funds available for working capital, capital
expenditures, acquisitions and other general corporate purposes.



The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the periods referenced as of September 30, 2005:



|                                  |  |                |         |                  |   |           |  |           |       |            |   |       |  |   |        
|--------------------------------- |  | -------------- | ------- | ---------------- | - | --------- |  | --------- | ----- | ---------- | - | ----- |  | - | -------
|                                  |  | Total          |         | Remainderof 2005 |   | 2006-2007 |  | 2008-2009 |       | Thereafter
|                                  |  | (in thousands)
|Mission senior credit facility(1) |  | $              | 172,700 |                  | $ | 432       |  | $         | 3,454 |            | $ | 3,454 |  | $ | 165,360

---

|(1) | Quarterly principal payments under the Mission senior credit facility term loan commence on December 31, 2005.
|--- | --------------------------------------------------------------------------------------------------------------



Interest payments on our senior credit facility are generally paid every one
to three months and are payable based on the type of interest rate selected.



The terms of our senior credit facility limit, but do not prohibit us from incurring substantial amounts of additional debt in the future.



We do not have any rating downgrade triggers that would accelerate the maturity dates of our debt. However, a downgrade in
our credit rating could adversely affect our ability to renew existing, or obtain access to, new credit facilities in the future and could increase the cost of such facilities.



Collateralization and Guarantees of Debt



Nexstar Broadcasting Group guarantees full payment of all obligations under our bank credit facility in the event of our
default. Similarly, we are a guarantor of Nexstars bank credit facility and the senior subordinated notes issued by Nexstar. The bank credit facilities are collateralized by a security interest in substantially all the combined assets,
excluding FCC licenses, of Nexstar and us. As of September 30, 2005, Nexstar has a maximum commitment of $225.8 million under its bank credit facility, of which $175.8 million of debt is outstanding, and had issued an aggregate principal amount
of $200.0 million of senior subordinated notes.



Debt
Covenants



Our bank credit facility agreement does not
contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not adequately comply with all covenants contained in its credit agreement.



Future Cash Requirements for Digital Television (DTV) Conversion



DTV Conversion



It will be expensive to convert our stations from the current analog format
to the digital broadcast format. This conversion required an average initial capital expenditure of approximately $0.2 million per station for low-power transmission of digital signal programming. All of the television stations we own and operate
are broadcasting at least a low power digital television signal. Digital conversion expenditures were $0.6 million and $32 thousand for the nine months ended September 30, 2005 and 2004, respectively.



Full-Power DTV Facilities Construction



We estimate that it will require an average capital expenditure of
approximately $1.5 million per station (for 11 stations) to modify our stations DTV transmitters for full-power digital signal transmission, including costs for the transmitter, transmission line, antenna and installation, and estimated costs
for tower upgrades and/or modifications. We anticipate these expenditures will be funded through



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available cash on hand and cash generated from operations as incurred in future years. Stations that fail to meet FCCs build-out deadlines will lose
interference protection for their signals outside their low-power coverage areas. As of September 30, 2005, only our stations WUTR and WTVO are transmitting full-power digital signals. We have filed a request for extension of time to construct
full-power DTV facilities for our top four network affiliates in the top one hundred market stations.



Additional DTV Requirements



The FCC also adopted additional Program System and Information Protocol (PSIP) requirements. The equipment and related installation necessary
to meet the PSIP requirements cost approximately $0.4 million in total for our stations. These expenditures were funded in 2005 through available cash on hand and cash generated from operations.



No Off-Balance Sheet Arrangements



At September 30, 2005, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.



Critical Accounting Policies and Estimates



Our condensed financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (U.S. GAAP) which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the condensed financial statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to intangible assets, bad debts, broadcast
rights, trade and barter, income taxes, commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. Results of operations for interim periods are not necessarily indicative of
results for the full year.



Information with respect to our
critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained on pages 34 through 36 in Part II, Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Management believes that as of September 30, 2005 there has been no material change to
this information.



Valuation of Intangible Assets



Indefinite-lived intangible assets are not subject to
amortization, but are tested for impairment at least annually. We will perform annual tests of impairment for indefinite-lived intangible assets, consisting of FCC licenses and goodwill, during the fourth quarter of 2005. These tests require
management to make certain assumptions in determining the fair value of these intangible assets, including assumptions about the cash flow growth rates of our businesses. Additionally, the fair values are significantly impacted by economic factors
affecting our industry at the time the impairment tests are performed. In connection with the annual impairment tests, management will consider various factors that have caused a recent decline in broadcaster company stock prices.



