##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended June 30,
    2004                                            
|          
|or        
|          
|o          |  | 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 33-82114

(SBS LOGO)

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 13-3827791                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

2601 South Bayshore Drive,
PH II

Coconut Grove, Florida 33133


(Address of principal executive offices) (Zip
Code)


(305) 441-6901

(Registrants telephone number, including
area code)


(Former name, former address and former fiscal
year,

if changed since last report)


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

Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange
Act).     Yes þ          No o

APPLICABLE ONLY TO CORPORATE
ISSUERS:

Indicate
the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date: As
of August 6, 2004, 39,656,355 shares of Class A
common stock, par value $.0001 per share, and
25,105,150 shares of Class B common stock, par value
$.0001 per share, were outstanding.



---






---










SPANISH BROADCASTING SYSTEM, INC.

INDEX

|                                      |  |                                                                                                                              |  |      |    | 
|------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                      |  |                                                                                                                              |  | Page
|                                      |  |                                                                                                                              |  |     
|PART I. FINANCIAL
    INFORMATION    
|ITEM 1.                               |  | Financial
    Statements  Unaudited                                                                                         |  |      | 2  | 
|                                      |  | Unaudited Condensed
    Consolidated Balance Sheets as of December 31, 2003 and
    June 30, 2004                            |  |      | 2  | 
|                                      |  | Unaudited Condensed
    Consolidated Statements of Operations for the Three- and
    Six-Months Ended June 30, 2003 and 2004 |  |      | 3  | 
|                                      |  | Unaudited Condensed
    Consolidated Statements of Cash Flows for the Six-Months Ended
    June 30, 2003 and 2004            |  |      | 4  | 
|                                      |  | Notes to Unaudited Condensed
    Consolidated Financial Statements                                                           |  |      | 5  | 
|ITEM 2.                               |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                                    |  |      | 14 | 
|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 4.                               |  | Submission of Matters to a
    Vote of Security Holders                                                                      |  |      | 24 | 
|ITEM 5.                               |  | Other Information                                                                                                            |  |      | 24 | 
|ITEM 6.                               |  | Exhibits and Reports on Form
    8-K                                                                                         |  |      | 24 | 
|NONQUALIFIED STOCK OPTION AGREEMENT  
|NONQUALIFIED STOCK OPTION AGREEMENT  
|AMENDMENT TO ASSET PURCHASE AGREEMENT
|TIME BROKERAGE AGREEMENT             
|ASSET PURCHASE AGREEMENT             
|CERTIFICATION                        
|CERTIFICATION                        
|CERTIFICATION                        
|CERTIFICATION                        



1



---



##### Table of Contents






PART I.  FINANCIAL
INFORMATION






|        |                                     
|------- | ------------------------------------
|Item 1. | Financial Statements 
    Unaudited




SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES

Unaudited Condensed Consolidated Balance
Sheets

|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |        |         | 
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | -------- | -------- | ------- | - | -------- | ------ | ------- | 
|                                                                      |                                                                                                                                                                                                                                       | December 31,               |          | June 30,
|                                                                      |                                                                                                                                                                                                                                       | 2003                       |          | 2004    
|                                                                      |                                                                                                                                                                                                                                       |                            |          |         
|                                                                      |                                                                                                                                                                                                                                       |                           
|                                                                      |                                                                                                                                                                                                                                       | (In thousands, except     
|                                                                      |                                                                                                                                                                                                                                       | share data)               
|Assets                                                               
|Current assets:                                                       |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      | Cash and cash equivalents                                                                                                                                                                                                             |                            | $        | 45,609   |         |   | $        | 63,246 |        
|                                                                      | Net receivables                                                                                                                                                                                                                       |                            |          | 25,567   |         |   |          | 29,840 |        
|                                                                      | Other current assets                                                                                                                                                                                                                  |                            |          | 3,482    |         |   |          | 2,908  |        
|                                                                      | Assets held for sale (note 4)                                                                                                                                                                                                         |                            |          | 25,906   |         |   |          | 13,897 |        
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      |                                                                                                                                                                                                                                       | Total current assets       |          |          | 100,564 |   |          |        | 109,891 | 
|Property and equipment, net                                           |                                                                                                                                                                                                                                       |                            | 24,558   |          |         |   | 24,270   |       
|Intangible assets, net                                                |                                                                                                                                                                                                                                       |                            | 705,251  |          |         |   | 705,337  |       
|Deferred financing costs, net                                         |                                                                                                                                                                                                                                       |                            | 11,461   |          |         |   | 10,632   |       
|Other assets                                                          |                                                                                                                                                                                                                                       |                            | 448      |          |         |   | 1,022    |       
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      |                                                                                                                                                                                                                                       | $                          | 842,282  |          |         | $ | 851,152  |       
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                     
|Liabilities and Stockholders
    Equity                             
|Current liabilities:                                                  |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      | Current portion of the senior credit facilities
    term loan due 2009 (note 4)                                                                                                                                                       |                            | $        | 1,250    |         |   | $        | 26,400 |        
|                                                                      | Current portion of other long-term debt                                                                                                                                                                                               |                            |          | 227      |         |   |          | 3,234  |        
|                                                                      | Accounts payable and accrued expenses                                                                                                                                                                                                 |                            |          | 18,822   |         |   |          | 16,190 |        
|                                                                      | Accrued interest                                                                                                                                                                                                                      |                            |          | 6,370    |         |   |          | 5,425  |        
|                                                                      | Deposits on the sale of a station                                                                                                                                                                                                     |                            |          | 1,500    |         |   |          | 2,000  |        
|                                                                      | Deferred commitment fee                                                                                                                                                                                                               |                            |          |         |         |   |          | 563    |        
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      |                                                                                                                                                                                                                                       | Total current liabilities  |          |          | 28,169  |   |          |        | 53,812  | 
|Senior credit facilities term loan due 2009, less
    current portion |                                                                                                                                                                                                                                       |                            | 123,750  |          |         |   | 97,975   |       
|9 5/8% senior subordinated notes due
    2009, net                    |                                                                                                                                                                                                                                       |                            | 325,246  |          |         |   | 325,843  |       
|Other long-term debt, less current portion                            |                                                                                                                                                                                                                                       |                            | 3,721    |          |         |   | 603      |       
|Deferred income taxes                                                 |                                                                                                                                                                                                                                       |                            | 68,354   |          |         |   | 69,734   |       
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      |                                                                                                                                                                                                                                       | Total liabilities          |          |          | 549,240 |   |          |        | 547,967 | 
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|Cumulative exchangeable redeemable preferred
    stock:               |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      | 10 3/4 Series B cumulative exchangeable
    redeemable preferred stock, $0.01 par value. Authorized
    280,000 shares, 75,000 issued and outstanding at
    December 31, 2003 and 78,763 issued and outstanding at
    June 30, 2004 |                            |          | 76,366   |         |   |          | 80,527 |        
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|Stockholders equity:                                                 |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      | Class A common stock, $0.0001 par
    value. Authorized 100,000,000 shares;
    37,087,355 shares issued and outstanding at
    December 31, 2003, 39,626,355 shares issued and
    outstanding at June 30, 2004                      |                            |          | 3        |         |   |          | 3      |        
|                                                                      | Class B common stock, $0.0001 par
    value. Authorized 50,000,000 shares; 27,605,150 shares
    issued and outstanding at December 31, 2003,
    25,105,150 shares issued and outstanding at June 30,
    2004                       |                            |          | 3        |         |   |          | 3      |        
|Additional paid-in capital                                            |                                                                                                                                                                                                                                       |                            | 443,961  |          |         |   | 443,812  |       
|Accumulated deficit                                                   |                                                                                                                                                                                                                                       |                            | (227,291 | )        |         |   | (221,160 | )     
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      |                                                                                                                                                                                                                                       | Total stockholders equity |          |          | 216,676 |   |          |        | 222,658 | 
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       
|                                                                      |                                                                                                                                                                                                                                       | $                          | 842,282  |          |         | $ | 851,152  |       
|                                                                      |                                                                                                                                                                                                                                       |                            |          |          |         |   |          |       

See accompanying notes to the unaudited condensed
consolidated financial statements.

2



---



##### Table of Contents






SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES

Unaudited Condensed Consolidated Statements of
Operations

|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |         |        |        | 
|-------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------ | --------------------- | ------ | ------ | ------ | ------- | ------ | ------ | ------ | ------- | ------ | ------ | ------ | ------- | ------ | ------ | 
|                                                         |                                                                        |                                                                                              |                                            |                      
|                                                         |                                                                        | Three Months Ended                                                                           |                                            | Six Months Ended     
|                                                         |                                                                        | June 30,                                                                                     |                                            | June 30,             
|                                                         |                                                                        |                                                                                              |                                            |                      
|                                                         |                                                                        | 2003                                                                                         |                                            | 2004                  |        | 2003   |        | 2004   
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |        
|                                                         |                                                                        |                                                                                              |                                            |                      
|                                                         |                                                                        | (In thousands, except                                                                        |                                            | (In thousands, except
|                                                         |                                                                        | per share data)                                                                              |                                            | per share data)      
|Net revenue                                              |                                                                        | $                                                                                            | 36,535                                     |                       |        | $      | 40,292 |         |        | $      | 64,458 |         |        | $      | 69,524 |        
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|Operating expenses:                                      |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         | Engineering                                                            |                                                                                              |                                            | 930                   |        |        |        | 1,176   |        |        |        | 1,847   |        |        |        | 2,263   |       
|                                                         | Programming                                                            |                                                                                              |                                            | 4,707                 |        |        |        | 6,361   |        |        |        | 9,944   |        |        |        | 12,686  |       
|                                                         | Stock-based programming                                                |                                                                                              |                                            | 1,280                 |        |        |        |        |        |        |        | 1,622   |        |        |        |        |       
|                                                         | Selling                                                                |                                                                                              |                                            | 10,234                |        |        |        | 10,317  |        |        |        | 17,871  |        |        |        | 17,701  |       
|                                                         | General and administrative                                             |                                                                                              |                                            | 4,005                 |        |        |        | 4,384   |        |        |        | 7,340   |        |        |        | 7,917   |       
|                                                         | Corporate expenses                                                     |                                                                                              |                                            | 4,693                 |        |        |        | 2,999   |        |        |        | 9,181   |        |        |        | 6,227   |       
|                                                         | Depreciation and amortization                                          |                                                                                              |                                            | 758                   |        |        |        | 824     |        |        |        | 1,466   |        |        |        | 1,646   |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        | Total operating expenses                                                                     |                                            |                       | 26,607 |        |        |         | 26,061 |        |        |         | 49,271 |        |        |         | 48,440 |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        | Operating income from continuing operations                                                  |                                            |                       | 9,928  |        |        |         | 14,231 |        |        |         | 15,187 |        |        |         | 21,084 |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|Other (expense) income:                                  |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         | Interest expense, net                                                  |                                                                                              |                                            | (8,800                | )      |        |        | (10,200 | )      |        |        | (17,429 | )      |        |        | (20,438 | )     
|                                                         | Other, net                                                             |                                                                                              |                                            | 197                   |        |        |        | 80      |        |        |        | 223     |        |        |        | 255     |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        | Income (loss) from continuing operations before
    income taxes and discontinued operations |                                            |                       | 1,325  |        |        |         | 4,111  |        |        |         | (2,019 | )      |        |         | 901    |       
|Income tax expense (benefit)                             |                                                                        |                                                                                              | 325                                        |                       |        |        | 5,446  |         |        |        | (2,122 | )       |        |        | 1,498  |        
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        | Income (loss) from continuing operations before
    discontinued operations                  |                                            |                       | 1,000  |        |        |         | (1,335 | )      |        |         | 103    |        |        |         | (597   | )     
|(Loss) income on discontinued operations, net of
    tax |                                                                        |                                                                                              | (211                                       | )                     |        |        | (51    | )       |        |        | (115   | )       |        |        | 10,889 |        
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        | Net income (loss)                                                                            |                                            | $                     | 789    |        |        | $       | (1,386 | )      |        | $       | (12    | )      |        | $       | 10,292 |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|Dividends on preferred stock                             |                                                                        |                                                                                              |                                           |                       |        |        | (2,107 | )       |        |        |       |         |        |        | (4,161 | )      
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|Net income (loss) applicable to common
    stockholders  |                                                                        | $                                                                                            | 789                                        |                       |        | $      | (3,493 | )       |        | $      | (12    | )       |        | $      | 6,131  |        
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|Basic and diluted loss per common share:                 |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         | Net income (loss) per common share before
    discontinued operations: |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |         |       
|                                                         |                                                                        | Basic and Diluted                                                                            |                                            | $                     | 0.01   |        |        | $       | (0.05  | )      |        | $       |       |        |        | $       | (0.07  | )     
|                                                         | Net (loss) income per common share for
    discontinued operations:    |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |         |       
|                                                         |                                                                        | Basic and Diluted                                                                            |                                            | $                     |       |        |        | $       |       |        |        | $       |       |        |        | $       | 0.16   |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         | Net income (loss) per common share:                                    |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |         |       
|                                                         |                                                                        | Basic and Diluted                                                                            |                                            | $                     | 0.01   |        |        | $       | (0.05  | )      |        | $       |       |        |        | $       | 0.09   |       
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        |                                                                                              | Weighted average common shares outstanding |                       |        |        |        |         |        |        |        |         |        |        |        |         |        |        | 
|                                                         |                                                                        |                                                                                              | Basic                                      |                       |        | 64,682 |        |         |        | 64,718 |        |         |        | 64,682 |        |         |        | 64,705 | 
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        
|                                                         |                                                                        |                                                                                              | Diluted                                    |                       |        | 64,786 |        |         |        | 64,718 |        |         |        | 64,682 |        |         |        | 65,178 | 
|                                                         |                                                                        |                                                                                              |                                            |                       |        |        |        |         |        |        |        |         |        |        |        |        

See accompanying notes to the unaudited condensed
consolidated financial statements.

3



---



##### Table of Contents






SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES

Unaudited Condensed Consolidated Statements of
Cash Flows

|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |        |         |        |        |  
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------------- | ------ | ------- | ------ | ------ | ------- | ------ | ------ | -
|                                                         |                                                                                          |                                             
|                                                         |                                                                                          | Six Months Ended                            
|                                                         |                                                                                          | June 30,                                    
|                                                         |                                                                                          |                                             
|                                                         |                                                                                          | 2003                                         |                                                                  | 2004                                        
|                                                         |                                                                                          |                                              |                                                                  |                                             
|                                                         |                                                                                          |                                             
|                                                         |                                                                                          | (In thousands)                              
|Cash flows from operating activities:                    |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         | Net (loss) income                                                                        |                                              | $                                                                | (12                                          | )      |         | $      | 10,292 |        
|                                                         | Adjustments to reconcile net (loss) income to net
    cash used in operating activities: |                                              |                                                                  |                                              |        |         |        |        |        
|                                                         |                                                                                          | Loss (income) from discontinued operations   |                                                                  |                                              | 115    |         |        |        | (10,889 | )     
|                                                         |                                                                                          | Stock-based programming expense              |                                                                  |                                              | 1,622  |         |        |        |        |       
|                                                         |                                                                                          | Loss on disposal of assets                   |                                                                  |                                              |       |         |        |        | 7       |       
|                                                         |                                                                                          | Depreciation and amortization                |                                                                  |                                              | 1,466  |         |        |        | 1,646   |       
|                                                         |                                                                                          | Net barter income                            |                                                                  |                                              | (102   | )       |        |        | (100    | )     
|                                                         |                                                                                          | Provision for trade doubtful accounts        |                                                                  |                                              | 290    |         |        |        | 365     |       
|                                                         |                                                                                          | Amortization of debt discount                |                                                                  |                                              | 529    |         |        |        | 597     |       
|                                                         |                                                                                          | Amortization of deferred financing costs     |                                                                  |                                              | 641    |         |        |        | 992     |       
|                                                         |                                                                                          | (Decrease) increase in deferred income taxes |                                                                  |                                              | (2,295 | )       |        |        | 1,390   |       
|                                                         |                                                                                          | Amortization of deferred commitment fee      |                                                                  |                                              | (351   | )       |        |        | (37     | )     
|                                                         |                                                                                          | Changes in operating assets and liabilities: |                                                                  |                                              |        |         |        |        |         |       
|                                                         |                                                                                          |                                              | Increase in receivables                                          |                                              |        | (1,408  | )      |        |         | (5,094 | )     
|                                                         |                                                                                          |                                              | (Increase) decrease in other current assets                      |                                              |        | (440    | )      |        |         | 437    |       
|                                                         |                                                                                          |                                              | Increase in other assets                                         |                                              |        | (1,105  | )      |        |         | (581   | )     
|                                                         |                                                                                          |                                              | Increase (decrease) in accounts payable and
    accrued expenses |                                              |        | 572     |        |        |         | (3,664 | )     
|                                                         |                                                                                          |                                              | Increase (decrease) in accrued interest                          |                                              |        | 177     |        |        |         | (945   | )     
|                                                         |                                                                                          |                                              | Increase in deferred commitment fee                              |                                              |        |        |        |        |         | 600    |       
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         |                                                                                          |                                              |                                                                  | Net cash used in continuing operations       |        |         | (301   | )      |         |        | (4,984 | )
|                                                         |                                                                                          |                                              |                                                                  | Net cash provided by discontinued operations |        |         | 156    |        |         |        | 789    |  
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         |                                                                                          |                                              | Net cash used in operating activities                            |                                              |        | (145    | )      |        |         | (4,195 | )     
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|Cash flows from investing activities:                    |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         | Proceeds from a sale of radio stations, net of
    closing cost                          |                                              |                                                                  |                                             |        |         |        | 23,730 |        
|                                                         | Deposit on sale of station                                                               |                                              |                                                                  |                                              |        |         |        | 500    |        
|                                                         | Advances on purchase price of radio stations                                             |                                              |                                                                  | (15,156                                      | )      |         |        |       |        
|                                                         | Acquisition of radio stations                                                            |                                              |                                                                  | (22,356                                      | )      |         |        |       |        
|                                                         | Additions to property and equipment                                                      |                                              |                                                                  | (1,903                                       | )      |         |        | (1,350 | )      
|                                                         | Additions to property and equipment of
    discontinued operations                       |                                              |                                                                  | (87                                          | )      |         |        |       |        
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         |                                                                                          |                                              | Net cash (used in) provided by investing
    activities          |                                              |        | (39,502 | )      |        |         | 22,880 |       
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|Cash flows from financing activities:                    |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         | Increase in deferred offering costs                                                      |                                              |                                                                  |                                             |        |         |        | (375   | )      
|                                                         | Increase in deferred financing costs                                                     |                                              |                                                                  |                                             |        |         |        | (163   | )      
|                                                         | Proceeds from Class A stock options exercised                                            |                                              |                                                                  |                                             |        |         |        | 226    |        
|                                                         | Repayment of senior credit facilities                                                    |                                              |                                                                  |                                             |        |         |        | (625   | )      
|                                                         | Repayment of other long-term debt                                                        |                                              |                                                                  | (102                                         | )      |         |        | (111   | )      
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         |                                                                                          |                                              | Net cash used in financing activities                            |                                              |        | (102    | )      |        |         | (1,048 | )     
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|Net (decrease) increase in cash and cash
    equivalents |                                                                                          |                                              | (39,749                                                          | )                                            |        |         | 17,637 |       
|Cash and cash equivalents at beginning of period         |                                                                                          |                                              | 71,430                                                           |                                              |        |         | 45,609 |       
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|Cash and cash equivalents at end of period               |                                                                                          | $                                            | 31,681                                                           |                                              |        | $       | 63,246 |       
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|Supplemental cash flow information:                      |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         | Interest paid                                                                            |                                              | $                                                                | 16,417                                       |        |         | $      | 20,086 |        
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         | Income taxes paid                                                                        |                                              | $                                                                | 187                                          |        |         | $      | 323    |        
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|Non-cash financing and investing activities:             |                                                                                          |                                              |                                                                  |                                              |        |         |        |       
|                                                         | Accrual and/or issuance of preferred stock as
    payment of preferred stock dividends   |                                              | $                                                                |                                             |        |         | $      | 4,161  |        
|                                                         |                                                                                          |                                              |                                                                  |                                              |        |         |        |       

See accompanying notes to the unaudited condensed
consolidated financial statements.

4



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES




NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS



|   |                      
|-- | ---------------------
|1. | Basis of Presentation

The unaudited condensed consolidated financial
statements include the accounts of Spanish Broadcasting System,
Inc. and its subsidiaries (the Company). All
intercompany balances and transactions have been eliminated in
consolidation. The accompanying unaudited condensed consolidated
financial statements as of December 31, 2003 and
June 30, 2004, and for the three- and six-month periods
ended June 30, 2003 and 2004 do not contain all disclosures
required by generally accepted accounting principles. These
unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements
of the Company as of and for the fiscal year ended
December 31, 2003 included in the Companys fiscal
year 2003 Annual Report on Form 10-K.

Effective December 30, 2002, the Company
changed its year-end from a broadcast calendar 52-53-week fiscal
year ending on the last Sunday in December to a calendar year
ending on December 31. Pursuant to Securities and Exchange
Commission Financial Reporting Release No. 35, such change
was not deemed to be a change in fiscal year for financial
reporting purposes and the Company was not required to file a
separate transition report or to report separate financial
information for the two-day period of December 30
and 31, 2002. Financial results for December 30
and 31, 2002 are included in the Companys financial
results for the six-month period ended June 30, 2003.

In the opinion of the Companys management,
the accompanying unaudited condensed consolidated financial
statements contain all adjustments, which are all of a normal
and recurring nature, necessary for a fair presentation of the
results of the interim periods. The results of operations for
the three- and six-month periods ended June 30, 2004 are
not necessarily indicative of the results for a full year.



|   |                                                                               
|-- | ------------------------------------------------------------------------------
|2. | Financial Information for Parent, Guarantor
    and Non-Guarantor Subsidiaries

Certain of the Companys subsidiaries
(collectively, the Subsidiary Guarantors) have
guaranteed the Companys 9 5/8% senior
subordinated notes due 2009 on a joint and several basis. The
Company has not included separate financial statements of the
Subsidiary Guarantors because (i) all of the Subsidiary
Guarantors are wholly owned subsidiaries of the Company, and
(ii) the guarantees issued by the Subsidiary Guarantors are
full and unconditional. The Company has not included separate
parent-only financial statements since the parent (Spanish
Broadcasting System, Inc., a Delaware corporation) is a holding
company with no independent assets or operations other than its
investments in its subsidiaries. All Federal Communications
Commission (FCC) licenses are held by special
purpose subsidiaries formed solely for the purpose of holding
each respective FCC license and/or non-guarantor subsidiaries.
All of the special purpose subsidiaries are non-guarantors of
the 9 5/8% senior subordinated notes due 2009.
Condensed consolidating

5



---



##### Table of Contents



unaudited financial information for the parent
and its guarantor and non-guarantor subsidiaries is as follows
(in thousands):


|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |         | 
|----------------------------------------------- | ------------------------- | ----------------------- | -------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | -------- | ------ |  |  | -------- | -------- | - |  | -------- | ------- | 
|                                                |                           |                        
|                                                |                           | As of December 31, 2003
|                                                |                           |                        
|                                                |                           |                         |          | Non-         |  |             
|                                                |                           |                         |          | Guarantor    |  | Guarantor    |         |             
|Condensed Consolidating Balance Sheet           |                           | Parent                  |          | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                                |                           |                         |          |              |  |              |         |              |  |      
|Cash and cash equivalents                       |                           | $                       | 24,503   |              |  |              | 18,340  |              |  |       | 2,766    |        |  |  |         |          |   |  | 45,609   |        
|Net receivables                                 |                           |                         |         |              |  |              | 23,917  |              |  |       | 1,650    |        |  |  |         |          |   |  | 25,567   |        
|Other current assets                            |                           |                         | 2,379    |              |  |              | 760     |              |  |       | 343      |        |  |  |         |          |   |  | 3,482    |        
|Assets held for sale                            |                           |                         |         |              |  |              | 2,879   |              |  |       | 23,027   |        |  |  |         |          |   |  | 25,906   |        
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Total current assets      |                         |          | 26,882       |  |              |         | 45,896       |  |       |          | 27,786 |  |  |          |         |   |  |          | 100,564 | 
|Property and equipment, net                     |                           |                         | 1,453    |              |  |              | 15,987  |              |  |       | 7,118    |        |  |  |         |          |   |  | 24,558   |        
|Intangible assets, net                          |                           |                         |         |              |  |              | 9,019   |              |  |       | 696,232  |        |  |  |         |          |   |  | 705,251  |        
|Deferred financing costs, net                   |                           |                         | 11,461   |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 11,461   |        
|Investment in subsidiaries and
    intercompany |                           |                         | 775,946  |              |  |              | 274,989 |              |  |       | (689,334 | )      |  |  | (361,601 | )        |   |  |         |        
|Other assets                                    |                           |                         | 300      |              |  |              | 147     |              |  |       | 1        |        |  |  |         |          |   |  | 448      |        
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                |                           | $                       | 816,042  |              |  |              | 346,038 |              |  |       | 41,803   |        |  |  | (361,601 | )        |   |  | 842,282  |        
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|Current portion of long-term debt               |                           | $                       | 1,250    |              |  |              | 66      |              |  |       | 161      |        |  |  |         |          |   |  | 1,477    |        
|Accounts payable and accrued expenses           |                           |                         | 6,355    |              |  |              | 7,785   |              |  |       | 4,682    |        |  |  |         |          |   |  | 18,822   |        
|Accrued interest                                |                           |                         | 6,370    |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 6,370    |        
|Deposit on the sale of station                  |                           |                         | 1,500    |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 1,500    |        
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Total current liabilities |                         |          | 15,475       |  |              |         | 7,851        |  |       |          | 4,843  |  |  |          |         |   |  |          | 28,169  | 
|Long-term debt                                  |                           |                         | 448,996  |              |  |              | 637     |              |  |       | 3,084    |        |  |  |         |          |   |  | 452,717  |        
|Deferred income taxes                           |                           |                         | 58,529   |              |  |              |        |              |  |       | 9,825    |        |  |  |         |          |   |  | 68,354   |        
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Total liabilities         |                         |          | 523,000      |  |              |         | 8,488        |  |       |          | 17,752 |  |  |          |         |   |  |          | 549,240 | 
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|Preferred Stock                                 |                           |                         | 76,366   |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 76,366   |        
|Common stock                                    |                           |                         | 6        |              |  |              |        |              |  |       | 1        |        |  |  | (1       | )        |   |  | 6        |        
|Additional paid-in capital                      |                           |                         | 443,961  |              |  |              |        |              |  |       | 94,691   |        |  |  | (94,691  | )        |   |  | 443,961  |        
|Accumulated deficit                             |                           |                         | (227,291 | )            |  |              | 337,550 |              |  |       | (70,641  | )      |  |  | (266,909 | )        |   |  | (227,291 | )      
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Stockholders equity      |                         |          | 216,676      |  |              |         | 337,550      |  |       |          | 24,051 |  |  |          | (361,601 | ) |  |          | 216,676 | 
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                |                           | $                       | 816,042  |              |  |              | 346,038 |              |  |       | 41,803   |        |  |  | (361,601 | )        |   |  | 842,282  |        
|                                                |                           |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        