The carrying value of our indefinite-lived intangible assets at September 30,
2005 was $45.4 million. As of September 30, 2005, we did not identify any events that would trigger an impairment assessment. If the values of these intangible assets decrease in the future, we could be required to incur an impairment charge which
could have a significant adverse effect on our results of operations.



Recent Accounting Pronouncements



Refer to
Note 2 of our financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a discussion of the recently issued accounting pronouncements including our expected date of adoption and effects on results of operations and
financial position.



Forward-Looking and Cautionary Statements



This Quarterly Report on
Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are
forward-looking statements for purposes of federal and state securities laws, including: any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any
assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning
proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include
the words may, will, should, could, would, predicts, potential, continue, expects, anticipates, future,
intends, plans, believes, estimates and other similar words.



Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ from this
projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties, including those
described in our Annual Report on Form 10-K for the year ended December 31, 2004 and in our other filings with the Securities and Exchange Commission. The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of
the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances unless otherwise required by law.



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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk



Interest Rate Risk



Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations.



All borrowings at September 30, 2005 under our senior credit facility
bear interest at 5.77%, which represented the base rate, or LIBOR, plus the applicable margin, as defined. Interest is payable in accordance with the credit agreement.



The following table estimates the changes to cash flow from operations as of September 30, 2005 if interest rates were
to fluctuate by 100 or 50 basis points, or BPS (where 100 basis points represents one percentage point), for a twelve-month period:



|                       |  |                        |       |              |   |                        |  |        |       |         |   |        |  |   |       
|---------------------- |  | ---------------------- | ----- | ------------ | - | ---------------------- |  | ------ | ----- | ------- | - | ------ |  | - | ------
|                       |  | Interest rate decrease |       | No change to |   | Interest rate increase
|                       |  | 100 BPS                |       | 50 BPS       |   | interest rate          |  | 50 BPS |       | 100 BPS
|                       |  | (in thousands)        
|Senior credit facility |  | $                      | 8,238 |              | $ | 9,101                  |  | $      | 9,965 |         | $ | 10,828 |  | $ | 11,692



Impact of
Inflation



We believe that our results of operations
are not affected by moderate changes in the inflation rate.



ITEM 4. Controls and Procedures



(a) Evaluation of Disclosure Controls and Procedures. Mission carried out an evaluation as of the end of the period covered in this report, under the supervision and with the participation of Missions management, including
Missions president and treasurer (who is Missions principal executive officer and principal financial and accounting officer), of the effectiveness of the design and operation of Missions disclosure controls and procedures pursuant
to Exchange Act Rule 13a-15(d) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, Missions president and treasurer (its principal executive officer and principal financial and accounting officer) concluded
that Missions disclosure controls and procedures (1) were effective in timely alerting him to material information relating to Mission required to be included in Missions periodic SEC filings and (2) were adequate to ensure
that information required to be disclosed by Mission in the reports filed or submitted by Mission under the Securities Exchange Act of 1934 is recorded, processed and summarized and reported within the time periods specified in the SECs rules
and forms.



(b) Changes in Internal Control over Financial
Reporting. There have been no changes in Missions internal control over financial reporting identified in connection with the evaluation described in paragraph (a) above that have materially affected or are reasonably likely to
materially affect, Missions internal control over financial reporting.



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PART II. OTHER INFORMATION



ITEM 1. Legal Proceedings



From time to time, we are involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, we believe
the resulting liabilities would not have a material adverse effect on our financial condition or results of operations.



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



None.



ITEM 3. Defaults Upon Senior Securities



None.



ITEM 4. Submission of Matters to a Vote of Security Holders



None.



ITEM 5. Other Information



None.



ITEM 6. Exhibits



|            |  |                                                                                            
|----------- |  | -------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit Index                                                                              
|31.1        |  | Certification of David S. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|            | 
|32.1        |  | Certification of David S. Smith pursuant to 18 U.S.C. ss. 1350.*                           

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|* | Filed herewith
|- | --------------



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.



MISSION BROADCASTING, INC./s/ DAVID S. SMITHBy:

David S. SmithIts:

President and Treasurer(Principal Executive Officer and Principal Financial
and Accounting Officer)




Dated: November 8, 2005



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