6



---



##### Table of Contents



|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |         | 
|----------------------------------------------- | ------------------------- | ------------------- | -------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | -------- | ------ |  |  | -------- | -------- | - |  | -------- | ------- | 
|                                                |                           |                    
|                                                |                           | As of June 30, 2004
|                                                |                           |                    
|                                                |                           |                     |          | Non-         |  |             
|                                                |                           |                     |          | Guarantor    |  | Guarantor    |         |             
|Condensed Consolidating Balance Sheet           |                           | Parent              |          | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                                |                           |                     |          |              |  |              |         |              |  |      
|Cash and cash equivalents                       |                           | $                   | 42,907   |              |  |              | 17,853  |              |  |       | 2,486    |        |  |  |         |          |   |  | 63,246   |        
|Net receivables                                 |                           |                     |         |              |  |              | 28,608  |              |  |       | 1,232    |        |  |  |         |          |   |  | 29,840   |        
|Other current assets                            |                           |                     | 924      |              |  |              | 1,633   |              |  |       | 351      |        |  |  |         |          |   |  | 2,908    |        
|Assets held for sale                            |                           |                     |         |              |  |              | 1,761   |              |  |       | 12,136   |        |  |  |         |          |   |  | 13,897   |        
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Total current assets      |                     |          | 43,831       |  |              |         | 49,855       |  |       |          | 16,205 |  |  |          |         |   |  |          | 109,891 | 
|Property and equipment, net                     |                           |                     | 1,326    |              |  |              | 16,028  |              |  |       | 6,916    |        |  |  |         |          |   |  | 24,270   |        
|Intangible assets, net                          |                           |                     |         |              |  |              | 9,004   |              |  |       | 696,333  |        |  |  |         |          |   |  | 705,337  |        
|Deferred financing costs, net                   |                           |                     | 10,632   |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 10,632   |        
|Investment in subsidiaries and
    intercompany |                           |                     | 768,129  |              |  |              | 309,591 |              |  |       | (680,409 | )      |  |  | (397,311 | )        |   |  |         |        
|Other assets                                    |                           |                     | 295      |              |  |              | 726     |              |  |       | 1        |        |  |  |         |          |   |  | 1,022    |        
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                |                           | $                   | 824,213  |              |  |              | 385,204 |              |  |       | 39,046   |        |  |  | (397,311 | )        |   |  | 851,152  |        
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|Current portion of long-term debt               |                           |                     | 26,400   |              |  |              | 68      |              |  |       | 3,166    |        |  |  |         |          |   |  | 29,634   |        
|Accounts payable and accrued
    expenses       |                           |                     | 2,918    |              |  |              | 9,279   |              |  |       | 3,993    |        |  |  |         |          |   |  | 16,190   |        
|Accrued interest                                |                           |                     | 5,420    |              |  |              | 5       |              |  |       |         |        |  |  |         |          |   |  | 5,425    |        
|Deposit on the sale of station                  |                           |                     | 2,000    |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 2,000    |        
|Deferred commitment fee                         |                           |                     | 563      |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 563      |        
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Total current liabilities |                     |          | 37,301       |  |              |         | 9,352        |  |       |          | 7,159  |  |  |          |         |   |  |          | 53,812  | 
|Long-term debt                                  |                           |                     | 423,818  |              |  |              | 603     |              |  |       |         |        |  |  |         |          |   |  | 424,421  |        
|Deferred income taxes                           |                           |                     | 59,909   |              |  |              |        |              |  |       | 9,825    |        |  |  |         |          |   |  | 69,734   |        
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Total liabilities         |                     |          | 521,028      |  |              |         | 9,955        |  |       |          | 16,984 |  |  |          |         |   |  |          | 547,967 | 
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|Preferred Stock                                 |                           |                     | 80,527   |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 80,527   |        
|Common stock                                    |                           |                     | 6        |              |  |              |        |              |  |       | 1        |        |  |  | (1       | )        |   |  | 6        |        
|Additional paid-in capital                      |                           |                     | 443,812  |              |  |              |        |              |  |       | 94,691   |        |  |  | (94,691  | )        |   |  | 443,812  |        
|Accumulated deficit                             |                           |                     | (221,160 | )            |  |              | 375,249 |              |  |       | (72,630  | )      |  |  | (302,619 | )        |   |  | (221,160 | )      
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                | Stockholders equity      |                     |          | 222,658      |  |              |         | 375,249      |  |       |          | 22,062 |  |  |          | (397,311 | ) |  |          | 222,658 | 
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                                |                           | $                   | 824,213  |              |  |              | 385,204 |              |  |       | 39,046   |        |  |  | (397,311 | )        |   |  | 851,152  |        
|                                                |                           |                     |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        

|                                                |                   |                                          |         |              |  |              |        |              |  |       |        |      |   |  |        |         |   |  |        |     | 
|----------------------------------------------- | ----------------- | ---------------------------------------- | ------- | ------------ |  | ------------ | ------ | ------------ |  | ----- | ------ | ---- | - |  | ------ | ------- | - |  | ------ | --- | 
|                                                |                   |                                         
|                                                |                   | For the Three Months Ended June 30, 2003
|                                                |                   |                                         
|                                                |                   |                                          |         | Non-         |  |             
|                                                |                   |                                          |         | Guarantor    |  | Guarantor    |        |             
|Condensed Consolidating Statement of Operations |                   | Parent                                   |         | Subsidiaries |  | Subsidiaries |        | Eliminations |  | Total
|                                                |                   |                                          |         |              |  |              |        |              |  |      
|Net revenue                                     |                   | $                                        |        |              |  |              | 33,625 |              |  |       | 2,910  |      |   |  |       |         |   |  | 36,535 |    
|Station operating expenses                      |                   |                                          |        |              |  |              | 18,996 |              |  |       | 2,160  |      |   |  |       |         |   |  | 21,156 |    
|Corporate expenses                              |                   |                                          | 4,693   |              |  |              |       |              |  |       | 120    |      |   |  | (120   | )       |   |  | 4,693  |    
|Depreciation and amortization                   |                   |                                          | 88      |              |  |              | 545    |              |  |       | 125    |      |   |  |       |         |   |  | 758    |    
|                                                |                   |                                          |         |              |  |              |        |              |  |       |        |      |   |  |        |         |   |  |        |    
|Operating income from continuing operations     |                   |                                          | (4,781  | )            |  |              | 14,084 |              |  |       | 505    |      |   |  | 120    |         |   |  | 9,928  |    
|Interest (expense) income, net                  |                   |                                          | (7,462  | )            |  |              |       |              |  |       | (1,338 | )    |   |  |       |         |   |  | (8,800 | )  
|Other income (expense), net                     |                   |                                          |        |              |  |              | 318    |              |  |       | (1     | )    |   |  | (120   | )       |   |  | 197    |    
|Equity in net earnings of subsidiaries          |                   |                                          | (13,313 | )            |  |              |       |              |  |       |       |      |   |  | 13,313 |         |   |  |       |    
|Income tax expense                              |                   |                                          | 281     |              |  |              |       |              |  |       | 44     |      |   |  |       |         |   |  | 325    |    
|Discontinued operations, net of tax             |                   |                                          |        |              |  |              | (211   | )            |  |       |       |      |   |  |       |         |   |  | (211   | )  
|                                                |                   |                                          |         |              |  |              |        |              |  |       |        |      |   |  |        |         |   |  |        |    
|                                                | Net income (loss) |                                          | $       | 789          |  |              |        | 14,191       |  |       |        | (878 | ) |  |        | (13,313 | ) |  |        | 789 | 
|                                                |                   |                                          |         |              |  |              |        |              |  |       |        |      |   |  |        |         |   |  |        |    

7



---



##### Table of Contents



|                                                |                                                         |                                          |         |              |   |              |        |              |  |       |        |      |   |  |        |         |   |  |         |        |  
|----------------------------------------------- | ------------------------------------------------------- | ---------------------------------------- | ------- | ------------ | - | ------------ | ------ | ------------ |  | ----- | ------ | ---- | - |  | ------ | ------- | - |  | ------- | ------ | -
|                                                |                                                         |                                         
|                                                |                                                         | For the Three Months Ended June 30, 2004
|                                                |                                                         |                                         
|                                                |                                                         |                                          |         | Non-         |   |             
|                                                |                                                         |                                          |         | Guarantor    |   | Guarantor    |        |             
|Condensed Consolidating Statement of Operations |                                                         | Parent                                   |         | Subsidiaries |   | Subsidiaries |        | Eliminations |  | Total
|                                                |                                                         |                                          |         |              |   |              |        |              |  |      
|Net revenue                                     |                                                         | $                                        |        |              |   |              | 37,546 |              |  |       | 2,746  |      |   |  |       |         |   |  | 40,292  |       
|Station operating expenses                      |                                                         |                                          |        |              |   |              | 20,366 |              |  |       | 1,872  |      |   |  |       |         |   |  | 22,238  |       
|Corporate expenses                              |                                                         |                                          | 2,999   |              |   |              |       |              |  |       | 120    |      |   |  | (120   | )       |   |  | 2,999   |       
|Depreciation and amortization                   |                                                         |                                          | 94      |              |   |              | 600    |              |  |       | 130    |      |   |  |       |         |   |  | 824     |       
|                                                |                                                         |                                          |         |              |   |              |        |              |  |       |        |      |   |  |        |         |   |  |         |       
|Operating income from continuing operations     |                                                         |                                          | (3,093  | )            |   |              | 16,580 |              |  |       | 624    |      |   |  | 120    |         |   |  | 14,231  |       
|Interest (expense) income, net                  |                                                         |                                          | (8,880  | )            |   |              |       |              |  |       | (1,320 | )    |   |  |       |         |   |  | (10,200 | )     
|Other income (expense), net                     |                                                         |                                          |        |              |   |              | 119    |              |  |       | 81     |      |   |  | (120   | )       |   |  | 80      |       
|Equity in net earnings of subsidiaries          |                                                         |                                          | (15,989 | )            |   |              |       |              |  |       |       |      |   |  | 15,989 |         |   |  |        |       
|Income tax expense                              |                                                         |                                          | 5,402   |              |   |              |       |              |  |       | 44     |      |   |  |       |         |   |  | 5,446   |       
|Discontinued operations, net of tax             |                                                         |                                          |        |              |   |              | (51    | )            |  |       |       |      |   |  |       |         |   |  | (51     | )     
|                                                |                                                         |                                          |         |              |   |              |        |              |  |       |        |      |   |  |        |         |   |  |         |       
|                                                | Net (loss) income                                       |                                          | $       | (1,386       | ) |              |        | 16,648       |  |       |        | (659 | ) |  |        | (15,989 | ) |  |         | (1,386 | )
|                                                |                                                         |                                          |         |              |   |              |        |              |  |       |        |      |   |  |        |         |   |  |         |       
|Dividend on preferred stock                     |                                                         |                                          | (2,107  | )            |   |              |       |              |  |       |       |      |   |  |       |         |   |  | (2,107  | )     
|                                                |                                                         |                                          |         |              |   |              |        |              |  |       |        |      |   |  |        |         |   |  |         |       
|                                                | Net (loss) income applicable to common
    stockholders |                                          | $       | (3,493       | ) |              |        | 16,648       |  |       |        | (659 | ) |  |        | (15,989 | ) |  |         | (3,493 | )
|                                                |                                                         |                                          |         |              |   |              |        |              |  |       |        |      |   |  |        |         |   |  |         |       

|                                                |                   |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |     |  
|----------------------------------------------- | ----------------- | -------------------------------------- | ------- | ------------ | - | ------------ | ------ | ------------ |  | ----- | ------ | ------ | - |  | ------ | ------- | - |  | ------- | --- | -
|                                                |                   |                                       
|                                                |                   | For the Six Months Ended June 30, 2003
|                                                |                   |                                       
|                                                |                   |                                        |         | Non-         |   |             
|                                                |                   |                                        |         | Guarantor    |   | Guarantor    |        |             
|Condensed Consolidating Statement of Operations |                   | Parent                                 |         | Subsidiaries |   | Subsidiaries |        | Eliminations |  | Total
|                                                |                   |                                        |         |              |   |              |        |              |  |      
|Net revenue                                     |                   | $                                      |        |              |   |              | 59,115 |              |  |       | 5,343  |        |   |  |       |         |   |  | 64,458  |    
|Station operating expenses                      |                   |                                        |        |              |   |              | 34,489 |              |  |       | 4,135  |        |   |  |       |         |   |  | 38,624  |    
|Corporate expenses                              |                   |                                        | 9,181   |              |   |              |       |              |  |       | 240    |        |   |  | (240   | )       |   |  | 9,181   |    
|Depreciation and amortization                   |                   |                                        | 180     |              |   |              | 1,036  |              |  |       | 250    |        |   |  |       |         |   |  | 1,466   |    
|                                                |                   |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |    
|Operating income from continuing operations     |                   |                                        | (9,361  | )            |   |              | 23,590 |              |  |       | 718    |        |   |  | 240    |         |   |  | 15,187  |    
|Interest (expense) income, net                  |                   |                                        | (14,752 | )            |   |              |       |              |  |       | (2,677 | )      |   |  |       |         |   |  | (17,429 | )  
|Other income (expense), net                     |                   |                                        |        |              |   |              | 463    |              |  |       |       |        |   |  | (240   | )       |   |  | 223     |    
|Equity in net earnings of subsidiaries          |                   |                                        | (21,806 | )            |   |              |       |              |  |       |       |        |   |  | 21,806 |         |   |  |        |    
|Income tax (benefit) expense                    |                   |                                        | (2,295  | )            |   |              | 82     |              |  |       | 91     |        |   |  |       |         |   |  | (2,122  | )  
|Discontinued operations, net of tax             |                   |                                        |        |              |   |              | (115   | )            |  |       |       |        |   |  |       |         |   |  | (115    | )  
|                                                |                   |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |    
|                                                | Net (loss) income |                                        | $       | (12          | ) |              |        | 23,856       |  |       |        | (2,050 | ) |  |        | (21,806 | ) |  |         | (12 | )
|                                                |                   |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |    

8



---



##### Table of Contents



|                                                |                                                         |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |        | 
|----------------------------------------------- | ------------------------------------------------------- | -------------------------------------- | ------- | ------------ | - | ------------ | ------ | ------------ |  | ----- | ------ | ------ | - |  | ------ | ------- | - |  | ------- | ------ | 
|                                                |                                                         |                                       
|                                                |                                                         | For the Six Months Ended June 30, 2004
|                                                |                                                         |                                       
|                                                |                                                         |                                        |         | Non-         |   |             
|                                                |                                                         |                                        |         | Guarantor    |   | Guarantor    |        |             
|Condensed Consolidating Statement of Operations |                                                         | Parent                                 |         | Subsidiaries |   | Subsidiaries |        | Eliminations |  | Total
|                                                |                                                         |                                        |         |              |   |              |        |              |  |      
|Net revenue                                     |                                                         | $                                      |        |              |   |              | 64,334 |              |  |       | 5,190  |        |   |  |       |         |   |  | 69,524  |       
|Station operating expenses                      |                                                         |                                        |        |              |   |              | 36,541 |              |  |       | 4,026  |        |   |  |       |         |   |  | 40,567  |       
|Corporate expenses                              |                                                         |                                        | 6,227   |              |   |              |       |              |  |       | 240    |        |   |  | (240   | )       |   |  | 6,227   |       
|Depreciation and amortization                   |                                                         |                                        | 190     |              |   |              | 1,203  |              |  |       | 253    |        |   |  |       |         |   |  | 1,646   |       
|                                                |                                                         |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |       
|                                                | Operating income from continuing operations             |                                        |         | (6,417       | ) |              |        | 26,590       |  |       |        | 671    |   |  |        | 240     |   |  |         | 21,084 | 
|Interest (expense) income, net                  |                                                         |                                        | (17,788 | )            |   |              |       |              |  |       | (2,650 | )      |   |  |       |         |   |  | (20,438 | )     
|Other income (expense), net                     |                                                         |                                        | 177     |              |   |              | 240    |              |  |       | 78     |        |   |  | (240   | )       |   |  | 255     |       
|Equity in net earnings of subsidiaries          |                                                         |                                        | (35,710 | )            |   |              |       |              |  |       |       |        |   |  | 35,710 |         |   |  |        |       
|Income tax expense                              |                                                         |                                        | 1,390   |              |   |              | 20     |              |  |       | 88     |        |   |  |       |         |   |  | 1,498   |       
|Discontinued operations, net of tax             |                                                         |                                        |        |              |   |              | 10,889 |              |  |       |       |        |   |  |       |         |   |  | 10,889  |       
|                                                |                                                         |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |       
|                                                |                                                         |                                        |         | 10,292       |   |              |        | 37,699       |  |       |        | (1,989 | ) |  |        | (35,710 | ) |  |         | 10,292 | 
|                                                |                                                         |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |       
|Dividend on preferred stock                     |                                                         |                                        | (4,161  | )            |   |              |       |              |  |       |       |        |   |  |       |         |   |  | (4,161  | )     
|                                                |                                                         |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |       
|                                                | Net (loss) income applicable to common
    stockholders |                                        | $       | 6,131        |   |              |        | 37,699       |  |       |        | (1,989 | ) |  |        | (35,710 | ) |  |         | 6,131  | 
|                                                |                                                         |                                        |         |              |   |              |        |              |  |       |        |        |   |  |        |         |   |  |         |       

|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |         |  
|----------------------------------------------- |  | -------------------------------------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | ------- | - |  |  | ------- | - |  |  | ------- | -
|                                                |  |                                       
|                                                |  | For the Six Months Ended June 30, 2003
|                                                |  |                                       
|                                                |  |                                        |         | Non-         |  |             
|                                                |  |                                        |         | Guarantor    |  | Guarantor    |         |             
|Condensed Consolidating Statement of Cash Flows |  | Parent                                 |         | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                                |  |                                        |         |              |  |              |         |              |  |      
|Cash flow from operating activities             |  | $                                      | (27,123 | )            |  |              | 32,215  |              |  |       | (5,237  | ) |  |  |        |   |  |  | (145    | )
|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |         |  
|Cash flow from investing activities             |  | $                                      | (3,666  | )            |  |              | (2,894  | )            |  |       | (21,357 | ) |  |  | (11,585 | ) |  |  | (39,502 | )
|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |         |  
|Cash flow from financing activities             |  | $                                      |        |              |  |              | (38,873 | )            |  |       | 27,186  |   |  |  | 11,585  |   |  |  | (102    | )
|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |         |  

|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |        |  
|----------------------------------------------- |  | -------------------------------------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | ------- | - |  |  | ------- | - |  |  | ------ | -
|                                                |  |                                       
|                                                |  | For the Six Months Ended June 30, 2004
|                                                |  |                                       
|                                                |  |                                        |         | Non-         |  |             
|                                                |  |                                        |         | Guarantor    |  | Guarantor    |         |             
|Condensed Consolidating Statement of Cash Flows |  | Parent                                 |         | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                                |  |                                        |         |              |  |              |         |              |  |      
|Cash flow from operating activities             |  | $                                      | (24,623 | )            |  |              | 22,353  |              |  |       | (1,925  | ) |  |  |        |   |  |  | (4,195 | )
|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |        |  
|Cash flow from investing activities             |  | $                                      | 43,964  |              |  |              | (2,343  | )            |  |       | 24,786  |   |  |  | (43,527 | ) |  |  | 22,880 |  
|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |        |  
|Cash flow from financing activities             |  | $                                      | (937    | )            |  |              | (20,185 | )            |  |       | (23,453 | ) |  |  | 43,527  |   |  |  | (1,048 | )
|                                                |  |                                        |         |              |  |              |         |              |  |       |         |   |  |  |         |   |  |  |        |  



|   |                              
|-- | -----------------------------
|3. | New Accounting Pronouncements

In December 2002, the Financial Accounting
Standards Board (FASB) issued Statement of
Financial Accounting
Standards (SFAS) No. 148,
Accounting for Stock-Based Compensation-Transition and
Disclosure (SFAS No. 148).
SFAS No. 148 amends the transition and disclosure
provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Among other items,
SFAS No. 148 allows companies adopting
SFAS No. 123 to utilize one of three alternative
transition methods, one of which was a prospective
method, as defined, that was only available if adopted
during 2003. To date, the Company has not adopted
SFAS No. 123 utilizing any of the transition methods
of SFAS No. 148. On March 31, 2004, the FASB
issued an exposure draft on a proposed statement, Share-Based
Payment, that addresses the accounting for share-based payment
transactions in which an enterprise receives employee services
in exchange for (a) equity instruments of the enterprise or
(b) liabilities that are based on the fair value of the
enterprises equity instruments or that may be settled by
the issuance of such equity instruments. The proposed statement
would eliminate the ability to account for share-based
compensation transactions using Accounting Principles

9



---



##### Table of Contents



Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and generally would
require instead that such transactions be accounted for using a
fair-value based method. The proposed statement is effective for
awards granted, modified, or settled in fiscal years beginning
after December 15, 2004, for public entities that used the
fair-value based method of accounting under the original
provisions of SFAS No. 123, for recognition or pro
forma disclosure purposes. The Company is currently evaluating
the impact the proposed statement may have on its consolidated
financial position, cash flows and results of operations.


In December 2003, FASB issued a revised
Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research
Bulletin No. 51 (FIN 46R). FIN 46R requires
the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a
majority of the entitys expected residual returns, or
both, as a result of ownership, contractual or other financial
interests in the entity. Currently, entities are generally
consolidated by an enterprise when it has a controlling
financial interest through ownership of a majority voting
interest in the entity. The provisions of FIN 46R are
generally effective for existing (prior to February 1,
2003) variable interest relationships of a public entity no
later than the end of the first reporting period that ends after
March 15, 2004. However, prior to the required application
of this interpretation, a public entity that is not a small
business issuer shall apply FIN 46R to those entities that
are considered to be special-purpose entities no later than the
end of the first reporting period that ends after
December 15, 2003. The adoption of FIN 46R did not
have an impact on the Companys consolidated financial
statements.



|   |                                                    
|-- | ---------------------------------------------------
|4. | Sale of Stations and/or Discontinued
    Operations

On September 18, 2003, the Company entered
into an asset purchase agreement with Border Media Partners, LLC
to sell the assets of radio stations KLEY-FM and KSAH-AM,
serving the San Antonio, Texas market, for a cash purchase
price of $24.4 million. On January 30, 2004, the
Company completed the sale of the assets of these radio stations
consisting of $11.2 million of intangible assets, net, and
$0.6 million of property and equipment. The Company
recognized a gain of approximately $11.3 million, net of
closing costs and taxes on the sale.

On October 2, 2003, the Company entered into
an asset purchase agreement with 3 Point Media 
San Francisco, LLC (Three Point Media) to sell
the assets of radio station KPTI-FM, serving the
San Francisco, California market, for a cash purchase price
of $30.0 million. In connection with this agreement, Three
Point Media made a $1.5 million deposit on the purchase
price. On February 3, 2004, the Company terminated the
agreement; however, on April 15, 2004, the Company
reinstated the agreement and entered into an amendment to the
asset purchase agreement and a time brokerage agreement under
which Three Point Media has been broadcasting its programming on
KPTI-FM. In connection with this amendment, Three Point Media
made an additional $0.5 million deposit on the purchase
price. The Company intends to close on the sale of the assets of
radio station KPTI-FM in September 2004; however, there cannot
be any assurance that the sale will be completed.

The Company determined that the pending sale
and/or sales of these stations met the criteria in accordance
with SFAS No. 144 to classify the stations
assets as held for sale and their respective operations as
discontinued operations. The results of operations in the
current year and prior year periods of these stations have been
classified as discontinued operations in the condensed
consolidated statements of operations. On

10



---



##### Table of Contents



June 30, 2004, the Company had assets held
for sale consisting of $13.6 million of intangible assets,
net, and $0.3 million of property and equipment for radio
station KPTI-FM. In addition, pursuant to the credit
agreement governing our senior secured credit facilities, a
portion (approximately $25.2 million) of the proceeds
received from the sale of KPTI-FM, when and if completed, must
be offered to the noteholders to repay a portion of our
borrowings under the senior credit facilities. Therefore, after
the reinstatement of the KPTI-FM asset purchase agreement in the
second quarter, the Company determined to reclassify
approximately $25.2 million from long-term debt to current
debt.




|   |                  
|-- | -----------------
|5. | Subsequent Events

On July 26, 2004, the Company entered into
an asset purchase agreement with Newsweb Corporation to sell the
assets of radio stations WDEK-FM, WKIE-FM and WKIF-FM, serving
the suburban Chicago, Illinois market, for a cash purchase price
of $28.0 million. In connection with this agreement,
Newsweb Corporation made a $1.4 million deposit on the
purchase price, which is being held in escrow. The agreement
contains customary representations and warranties and the
closing of the sale is subject to the satisfaction of certain
conditions, including renewal of the FCC licenses and receipt of
regulatory approval from the FCC. The Company intends to sell
the assets of radio stations WDEK-FM, WKIE-FM and WKIF-FM;
however, there cannot be any assurance that the sale will be
completed.



|   |                           
|-- | --------------------------
|6. | Stock Options and Warrants

The Company accounts for its stock option plans
in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees, and
related interpretations, under which compensation expense is
recorded to the extent that the market price on the grant date
of the underlying stock exceeds the exercise price. No
stock-based employee compensation cost is reflected in net
income (loss), as all options granted under these plans had an
exercise price equal to the market value of the underlying
common stock on the date of grant. The fair value of each option
granted to employees is estimated on the date of grant using the
Black-Scholes option-pricing model with the following
assumptions at:

|                        |  |               |         |               |  |  |         | 
|----------------------- |  | ------------- | ------- | ------------- |  |  | ------- | 
|                        |  | June 30, 2003 |         | June 30, 2004
|                        |  |               |         |              
|Expected life           |  |               | 7 years |               |  |  | 7 years | 
|Dividends               |  |               | None    |               |  |  | None    | 
|Risk-free interest rate |  |               | 3.37%   |               |  |  | 4.24%   | 
|Expected volatility     |  |               | 86%     |               |  |  | 76%     | 

Had compensation expense for the Companys
plans been determined consistent with SFAS No. 123,
the Companys net income (loss) applicable to common
stockholders and net income (loss) per common share would have
been adjusted to pro forma amounts indicated below (in
thousands, except per share data):

|                                                                                                                                    |                                |                    |        |                  |  |      |        |       |   |   |        |       |   |  |        |      | 
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------------------ | ------ | ---------------- |  | ---- | ------ | ----- | - | - | ------ | ----- | - |  | ------ | ---- | 
|                                                                                                                                    |                                |                    |        |                 
|                                                                                                                                    |                                | Three-Months Ended |        | Six-Months Ended
|                                                                                                                                    |                                | June 30,           |        | June 30,        
|                                                                                                                                    |                                |                    |        |                 
|                                                                                                                                    |                                | 2003               |        | 2004             |  | 2003 |        | 2004 
|                                                                                                                                    |                                |                    |        |                  |  |      |        |      
|Net income (loss) applicable to common
    stockholders:                                                                            |                                |                    |        |                  |  |      |        |       |   |   |        |       |   |  |        |     
|As reported                                                                                                                         |                                | $                  | 789    |                  |  |      | (3,493 | )     |   | $ | (12    | )     |   |  | 6,131  |     
|Deduct: total stock-based employee
    compensation expense determined under fair value based method
    for all awards, net of tax |                                |                    | (1,006 | )                |  |      | (1,085 | )     |   |   | (2,026 | )     |   |  | (2,869 | )   
|                                                                                                                                    |                                |                    |        |                  |  |      |        |       |   |   |        |       |   |  |        |     
|Pro forma net (loss) income                                                                                                         |                                | $                  | (217   | )                |  |      | (4,578 | )     |   | $ | (2,038 | )     |   |  | 3,262  |     
|                                                                                                                                    |                                |                    |        |                  |  |      |        |       |   |   |        |       |   |  |        |     
|Net (loss) income per common share:                                                                                                 |                                |                    |        |                  |  |      |        |       |   |   |        |       |   |  |        |     
|                                                                                                                                    | As reported: Basic and Diluted |                    | $      | 0.01             |  |      |        | (0.05 | ) |   | $      |      |   |  |        | 0.09 | 
|                                                                                                                                    | Pro forma: Basic and Diluted   |                    | $      |                 |  |      |        | (0.07 | ) |   | $      | (0.03 | ) |  |        | 0.05 | 
|                                                                                                                                    |                                |                    |        |                  |  |      |        |       |   |   |        |       |   |  |        |     

11



---



##### Table of Contents



In connection with the purchase of KXOL-FM,
serving the Los Angeles, California market, the Company
issued warrants to purchase an aggregate of
2,700,000 shares of the Companys Class A common
stock. To date, these warrants have not been exercised. The
following table summarizes information about these warrants:

|                      |  |                     |           |                |  |                    |       |  |  |  |                    | 
|--------------------- |  | ------------------- | --------- | -------------- |  | ------------------ | ----- |  |  |  | ------------------ | 
|                      |  | Number of Shares of |           |                |  |                   
|                      |  | Class A Common      |           |                |  |                   
|                      |  | Stock Underlying    |           | Per Share      |  | Warrant Expiration
|Warrant Date of Issue |  | Warrants            |           | Exercise Price |  | Date              
|                      |  |                     |           |                |  |                   
|February 8, 2002      |  |                     | 2,000,000 |                |  | $                  | 10.50 |  |  |  | February 8, 2005   | 
|March 31, 2003        |  |                     | 100,000   |                |  | $                  | 6.14  |  |  |  | March 31, 2006     | 
|April 30, 2003        |  |                     | 100,000   |                |  | $                  | 7.67  |  |  |  | April 30, 2006     | 
|May 31, 2003          |  |                     | 100,000   |                |  | $                  | 7.55  |  |  |  | May 31, 2006       | 
|June 30, 2003         |  |                     | 100,000   |                |  | $                  | 8.08  |  |  |  | June 30, 2006      | 
|July 31, 2003         |  |                     | 100,000   |                |  | $                  | 8.17  |  |  |  | July 31, 2006      | 
|August 31, 2003       |  |                     | 100,000   |                |  | $                  | 7.74  |  |  |  | August 31, 2006    | 
|September 30, 2003    |  |                     | 100,000   |                |  | $                  | 8.49  |  |  |  | September 30, 2006 | 
|                      |  |                     |           |                |  |                    |       |  |  |  |                    | 
|                      |  |                     | 2,700,000 |                |  |                    |       |  |  |  |                    | 
|                      |  |                     |           |                |  |                    |       |  |  |  |                    | 



|   |           
|-- | ----------
|7. | Litigation

From time to time the Company is involved in
litigation incidental to the conduct of its business, such as
contractual matters and employee-related matters. In the opinion
of management, such litigation is not likely to have a material
adverse effect on the Companys business, operating results
or financial position.

On June 12, 2002, the Company filed a
lawsuit in the United States District Court for the Southern
District of Florida against Clear Channel Communications
(Clear Channel) and Hispanic Broadcasting
Corporation (HBC), and filed an amended
complaint on July 31, 2002. The lawsuit asserts federal and
state antitrust law violations and other state law claims and
alleges that Clear Channel and HBC have adversely affected the
Companys ability to raise capital, depressed its share
price, impugned its reputation, made station acquisitions more
difficult and interfered with its business opportunities and
contractual arrangements. In the amended complaint, the Company
sought actual damages in excess of $500.0 million, to be
trebled under antitrust law.

Both defendants moved to dismiss the amended
complaint, and on January 31, 2003, the Court granted
defendants motions for failure to adequately allege
antitrust injury and dismissed the federal court claims with
prejudice and dismissed the state court claims for lack of
federal court jurisdiction in light of the dismissal of the
federal court claims. The Company filed a motion for
reconsideration of that opinion and asked for leave to file a
proposed second amended complaint, which contains additional
economic analysis and factual detail based upon the depositions
of Clear Channels CEO and CFO and HBCs CFO and
document production in the action, and which seeks damages in an
amount to be determined at trial. On August 6, 2003, the
District Court denied the Companys motion for
reconsideration. On September 5, 2003, the Company filed an
appeal to the 11th Circuit Court of Appeals of the District
Courts decisions dated January 31, 2003 and
August 6, 2003. The briefing on that appeal was completed
in December 2003, oral argument occurred in Miami on
February 26, 2004 and the Eleventh Circuit affirmed the
District Court decision on June 30, 2004.

As reported in the Companys quarterly
report on Form 10-Q for the quarterly period ended
March 31, 2004, in connection with the Companys sale
of WXLX-AM in 1997, the Company assigned the lease of the
transmitter for WXLX in Lyndhurst, New Jersey, to the purchaser
of the station. The transmitter is located on a former landfill
which ceased operations in the late 1960s. Although WXLX
has been sold, the Company retains potential exposure to
possible environmental liabilities relating to the transmitter
site (the Transmitter Property). On
September 12, 2002, the landlords of the property,
Frank F. Viola, Thomas C. Viola Trust and Louis Viola
Company (the Property Owners), received a notice
from the New Jersey Meadowlands

12



---



##### Table of Contents



Commission (NJMC) indicating that it
was planning to redevelop the lands which include the
Transmitter Property and offering compensation to the Property
Owners for the purchase of the Transmitter Property.


On December 4, 2002, the NJMC filed a
Verified Complaint in condemnation in the Superior Court of New
Jersey, Bergen County, against the Property Owners to acquire
the Transmitter Property. The Transmitter Property is one of a
number of sites that the NJMC is acquiring for a redevelopment
project. Many of these sites (owned both publicly and privately)
were used for landfill operations including the Transmitter
Property. The Company is named as a defendant in the litigation
(the Action) by virtue of its interest of record in
the Transmitter Property as a former leaseholder prior to the
aforementioned lease assignment.

A settlement agreement has been entered in the
Court record resolving the compensation to be paid to the
Property Owners (the Settlement Agreement), and
providing for waiver of claims for landfill closure costs
against the Property Owners. While the Settlement Agreement
reserved the NJMCs claims for environmental remediation
against the other parties, including the Company, the Settlement
Agreement further stipulates that the NJMCs developer will
agree to indemnify and insure (under policies expiring on
December 31, 2021 and providing coverage in the amount of
$50.0 million) such other parties (including the Company)
against claims for remediation of environmental contamination
while also providing for the discontinuance of the Action.

The principal terms of the Settlement Agreement
and insurance have been resolved and a proposed final Consent
Judgment implementing the Settlement Agreement is pending before
the Court and is expected to be entered prior to the end of the
year.

13



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Overview

We are the largest Hispanic-controlled radio
broadcasting company in the United States. After giving effect
to the proposed pending divestitures, we will own and operate
21 radio stations in five of the top-ten Hispanic markets
in the United States, including Los Angeles, New York, Puerto
Rico, Miami and Chicago. Our radio stations are located in
markets that reach approximately 45% of the U.S. Hispanic
population. As part of our operating business, we also operate
LaMusica.com, a bilingual Spanish-English Internet website
providing content related to Latin music, entertainment, news
and culture.

The success of each of our radio stations depends
significantly upon its audience ratings and share of the overall
advertising revenue within its market, among other things. The
radio broadcasting industry is a highly competitive business,
but some barriers to entry do exist. Each of our radio stations
competes with both Spanish-language and English-language radio
stations in its market as well as with other advertising media
such as newspapers, broadcast television, cable television, the
Internet, magazines, outdoor advertising, transit advertising
and direct mail marketing. Factors which are material to
competitive position include management experience, the radio
stations rank in its market, signal strength and
frequency, and audience demographics, including the nature of
the Spanish-language market targeted by a particular station.
Our top three markets, based on net revenue, are New York, Los
Angeles and Miami. A significant decline in net revenue or
station operating income from our stations in any of these
markets could have a material adverse effect on our financial
position and results of operations.

Our primary source of revenue is the sale of
advertising time on our radio stations to local and national
advertisers. Our revenue is affected primarily by the
advertising rates that our radio stations are able to charge, as
well as the overall demand for radio advertising time in each
respective market. Seasonal net broadcasting revenue
fluctuations are common in the radio broadcasting industry and
are due to fluctuations in advertising expenditures by local and
national advertisers. Typically, for the radio broadcasting
industry, the first calendar quarter generally produces the
lowest revenue.

The performance of a radio station group is
customarily measured by its ability to generate station
operating income and Adjusted EBITDA. Our most significant
operating expenses, for purposes of the computation of station
operating income and Adjusted EBITDA, are compensation expenses,
programming expenses, selling expenses, and advertising and
promotional expenses. Our senior management strives to control
these expenses as well as other expenses by working closely with
local station management and others.

The term station operating income
(our former broadcast cash flow or BCF) is defined
as Generally Accepted Accounting Principles (GAAP)
operating income from continuing operations, excluding corporate
expenses and depreciation and amortization. Station operating
income has replaced our former BCF as one of the metrics used by
management to assess the performance of our radio stations.
Although it is calculated in the same manner as BCF, management
believes that using the term station operating
income provides a more accurate description of the
performance measure. The term station operating income
margin consists of station operating income divided by net
revenue.

EBITDA consists of earnings before interest
expenses, interest income, income taxes, depreciation and
amortization of assets and discontinued operations. We calculate
our EBITDA differently. Our EBITDA is EBITDA as
defined above but excluding other income or expense, or
alternatively, GAAP operating income from continuing operations
before depreciation and amortization. To distinguish our
calculation of EBITDA from other possible meanings of EBITDA,
for periods ending after March 31, 2003 and going forward
we changed references to EBITDA in our financial
reports to the term Adjusted EBITDA. Although our
Adjusted EBITDA and what we formerly referred to as
our EBITDA are calculated in the same manner,
management believes Adjusted EBITDA is a more
accurate description and represents another metric used by
management to assess the performance of our stations and the
Company, as a whole.

Station operating income,
station operating income margin, and Adjusted
EBITDA are non-GAAP financial measures as defined by the
Securities and Exchange Commissions Regulation G.
These non-GAAP financial measures should not be construed as
being superior to GAAP financial measures. The GAAP

14



---



##### Table of Contents



financial measure most directly comparable to
each non-GAAP financial measure and a reconciliation of the
differences between each non-GAAP financial measure and the
comparable GAAP financial measure are included below. Although
station operating income, station operating income margin and
Adjusted EBITDA are not measures of performance calculated in
accordance with GAAP, we believe that they are useful to an
investor in evaluating an investment in our securities because
they are measures widely used in the broadcast industry to
evaluate a radio companys operating performance and are
used by management for internal budgeting purposes and to
evaluate the performance of our radio stations. However, station
operating income, station operating income margin and Adjusted
EBITDA should not be considered in isolation or as substitutes
for operating income, net income (loss), cash flows from
operating activities and other income or cash flow statement
data prepared in accordance with GAAP, or as measures of
liquidity or profitability. Also, because they are not
calculated in the same manner by all companies, they may not be
comparable to other similarly titled measures used by other
companies.


Comparison Analysis of the Operating Results
for the Three Months Ended June 30, 2003 and 2004 and
Non-GAAP Measures Reconciliation.

The following summary table presents a comparison
of our results of operations for the three month periods ended
June 30, 2003 and 2004 with respect to certain of our key
financial measures, as well as a reconciliation of the
difference between each non-GAAP financial measure and the
comparable GAAP financial measure. The changes illustrated in
the table are discussed below. This section should be read in
conjunction with the unaudited condensed consolidated financial
statements and notes.

|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |      |   
|----------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------ | ------ | ------ |  | - | ------- | ------ | - |  | ------ | ------ | - |  | ---- | ---- | --
|                                                                                          |                                                             |                    |        |        |  |  
|                                                                                          |                                                             | Three Months Ended |        |       
|                                                                                          |                                                             | June 30,           |        | Change
|                                                                                          |                                                             |                    |        |       
|                                                                                          |                                                             | 2003               |        | 2004   |  | $ |         | %     
|                                                                                          |                                                             |                    |        |        |  |   |         |       
|                                                                                          |                                                             |                    |        |        |  |  
|                                                                                          |                                                             | (In thousands)     |        |        |  |  
|Net revenue                                                                               |                                                             | $                  | 36,535 |        |  | $ | 40,292  |        |   |  | 3,757  |        |   |  | 10   | %   
|Station operating expenses
    (Engineering, Programming, Selling and G & A
    expenses) |                                                             |                    | 21,156 |        |  |   | 22,238  |        |   |  | 1,082  |        |   |  | 5    | %   
|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |     
|                                                                                          | Station operating income (formerly broadcast
    cash flow) |                    |        | 15,379 |  |   |         | 18,054 |   |  |        | 2,675  |   |  |      | 17   | % 
|Corporate expenses                                                                        |                                                             |                    | 4,693  |        |  |   | 2,999   |        |   |  | (1,694 | )      |   |  | (36  | )%  
|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |     
|                                                                                          | Adjusted EBITDA                                             |                    |        | 10,686 |  |   |         | 15,055 |   |  |        | 4,369  |   |  |      | 41   | % 
|Depreciation and amortization                                                             |                                                             |                    | 758    |        |  |   | 824     |        |   |  | 66     |        |   |  | 9    | %   
|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |     
|Operating income from continuing operations                                               |                                                             |                    | 9,928  |        |  |   | 14,231  |        |   |  | 4,303  |        |   |  | 43   | %   
|Interest expense, net                                                                     |                                                             |                    | (8,800 | )      |  |   | (10,200 | )      |   |  | (1,400 | )      |   |  | 16   | %   
|Other income, net                                                                         |                                                             |                    | 197    |        |  |   | 80      |        |   |  | (117   | )      |   |  | (59  | )%  
|Income tax expense                                                                        |                                                             |                    | 325    |        |  |   | 5,446   |        |   |  | 5,121  |        |   |  | 1576 | %   
|Discontinued operations, net                                                              |                                                             |                    | (211   | )      |  |   | (51     | )      |   |  | 160    |        |   |  | (76  | )%  
|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |     
|                                                                                          | Net income (loss)                                           |                    | $      | 789    |  |   | $       | (1,386 | ) |  |        | (2,175 | ) |  |      | (276 | )%
|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |     
|Station operating income margin                                                           |                                                             |                    | 42.1   | %      |  |   | 44.8    | %      |   |  |        |        |   |  |      |     
|                                                                                          |                                                             |                    |        |        |  |   |         |        |   |  |        |        |   |  |      |     

Net Revenue.The
increase in net revenue was due to the double-digit growth in
our Miami and Los Angeles markets primarily in local and network
revenue. Additionally, the New York and Chicago markets had
low-single digit growth mainly from an increase in local and
network revenue. We entered into two network revenue contracts
in the fourth quarter of 2003, which are generating significant
increases in network revenue. Offsetting these increases was a
decrease in the Puerto Rico market mainly in local revenue and
promotional events.

Station Operating
Expenses.The increase in station
operating expenses was primarily due to the investments made in
our Los Angeles and New York programming departments. Other
expenses that

15



---



##### Table of Contents



increased were the provision for doubtful
accounts, advertising and other selling expenses. These
increases were offset by decreases in: (a) national
commissions due to a lower commission structure,
(b) stock-based programming expense related to the warrants
issued in connection with our acquisition of KXOL-FM and
(c) trade expense due to a decrease in trade advertising in
our Los Angeles and New York markets.


Station Operating
Income.The increase in station
operating income and station operating income margin was due to
the 10% net revenue growth compared to only a 5% increase in
station operating expenses.

Corporate Expenses.The decrease in corporate expenses resulted mainly from a
significant decrease in legal and professional fees related to
various lawsuits and other legal matters of the prior year.

Adjusted EBITDA.The
increase in Adjusted EBITDA was primarily attributed to the
increase in station operating income and decrease in corporate
expenses.

Operating Income from Continuing
Operations.The increase in operating
income from continuing operations was primarily attributed to
the increase in Adjusted EBITDA.

Interest Expense,
Net.The increase in interest expense,
net, was due to interest incurred on the $125.0 million
senior secured credit facility term loan that was entered into
on October 30, 2003.

Income Taxes.The
income tax expense was a result of applying our estimated
effective tax rate for the full year of approximately 166% to
our pre-tax income from continuing operations. The increase in
income tax expense was due to an increase in our estimated
effective book tax rate, over the prior year, primarily due to
the additional tax amortization of FCC licenses as a result of
our acquisition of KXOL-FM in October 2003. Our effective book
tax rate was impacted by the adoption of SFAS No. 142
on December 31, 2001. As a result of adopting
SFAS No. 142, the reversal of our deferred tax
liabilities related to our intangible assets could no longer be
assured over our net operating loss carryforward period.
Therefore, our estimated effective book tax rate is impacted by
a full valuation allowance on our deferred tax assets.

Discontinued Operations, Net of
Taxes.We determined that the pending
sale of our station KPTI-FM, serving the San Francisco,
California market, met the criteria in accordance with
SFAS No. 144 to classify its operations as
discontinued operations. Consequently, the stations
results from operations for the three months ended June 30,
2003 and 2004 have been classified as discontinued operations.

Net Income (loss).The decrease in net income (loss) was primarily due to the
increase in our estimated effective tax rate for the full year
of 166%, which was applied to our pre-tax income from continuing
operations.

16



---



##### Table of Contents



Comparison Analysis of the Operating Results
for the Six Months Ended June 30, 2003 and 2004 and
Non-GAAP Measures Reconciliation.

The following summary table presents a comparison
of our results of operations for the six months ended
June 30, 2003 and 2004 with respect to certain of our key
financial measures, as well as a reconciliation of the
difference between each non-GAAP financial measure and the
comparable GAAP financial measure. The changes illustrated in
the table are discussed below. This section should be read in
conjunction with the unaudited condensed consolidated financial
statements and notes.

|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |        |   
|----------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ---------------- | ------- | ------ | - | - | ------- | ------ |  |  | ------ | ------ |  |  | ----- | ------ | --
|                                                                                          |                                                             |                  |         |        |   |  
|                                                                                          |                                                             | Six Months Ended |         |       
|                                                                                          |                                                             | June 30,         |         | Change
|                                                                                          |                                                             |                  |         |       
|                                                                                          |                                                             | 2003             |         | 2004   |   | $ |         | %     
|                                                                                          |                                                             |                  |         |        |   |   |         |       
|                                                                                          |                                                             |                  |         |        |   |  
|                                                                                          |                                                             | (In thousands)   |         |        |   |  
|Net revenue                                                                               |                                                             | $                | 64,458  |        |   | $ | 69,524  |        |  |  | 5,066  |        |  |  | 8     | %     
|Station operating expenses
    (Engineering, Programming, Selling and G & A
    expenses) |                                                             |                  | 38,624  |        |   |   | 40,567  |        |  |  | 1,943  |        |  |  | 5     | %     
|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |       
|                                                                                          | Station operating income (formerly broadcast
    cash flow) |                  |         | 25,834 |   |   |         | 28,957 |  |  |        | 3,123  |  |  |       | 12     | % 
|Corporate expenses                                                                        |                                                             |                  | 9,181   |        |   |   | 6,227   |        |  |  | (2,954 | )      |  |  | (32   | )%    
|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |       
|                                                                                          | Adjusted EBITDA                                             |                  |         | 16,653 |   |   |         | 22,730 |  |  |        | 6,077  |  |  |       | 36     | % 
|Depreciation and amortization                                                             |                                                             |                  | 1,466   |        |   |   | 1,646   |        |  |  | 180    |        |  |  | 12    | %     
|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |       
|Operating income from continuing operations                                               |                                                             |                  | 15,187  |        |   |   | 21,084  |        |  |  | 5,897  |        |  |  | 39    | %     
|Interest expense, net                                                                     |                                                             |                  | (17,429 | )      |   |   | (20,438 | )      |  |  | (3,009 | )      |  |  | 17    | %     
|Other income, net                                                                         |                                                             |                  | 223     |        |   |   | 255     |        |  |  | 32     |        |  |  | 14    | %     
|Income tax (benefit) expense                                                              |                                                             |                  | (2,122  | )      |   |   | 1,498   |        |  |  | 3,620  |        |  |  | (171  | )%    
|Discontinued operations, net                                                              |                                                             |                  | (115    | )      |   |   | 10,889  |        |  |  | 11,004 |        |  |  | (9569 | )%    
|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |       
|                                                                                          | Net income (loss)                                           |                  | $       | (12    | ) |   | $       | 10,292 |  |  |        | 10,304 |  |  |       | (85867 | )%
|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |       
|Station operating income margin                                                           |                                                             |                  | 40.1    | %      |   |   | 41.7    | %      |  |  |        |        |  |  |       |       
|                                                                                          |                                                             |                  |         |        |   |   |         |        |  |  |        |        |  |  |       |       

Net Revenue.The
increase in net revenue was due to the double-digit growth in
our Miami and Los Angeles markets primarily in local and network
revenue. Additionally, the Chicago market had mid-single digit
growth mainly from an increase in local and network revenue. We
entered into two network revenue contracts in the fourth quarter
of 2003, which are generating significant increases in network
revenue. Offsetting these increases were decreases in the New
York and Puerto Rico markets mainly in national and local
revenue and promotional events.

Station Operating
Expenses.The increase in station
operating expenses was primarily due to the investments made in
our Los Angeles and New York programming departments. Other
expenses that increased were compensation, transmitter rent,
other selling expenses and insurance due to higher premiums.
These increases were offset by decreases in: (a) local and
national commissions due to lower commission structures,
(b) stock-based programming expense related to the warrants
issued in connection with our acquisition of KXOL-FM,
(c) advertising and promotional expenses due to a decrease
in promotional events and less advertising in our core markets
and (d) professional fees related to a decrease in legal
fees related to our stations operations.

Station Operating
Income.The increase in station
operating income and station operating income margin was due to
the 8% net revenue growth compared to only a 5% increase in
station operating expenses.

Corporate Expenses.The decrease in corporate expenses resulted mainly from a
significant decrease in legal and professional fees related to
various lawsuits and other legal matters of the prior year.

17



---



##### Table of Contents



Adjusted EBITDA.The
increase in Adjusted EBITDA was primarily attributed to the
increase in station operating income and decrease in corporate
expenses.

Operating Income from Continuing
Operations.The increase in operating
income from continuing operations was primarily attributed to
the increase in Adjusted EBITDA.

Interest Expense,
Net.The increase in interest expense,
net, was due to interest incurred on the $125.0 million
senior secured credit facility term loan that was entered into
on October 30, 2003.

Income Taxes.The
income tax expense was a result of applying our estimated
effective tax rate for the full year of approximately 166% to
our pre-tax income from continuing operations. The increase in
income tax expense was due to an increase in our estimated
effective book tax rate, over the prior year, primarily due to
the additional tax amortization of FCC licenses as a result of
our acquisition of KXOL-FM in October 2003. Our effective book
tax rate was impacted by the adoption of SFAS No. 142
on December 31, 2001. As a result of adopting
SFAS No. 142, the reversal of our deferred tax
liabilities related to our intangible assets could no longer be
assured over our net operating loss carryforward period.
Therefore, our estimated effective book tax rate is impacted by
a full valuation allowance on our deferred tax assets.

Discontinued Operations, Net of
Taxes.We determined that the sale of
our KLEY-FM and KSAH-AM stations serving the San Antonio, Texas
market, and the pending sale of our KPTI-FM station serving the
San Francisco, California market, all met the criteria, in
accordance with SFAS No. 144, to classify their
respective operations as discontinued operations. Consequently,
these stations results from operations for the six months
ended June 30, 2003 and 2004 have been classified as
discontinued operations. The increase in discontinued
operations, net of taxes was mainly attributable to the
$11.3 million gain recognized on the sale of our KLEY-FM
and KSAH-AM stations, net of closing costs and taxes on the sale.

Net Income.The
increase in net income was primarily due to the increase in
discontinued operations, net of taxes, related to the
$11.3 million gain on the sale of radio stations KLEY-FM
and KSAH-AM.

Liquidity and Capital Resources

Our primary source of liquidity is cash on hand
and cash provided by operations and, to the extent necessary,
undrawn commitments that are available under a
$10.0 million revolving credit facility. Our ability to
raise funds by increasing our indebtedness is limited by the
terms of the indentures governing our senior subordinated notes,
the certificates of designations governing our preferred stock
and the credit agreement governing our senior secured credit
facilities. Additionally, the indentures, certificates of
designations and credit agreement place restrictions on us with
respect to the sale of assets, liens, investments, dividends,
debt repayments, capital expenditures, transactions with
affiliates and consolidations and mergers, among other things.
We had cash and cash equivalents of $45.6 million and
$63.2 million as of December 31, 2003 and
June 30, 2004, respectively.

The following summary table presents a comparison
of our capital resources for the six month periods ended
June 30, 2003 and 2004, with respect to certain of our key
measures affecting our liquidity. The changes set forth in the
table are discussed below. This section should be read in
conjunction with the unaudited condensed consolidated financial
statements and notes.

|                                                              |                                                          |                  |         |         |   |   |        |        |  |  |        |   | 
|------------------------------------------------------------- | -------------------------------------------------------- | ---------------- | ------- | ------- | - | - | ------ | ------ |  |  | ------ | - | 
|                                                              |                                                          |                  |         |        
|                                                              |                                                          | Six Months Ended |         |        
|                                                              |                                                          | June 30,         |         | Change 
|                                                              |                                                          |                  |         |        
|                                                              |                                                          | 2003             |         | 2004    |   | $
|                                                              |                                                          |                  |         |         |   |  
|                                                              |                                                          |                  |         |        
|                                                              |                                                          | (In thousands)   |         |        
|Capital expenditures                                          |                                                          | $                | 1,990   |         |   | $ | 1,350  |        |  |  | (640   | )
|                                                              |                                                          |                  |         |         |   |   |        |        |  |  |        |  
|Net cash flows used in operating activities                   |                                                          | $                | (145    | )       |   | $ | (4,195 | )      |  |  | (4,050 | )
|Net cash flows (used in) provided by investing
    activities |                                                          |                  | (39,502 | )       |   |   | 22,880 |        |  |  | 62,382 |  
|Net cash flows used in financing activities                   |                                                          |                  | (102    | )       |   |   | (1,048 | )      |  |  | (946   | )
|                                                              |                                                          |                  |         |         |   |   |        |        |  |  |        |  
|                                                              | Net (decrease) increase in cash and cash
    equivalents |                  | $       | (39,749 | ) |   | $      | 17,637 |  |  |        |   | 
|                                                              |                                                          |                  |         |         |   |   |        |        |  |  |        |  

18



---



##### Table of Contents



Net Cash Flows Used In Operating
Activities.Changes in our net cash
flows from operating activities were primarily a result of the
increase in cash paid to vendors, suppliers and employees and
for interest, causing the decrease in working capital balances.

Net Cash Flows (Used In) Provided By Investing
Activities.Changes in our net cash
flows from investing activities were primarily a result of the
proceeds received from the sale of radio stations KLEY-FM and
KSAH-AM in January 2004, proceeds used to acquire radio stations
WDEK-FM, WKIE-FM and WKIF-FM in April 2003, and a deposit made
in March 2003 for the acquisition of KXOL-FM, which was
completed in October 2003.

Net Cash Flows Used in Financing Activities.Changes in our net cash flows from
financing activities were primarily a result of the additional
offering costs related to our 10 3/4% Series B
cumulative exchangeable redeemable preferred stock and financing
costs related to our $135.0 million senior secured credit
facilities, and the principal payment made on the senior secured
credit facility term loan during the six month period ended
June 30, 2004.

Management believes that cash from operating
activities, together with cash on hand, should be sufficient to
permit us to meet our operating obligations in the foreseeable
future, including required interest and quarterly principal
payments pursuant to the senior secured credit facilities
agreement, interest payment requirements under our 9 5/8%
senior subordinated notes due 2009 and capital expenditures,
excluding the acquisitions of FCC licenses. Assumptions (none of
which can be assured), which underlie managements beliefs,
include the following:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the economic conditions within the radio
    broadcasting industry and economic conditions in general will
    not deteriorate in any material respect;
|
| |  | we will continue to successfully implement our
    business strategy; and                                                                              
|
| |  | we will not incur any material unforeseen
    liabilities, including environmental liabilities.                                                        

Our strategy is to primarily utilize cash flows
from operations to meet our capital needs and contractual
obligations. However, we also have bank borrowings available to
meet our capital needs and contractual obligations and, when
appropriate and if available, will obtain financing by issuing
debt or stock.

We are required to maintain financial covenant
ratios under our senior secured credit facilities as follows:
(i) Consolidated EBITDA minimum, (ii) Consolidated
Fixed Charge Coverage Ratio, (iii) Consolidated Leverage
Ratio, (iv) Consolidated Interest Coverage Ratio and
(v) Consolidated Senior Secured Debt Ratio, all as defined
in the credit agreement, solely for the purpose of determining
compliance with the covenants. The credit agreement requiring
compliance with these financial covenants states that the
calculations must be based on generally accepted accounting
principles promulgated by the Financial Accounting Standards
Board. We are in compliance with all covenants under our senior
secured credit facilities and all other debt instruments as of
June 30, 2004 and expect to be in compliance in the
foreseeable future.

On October 2, 2003, we entered into an asset
purchase agreement with 3 Point Media  San Francisco,
LLC (Three Point Media) to sell the assets of radio
station KPTI-FM, serving the San Francisco, California market,
for a cash purchase price of $30.0 million. In connection
with this agreement, Three Point Media made a $1.5 million
deposit on the purchase price. On February 3, 2004, we
terminated the agreement; however, on April 15, 2004, we
reinstated the agreement and entered into an amendment to the
asset purchase agreement and a time brokerage agreement under
which Three Point Media has been broadcasting its programming on
KPTI-FM. In connection with this amendment, Three Point Media
made an additional $0.5 million deposit on the purchase
price. We intend to close on the sale of the assets of radio
station KPTI-FM in September 2004; however, there cannot be any
assurance that the sale will be completed. In addition, pursuant
to the credit agreement governing our senior secured credit
facilities, a portion (approximately $25.2 million) of the
proceeds received from the sale of KPTI-FM, when and if
completed, must be offered to the noteholders to repay a portion
of our borrowings under the senior credit facilities. Therefore,
after the reinstatement of the KPTI-FM asset purchase agreement
in the second quarter, the Company determined to reclassify
approximately $25.2 million from long-term debt to current
debt.

19



---



##### Table of Contents



On July 26, 2004, we entered into an asset
purchase agreement with Newsweb Corporation to sell the assets
of radio stations WDEK-FM, WKIE-FM and WKIF-FM, serving the
suburban Chicago, Illinois market, for a cash purchase price of
$28.0 million. In connection with this agreement, Newsweb
Corporation made a $1.4 million deposit on the purchase
price, which is being held in escrow. The agreement contains
customary representations and warranties and the closing of the
sale is subject to the satisfaction of certain conditions,
including renewal of the FCC licenses and receipt of regulatory
approval from the FCC. We intend to sell the assets of radio
stations WDEK-FM, WKIE-FM and WKIF-FM; however, there cannot be
any assurance that the sale will be completed.

We continuously review opportunities to acquire
additional radio stations and sell non-core radio stations,
primarily in the largest Hispanic markets in the United States.
We engage in discussions regarding potential acquisitions from
time to time in the ordinary course of business. We currently
have no written understandings, letters of intent or contracts
to acquire radio stations or other companies. We anticipate that
any future acquisitions would be financed through funds
generated from permitted debt financing, equity financing,
operations, asset sales or a combination of these sources.
However, there can be no assurance that financing from any of
these sources, if necessary and available, can be obtained on
favorable terms for future acquisitions.

During the six months ended June 30, 2004,
we entered into various contractual obligations related to
production services agreements, syndication agreements and
employee agreements. We expect our unrecorded obligations to
increase by approximately $5.5 million, $5.5 million,
$5.8 million, $4.7 million, $4.7 million and
$0.8 million for the fiscal years ended 2004, 2005, 2006,
2007, 2008 and 2009 from what was previously disclosed in our
Form 10-K for 2003.

New Accounting Pronouncements

In December 2002, the Financial Accounting
Standards Board (FASB) issued Statement of
Financial Accounting Standards
(SFAS) No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure (SFAS
No. 148). SFAS No. 148 amends the transition and
disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Among other items, SFAS
No. 148 allows companies adopting SFAS No. 123 to
utilize one of three alternative transition methods, one of
which was a prospective method, as defined, that was
only available if adopted during 2003. To date, the Company has
not adopted SFAS No. 123 utilizing any of the transition
methods of SFAS No. 148. On March 31, 2004, the FASB
issued an exposure draft on a proposed statement, Share-Based
Payment, that addresses the accounting for share-based payment
transactions in which an enterprise receives employee services
in exchange for (a) equity instruments of the enterprise or
(b) liabilities that are based on the fair value of the
enterprises equity instruments or that may be settled by
the issuance of such equity instruments. The proposed statement
would eliminate the ability to account for share-based
compensation transactions using Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and generally would require instead that such
transactions be accounted for using a fair-value based method.
The proposed statement is effective for awards granted,
modified, or settled in fiscal years beginning after
December 15, 2004, for public entities that used the
fair-value based method of accounting under the original
provisions of SFAS No. 123, for recognition or pro forma
disclosure purposes. The Company is currently evaluating the
impact the proposed statement may have on its consolidated
financial position, cash flows and results of operations.

In December 2003, FASB issued a revised
Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research
Bulletin No. 51 (FIN 46R). FIN 46R requires
the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a
majority of the entitys expected residual returns, or
both, as a result of ownership, contractual or other financial
interests in the entity. Currently, entities are generally
consolidated by an enterprise when it has a controlling
financial interest through ownership of a majority voting
interest in the entity. The provisions of FIN 46R are
generally effective for existing (prior to February 1,
2003) variable interest relationships of a public entity no
later than the end of the first reporting period that ends after
March 15, 2004. However, prior to the required application
of this interpretation, a public entity that is not a small
business issuer shall apply FIN 46R to those entities that
are considered to be special-purpose entities no later than the
end of the first

20



---



##### Table of Contents



reporting period that ends after
December 15, 2003. The adoption of FIN 46R did not
have an impact on the Companys consolidated financial
statements.


Disclosure Regarding Forward-Looking
Statements

This quarterly report on Form 10-Q contains
both historical and forward-looking statements. All statements
other than statements of historical fact are, or may be deemed
to be, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements are not based on
historical facts, but rather reflect our current expectations
concerning future results and events. These forward-looking
statements generally can be identified by the use of statements
that include phrases such as believe,
expect, anticipate, intend,
plan, foresee, likely,
will or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals are, or
may be, forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or
achievements to be different from any future results,
performance and achievements expressed or implied by these
statements. Factors that could cause actual results to differ
from those expressed in forward-looking statements include, but
are not limited to:



| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our substantial amount of debt could adversely
    affect our financial condition and prevent us from fulfilling
    our obligations under our senior secured credit facilities and
    Series B preferred stock;                                               
|
| |  | We will require a significant amount of cash to
    service our debt and to make cash dividend payments under the
    Series B preferred stock after October 15, 2008;                                                                                          
|
| |  | We may not have the funds to repay or the ability
    to refinance our senior secured credit facilities or 9 5/8%
    senior subordinated notes due 2009;                                                                                                       
|
| |  | Our ability to generate cash is affected by many
    factors beyond our control;                                                                                                                                                                                
|
| |  | Any acceleration of our debt or event of default
    would harm our business and financial condition;                                                                                                                                                           
|
| |  | Despite our current significant level of debt, we
    and our subsidiaries may still be able to incur substantially
    more debt. This could further intensify some of the risks
    described above;                                                          
|
| |  | The terms of our debt restrict us from engaging
    in many activities and require us to satisfy various financial
    tests;                                                                                                                                   
|
| |  | The terms of our debt and Series B preferred
    stock impose or will impose restrictions on us that may
    adversely affect our business;                                                                                                                     
|
| |  | The restrictions imposed by our debt may prevent
    us from paying cash dividends on the Series B preferred
    stock after October 15, 2008 and exchanging the
    Series B preferred stock for exchange notes;                                               
|
| |  | We may not have the funds or the ability to raise
    the funds necessary to repurchase our Series B preferred
    stock if holders exercise their repurchase right, or to finance
    the change of control offer required by the Series B
    preferred stock;
|
| |  | We may not complete the pending sales of our
    radio stations;                                                                                                                                                                                                
|
| |  | We have experienced net losses in the past and,
    to the extent that we experience net losses in the future, the
    market price of our common stock may be adversely affected which
    in turn may adversely affect our ability to raise capital;          
|
| |  | Our operating results could be adversely affected
    by a national or regional recession;                                                                                                                                                                      
|
| |  | A large portion of our net revenue and station
    operating income currently comes from our New York, Los Angeles
    and Miami markets;                                                                                                                       
|
| |  | Loss of any key personnel could adversely affect
    our business;                                                                                                                                                                                              
|
| |  | Our long-term growth depends upon successfully
    executing our acquisition strategy;                                                                                                                                                                          

21



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Raúl Alarcón, Jr., Chairman of the
    Board of Directors, Chief Executive Officer and President, has
    majority voting control and this control may discourage or
    influence certain types of transactions, including an actual or
    potential change of control of SBS such as a merger or sale of
    SBS;
|
| |  | We compete for advertising revenue with other
    radio groups as well as television and other media, many
    operators of which have greater resources than we do;                                                                                                                                                
|
| |  | We must be able to respond to rapidly changing
    technology, services and standards which characterize our
    industry for us to remain competitive;                                                                                                                                                             
|
| |  | Our business depends on maintaining our FCC
    licenses and we cannot assure you that we will be able to
    maintain these licenses;                                                                                                                                                                              
|
| |  | We may face regulatory review for additional
    acquisitions;                                                                                                                                                                                                                                                      
|
| |  | The market price of our shares of Class A
    common stock may fluctuate significantly; and                                                                                                                                                                                                                         
|
| |  | Current or future sales by existing or future
    stockholders could depress the market price of our Class A
    common stock.                                                                                                                                                                                      

Consequently, such forward-looking statements
should be regarded solely as our current plans, estimates and
beliefs. We do not undertake any obligation to update any
forward-looking statements to reflect subsequent events or
circumstances.






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

We believe that inflation has not had a material
impact on our results of operations for the three- and
six-months ended June 30, 2003 and 2004, respectively.
However, there can be no assurance that inflation will not have
an adverse impact on our future operating results and financial
condition.

Our primary market risk is a change in interest
rates associated with borrowings under our senior secured credit
facilities. Advances under the senior secured credit facilities
bear base rate or eurodollar rate interest (in each case subject
to applicable margins), as applicable, which vary in accordance
with prevailing economic conditions. Our earnings are affected
by changes in interest rates due to the impact those changes
have on interest expense from variable-rate debt instruments and
on interest income generated from our cash and investment
balances. At June 30, 2004, all of our debt, other than our
$124.4 million senior secured credit facility term loan,
had fixed interest rates. If variable interest rates average 10%
higher in 2004 than they did during 2003, our variable interest
expense would increase by approximately $0.6 million,
compared to a variable annualized estimated $5.5 million
for 2003 measured as of December 31, 2003. If interest
rates average 10% lower in 2004 than they did during 2003, our
interest income from cash and investment balances would decrease
by approximately $0.1 million, compared to a variable
annualized estimated $0.5 million for 2003 measured as of
December 31, 2003. These amounts are determined by
considering the impact of the hypothetical interest rates on our
variable-rate debt, cash equivalents and short-term investment
balances at December 31, 2003. There has been no material
change in our market risk position since December 31, 2003.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures



| |                                                     
| | ----------------------------------------------------
| | Evaluation of disclosure controls and
    procedures

We maintain disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act) that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is
accumulated and communicated to our management, including our

22



---



##### Table of Contents



Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow for timely decisions regarding
required disclosure.


As of the end of the quarterly period covered by
this report, our management carried out an evaluation, with the
participation of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and
procedures. Based on this evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the
end of such period, our disclosure controls and procedures were
effective.



| |                                                         
| | --------------------------------------------------------
| | Changes in internal control over financial
    reporting

There has been no change in our internal control
over financial reporting during the fiscal quarter to which this
report relates that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.



PART II  OTHER
INFORMATION





|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

From time to time the Company is involved in
litigation incidental to the conduct of its business, such as
contractual matters and employee-related matters. In the opinion
of management, such litigation is not likely to have a material
adverse effect on the Companys business, operating results
or financial position.

On June 12, 2002, the Company filed a
lawsuit in the United States District Court for the Southern
District of Florida against Clear Channel Communications
(Clear Channel) and Hispanic Broadcasting
Corporation (HBC), and filed an amended complaint on
July 31, 2002. The lawsuit asserts federal and state
antitrust law violations and other state law claims and alleges
that Clear Channel and HBC have adversely affected the
Companys ability to raise capital, depressed its share
price, impugned its reputation, made station acquisitions more
difficult and interfered with its business opportunities and
contractual arrangements. In the amended complaint, the Company
sought actual damages in excess of $500.0 million, to be
trebled under antitrust law.

Both defendants moved to dismiss the amended
complaint, and on January 31, 2003, the Court granted
defendants motions for failure to adequately allege
antitrust injury and dismissed the federal court claims with
prejudice and dismissed the state court claims for lack of
federal court jurisdiction in light of the dismissal of the
federal court claims. The Company filed a motion for
reconsideration of that opinion and asked for leave to file a
proposed second amended complaint, which contains additional
economic analysis and factual detail based upon the depositions
of Clear Channels CEO and CFO and HBCs CFO and
document production in the action, and which seeks damages in an
amount to be determined at trial. On August 6, 2003, the
District Court denied the Companys motion for
reconsideration. On September 5, 2003, the Company filed an
appeal to the 11th Circuit Court of Appeals of the District
Courts decisions dated January 31, 2003 and
August 6, 2003. The briefing on that appeal was completed
in December 2003, oral argument occurred in Miami on
February 26, 2004 and the Eleventh Circuit affirmed the
District Court decision on June 30, 2004.

As reported in the Companys quarterly
report on Form 10-Q for the quarterly period ended
March 31, 2004, in connection with the Companys sale
of WXLX-AM in 1997, the Company assigned the lease of the
transmitter for WXLX in Lyndhurst, New Jersey, to the purchaser
of the station. The transmitter is located on a former landfill
which ceased operations in the late 1960s. Although WXLX
has been sold, the Company retains potential exposure to
possible environmental liabilities relating to the transmitter
site (the Transmitter Property). On
September 12, 2002, the landlords of the property,
Frank F. Viola, Thomas C. Viola Trust and Louis Viola
Company (the Property Owners), received a notice
from the New Jersey Meadowlands Commission (NJMC)
indicating that it was planning to redevelop the lands which
include the Transmitter Property and offering compensation to
the Property Owners for the purchase of the Transmitter Property.

On December 4, 2002, the NJMC filed a
Verified Complaint in condemnation in the Superior Court of New
Jersey, Bergen County, against the Property Owners to acquire
the Transmitter Property. The Transmitter Property is one of a
number of sites that the NJMC is acquiring for a redevelopment
project. Many of these sites (owned both publicly and privately)
were used for landfill operations including the Transmitter
Property. The Company is named as a defendant in the litigation
(the Action) by virtue of its

23



---



##### Table of Contents



interest of record in the Transmitter Property as
a former leaseholder prior to the aforementioned lease
assignment.


A settlement agreement has been entered in the
Court record resolving the compensation to be paid to the
Property Owners (the Settlement Agreement), and
providing for waiver of claims for landfill closure costs
against the Property Owners. While the Settlement Agreement
reserved the NJMCs claims for environmental remediation
against the other parties, including the Company, the Settlement
Agreement further stipulates that the NJMCs developer will
agree to indemnify and insure (under policies expiring on
December 31, 2021 and providing coverage in the amount of
$50.0 million) such other parties (including the Company)
against claims for remediation of environmental contamination
while also providing for the discontinuance of the Action.

The principal terms of the Settlement Agreement
and insurance have been resolved and a proposed final Consent
Judgment implementing the Settlement Agreement is pending before
the Court and is expected to be entered prior to the end of the
year.





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

The election of our board of directors was
submitted to a vote of security holders, through the
solicitation of proxies pursuant to Section 14 under the
Securities Exchange Act of 1934, as amended, at the annual
meeting of stockholders held on June 30, 2004.

|                        |  |           |             |                        |  |  |            | 
|----------------------- |  | --------- | ----------- | ---------------------- |  |  | ---------- | 
|Directors               |  | Votes For |             | Votes Against/Withheld
|                        |  |           |             |                       
|Raúl Alarcón, Jr.       |  |           | 263,412,068 |                        |  |  | 9,121,259  | 
|Pablo Raúl Alarcón, Sr. |  |           | 260,845,833 |                        |  |  | 11,687,494 | 
|Antonio S. Fernandez    |  |           | 272,006,215 |                        |  |  | 527,112    | 
|Dan Mason               |  |           | 271,302,016 |                        |  |  | 1,231,311  | 
|Jason L. Shrinsky       |  |           | 263,018,780 |                        |  |  | 9,514,547  | 
|Jose A. Villamil        |  |           | 272,032,793 |                        |  |  | 500,534    | 

There were no broker non-votes.





|        |                  
|------- | -----------------
|Item 5. | Other Information

On July 26, 2004, we entered into an asset
purchase agreement with Newsweb Corporation to sell the assets
of radio stations WDEK-FM, WKIE-FM and WKIF-FM, serving the
suburban Chicago, Illinois market, for a cash purchase price of
$28.0 million. In connection with this agreement, Newsweb
Corporation made a $1.4 million deposit on the purchase
price, which is being held in escrow. The agreement contains
customary representations and warranties and the closing of the
sale is subject to the satisfaction of certain conditions,
including renewal of the FCC licenses and receipt of regulatory
approval from the FCC. We intend to sell the assets of radio
stations WDEK-FM, WKIE-FM and WKIF-FM; however, there cannot be
any assurance that the sale will be completed.





|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits 

| |   |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3 | .1 |  | Third Amended and Restated Certificate of
    Incorporation of Spanish Broadcasting System, Inc. (the
    Company), dated September 29, 1999
    (incorporated by reference to the Companys 1999
    Registration Statement on Form S-1 (Commission File
    No. 333-85499) (the 1999 Registration
    Statement)) (Exhibit A to this exhibit is
    incorporated by reference to the Companys Current Report
    on Form 8-K, dated March 25, 1996 (the 1996
    Current Report)).
| | 3 | .2 |  | Certificate of Amendment to the Third Amended and
    Restated Certificate of Incorporation of the Company, dated
    September 29, 1999 (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                     
| | 3 | .3 |  | Amended and Restated By-Laws of the Company
    (incorporated by reference to the Companys 1999
    Registration Statement).                                                                                                                                                                                                                                                                                                                                                              

24



---



##### Table of Contents



| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .4  |  | Certificate of Elimination of 14 1/4% Senior
    Exchangeable Preferred Stock, Series A of the Company,
    dated October 28, 2003 (incorporated by reference to
    Exhibit 3.3 of the Companys Quarterly Report on
    Form 10-Q, dated November 14, 2003 (the 11/14/03
    Quarterly Report)).                                                                                                                                             
| | 4  | .1  |  | Article V of the Third Amended and Restated
    Certificate of Incorporation of the Company, dated
    September 29, 1999 (incorporated by reference to the
    Companys 1999 Registration Statement) (see
    Exhibit 3.1).                                                                                                                                                                                                                    
| | 4  | .2  |  | Certificate of Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series A Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting System, Inc.
    (incorporated by reference to Exhibit 4.1 of the
    Companys 11/14/03 Quarterly Report).
| | 4  | .3  |  | Certificate of Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series B Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting System, Inc.
    (incorporated by reference to Exhibit 4.2 of the
    Companys 11/14/03 Quarterly Report).
| | 4  | .4  |  | Indenture dated June 29, 1994 among the
    Company, IBJ Schroder Bank & Trust Company, as Trustee, the
    Guarantors named therein and the Purchasers named therein
    (incorporated by reference to Exhibit 4.1 of the
    Companys 1994 Registration Statement on Form S-4).                                                                                                                                                               
| | 4  | .5  |  | First Supplemental Indenture dated as of
    March 25, 1996 to the Indenture dated as of June 29,
    1994 among the Company, the Guarantors named therein and IBJ
    Schroder Bank & Trust Company, as Trustee (incorporated by
    reference to the 1996 Current Report).                                                                                                                                                                     
| | 4  | .6  |  | Second Supplemental Indenture dated as of
    March 1, 1997 to the Indenture dated as of June 29,
    1994 among the Company, the Guarantors named therein and IBJ
    Schroder Bank & Trust Company, as Trustee (incorporated by
    reference to the 1996 Current Report).                                                                                                                                                                     
| | 4  | .7  |  | Supplemental Indenture dated as of
    October 21, 1999 to the Indenture dated as of June 29,
    1994 among the Company, the Guarantors named therein and IBJ
    Schroder Bank & Trust Company, as Trustee (incorporated by
    reference to the Companys 1999 Registration Statement).                                                                                                                                                       
| | 4  | .8  |  | Indenture with respect to 9 5/8% Senior
    Subordinated Notes due 2009 with The Bank of New York as
    Trustee, dated November 2, 1999 (incorporated by reference
    to the Current Report on Form 8-K dated November 2,
    1999).                                                                                                                                                                                                           
| | 4  | .9  |  | Indenture with respect to 9 5/8% Senior
    Subordinated Notes due 2009 with The Bank of New York as
    Trustee, dated June 8, 2001 (incorporated by reference to
    the Companys Registration Statement on Form S-3,
    filed on June 25, 2001).                                                                                                                                                                                            
| | 4  | .10 |  | Form of stock certificate for the Class A
    common stock of the Company (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                          
| | 10 | .1  |  | Nonqualified Stock Option Agreement dated
    June 30, 2004 between the Company and Antonio S. Fernandez.                                                                                                                                                                                                                                                                                                                                        
| | 10 | .2  |  | Nonqualified Stock Option Agreement dated
    June 30, 2004 between the Company and Jose A. Villamil.                                                                                                                                                                                                                                                                                                                                            
| | 10 | .3  |  | Amendment dated as of April 15, 2004 to the
    Asset Purchase Agreement dated as of October 2, 2003, by
    and among the Company, Spanish Broadcasting System-San
    Francisco, Inc., KPTI Licensing, Inc. and 3 Point
    Media  San Francisco, LLC.                                                                                                                                                                                        
| | 10 | .4  |  | Time Brokerage Agreement dated as of
    April 15, 2004, by and among the Company, Spanish
    Broadcasting System-San Francisco, Inc., KPTI Licensing, Inc.
    and 3 Point Media  San Francisco, LLC.                                                                                                                                                                                                                                         
| | 10 | .5  |  | Asset Purchase Agreement dated as of
    July 26, 2004 by and among Newsweb Corporation, an Illinois
    corporation, and Spanish Broadcasting System of Illinois, Inc.,
    a Delaware corporation.                                                                                                                                                                                                                                             
| | 31 | .1  |  | Chief Executive Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                           
| | 31 | .2  |  | Chief Financial Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                           

25



---



##### Table of Contents



| |    |    |  |                                                                                                                                                          
| | -- | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | 32 | .1 |  | Chief Executive Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
| | 32 | .2 |  | Chief Financial Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

The Company filed the following report on
Form 8-K during the three months ended June 30, 2004:



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) a current report on Form 8-K on
    May 5, 2004 to report that on May 5, 2004 the Company
    issued a press release announcing its first quarter fiscal year
    2004 financial results.

26



---



##### Table of Contents



SIGNATURES

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



| |                                  
| | ---------------------------------
| | SPANISH BROADCASTING SYSTEM, INC.



| |     |                     
| | --- | --------------------
| | BY: | /s/ JOSEPH A. GARCíA

| |                                               
| | ----------------------------------------------
| |                                               
| | JOSEPH A. GARCíA                              
| | Executive Vice President, Chief               
| | Financial Officer and Secretary
    (principal
| | financial and accounting officer and
    duly 
| | authorized officer of the
    registrant)     

Date: August 9, 2004

27



---



##### Table of Contents



(a) Exhibits 

| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1  |  | Third Amended and Restated Certificate of
    Incorporation of Spanish Broadcasting System, Inc. (the
    Company), dated September 29, 1999
    (incorporated by reference to the Companys 1999
    Registration Statement on Form S-1 (Commission File
    No. 333-85499) (the 1999 Registration
    Statement)) (Exhibit A to this exhibit is
    incorporated by reference to the Companys Current Report
    on Form 8-K, dated March 25, 1996 (the 1996
    Current Report)).
| | 3  | .2  |  | Certificate of Amendment to the Third Amended and
    Restated Certificate of Incorporation of the Company, dated
    September 29, 1999 (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                     
| | 3  | .3  |  | Amended and Restated By-Laws of the Company
    (incorporated by reference to the Companys 1999
    Registration Statement).                                                                                                                                                                                                                                                                                                                                                              
| | 3  | .4  |  | Certificate of Elimination of 14 1/4% Senior
    Exchangeable Preferred Stock, Series A of the Company,
    dated October 28, 2003 (incorporated by reference to
    Exhibit 3.3 of the Companys Quarterly Report on
    Form 10-Q, dated November 14, 2003 (the 11/14/03
    Quarterly Report)).                                                                                                                                                                                       
| | 4  | .1  |  | Article V of the Third Amended and Restated
    Certificate of Incorporation of the Company, dated
    September 29, 1999 (incorporated by reference to the
    Companys 1999 Registration Statement) (see
    Exhibit 3.1).                                                                                                                                                                                                                                                              
| | 4  | .2  |  | Certificate of Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series A Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting System, Inc.
    (incorporated by reference to Exhibit 4.1 of the
    Companys 11/14/03 Quarterly Report).                                          
| | 4  | .3  |  | Certificate of Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series B Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting System, Inc.
    (incorporated by reference to Exhibit 4.2 of the
    Companys 11/14/03 Quarterly Report).                                          
| | 4  | .4  |  | Indenture dated June 29, 1994 among the
    Company, IBJ Schroder Bank & Trust Company, as Trustee, the
    Guarantors named therein and the Purchasers named therein
    (incorporated by reference to Exhibit 4.1 of the
    Companys 1994 Registration Statement on Form S-4).                                                                                                                                                                                                         
| | 4  | .5  |  | First Supplemental Indenture dated as of
    March 25, 1996 to the Indenture dated as of June 29,
    1994 among the Company, the Guarantors named therein and IBJ
    Schroder Bank & Trust Company, as Trustee (incorporated by
    reference to the 1996 Current Report).                                                                                                                                                                                                               
| | 4  | .6  |  | Second Supplemental Indenture dated as of
    March 1, 1997 to the Indenture dated as of June 29,
    1994 among the Company, the Guarantors named therein and IBJ
    Schroder Bank & Trust Company, as Trustee (incorporated by
    reference to the 1996 Current Report).                                                                                                                                                                                                               
| | 4  | .7  |  | Supplemental Indenture dated as of
    October 21, 1999 to the Indenture dated as of June 29,
    1994 among the Company, the Guarantors named therein and IBJ
    Schroder Bank & Trust Company, as Trustee (incorporated by
    reference to the Companys 1999 Registration Statement).                                                                                                                                                                                                 
| | 4  | .8  |  | Indenture with respect to 9 5/8% Senior
    Subordinated Notes due 2009 with The Bank of New York as
    Trustee, dated November 2, 1999 (incorporated by reference
    to the Current Report on Form 8-K dated November 2,
    1999).                                                                                                                                                                                                                                                     
| | 4  | .9  |  | Indenture with respect to 9 5/8% Senior
    Subordinated Notes due 2009 with The Bank of New York as
    Trustee, dated June 8, 2001 (incorporated by reference to
    the Companys Registration Statement on Form S-3,
    filed on June 25, 2001).                                                                                                                                                                                                                                      
| | 4  | .10 |  | Form of stock certificate for the Class A
    common stock of the Company (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                    
| | 10 | .1  |  | Nonqualified Stock Option Agreement dated
    June 30, 2004 between the Company and Antonio S. Fernandez.                                                                                                                                                                                                                                                                                                                                                                                  
| | 10 | .2  |  | Nonqualified Stock Option Agreement dated
    June 30, 2004 between the Company and Jose A. Villamil.                                                                                                                                                                                                                                                                                                                                                                                      

28



---



##### Table of Contents



| |    |    |  |                                                                                                                                                                                                                                                          
| | -- | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .3 |  | Amendment dated as of April 15, 2004 to the
    Asset Purchase Agreement dated as of October 2, 2003, by
    and among the Company, Spanish Broadcasting System-San
    Francisco, Inc., KPTI Licensing, Inc. and 3 Point
    Media  San Francisco, LLC.
| | 10 | .4 |  | Time Brokerage Agreement dated as of
    April 15, 2004, by and among the Company, Spanish
    Broadcasting System-San Francisco, Inc., KPTI Licensing, Inc.
    and 3 Point Media  San Francisco, LLC.                                                 
| | 10 | .5 |  | Asset Purchase Agreement dated as of
    July 26, 2004 by and among Newsweb Corporation, an Illinois
    corporation, and Spanish Broadcasting System of Illinois, Inc.,
    a Delaware corporation.                                                     
| | 31 | .1 |  | Chief Executive Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                   
| | 31 | .2 |  | Chief Financial Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                   
| | 32 | .1 |  | Chief Executive Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                
| | 32 | .2 |  | Chief Financial Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                

29