##### Table of Contents

---



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2003



Commission file number: 333-84416



NEXTMEDIA OPERATING, INC.

(Exact
name of Registrant as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 84-154397                           
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|6312 S. Fiddlers Green Circle, Suite 360E Englewood, CO        |  | 80111                               
|(Address of Principal Executive Office)                        |  | (Zip Code)                          



Registrants
telephone number, including area code: (303) 694-9118



Securities registered pursuant to Section 12 (b) of the Act:

None



---

(Title of Class)



Securities registered pursuant to Section 12 (g) of the
Act:

None



---

(Title of Class)



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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes x No ̈



Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).



Yes ̈No x



The
aggregate market value of the voting stock of the registrant held by non-affiliates as of March 30, 2004 was $0. The total number of shares of common stock issued and outstanding as of March 30, 2004 was 3,000.



DOCUMENTS INCORPORATED BY REFERENCE



None



---



---

##### Table of Contents

NEXTMEDIA OPERATING, INC.

FORM 10-K

TABLE OF CONTENTS



|         |  |          |  |                                                                                       |  |     
|-------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |          |  |                                                                                       |  | Page
|         |  |         
|PART I   |  |          |  | 1                                                                                    
|         |  |          | 
|         |  | ITEM 1.  |  | BUSINESS                                                                              |  | 1   
|         |  |          | 
|         |  | ITEM 2.  |  | PROPERTIES                                                                            |  | 17  
|         |  |          | 
|         |  | ITEM 3.  |  | LEGAL PROCEEDINGS                                                                     |  | 17  
|         |  |          | 
|         |  | ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 17  
|         |  |         
|PART II  |  |          |  | 18                                                                                   
|         |  |          | 
|         |  | ITEM 5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 |  | 18  
|         |  |          | 
|         |  | ITEM 6.  |  | SELECTED FINANCIAL DATA                                                               |  | 18  
|         |  |          | 
|         |  | ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 19  
|         |  |          | 
|         |  | ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 28  
|         |  |          | 
|         |  | ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |  | 28  
|         |  |          | 
|         |  | ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  |  | 28  
|         |  |          | 
|         |  | ITEM 9A. |  | CONTROLS AND PROCEDURES                                                               |  | 28  
|         |  |         
|PART III |  |          |  | 29                                                                                   
|         |  |          | 
|         |  | ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                    |  | 29  
|         |  |          | 
|         |  | ITEM 11. |  | EXECUTIVE COMPENSATION                                                                |  | 30  
|         |  |          | 
|         |  | ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                        |  | 30  
|         |  |          | 
|         |  | ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                        |  | 31  
|         |  |          | 
|         |  | ITEM 14. |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                |  | 31  
|         |  |         
|PART IV  |  |          |  | 32                                                                                   
|         |  |          | 
|         |  | ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES and REPORTS ON FORM 8-K                       |  | 32  



i



---

##### Table of Contents

FORWARD-LOOKING STATEMENTS



Certain statements discussed in Item 1 (Business), Item 3 (Legal Proceedings), Item 7 (Managements Discussion and Analysis of
Financial Condition and Results of Operations), Item 7A (Quantitative and Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-K constitute forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements relate to managements expectations, strategic objectives, business prospects, trends, anticipated economic performance and financial condition and other similar matters and
involve known and unknown risks, uncertainties and other important factors that could cause the actual results, trends, performance or achievements of results to differ materially from any future results, performance or achievements discussed or
implied by such forward-looking statements. These risks, uncertainties and other important factors include, among others: general economic and business conditions, the cyclical nature of our business, the volume of advertising spending, competition,
regulatory initiatives, customer preferences and various other matters, many of which are beyond our control. Forward-looking statements speak only as of the date of the document in which they are made, and we disclaim any obligation to provide any
updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based.



MARKET SHARE AND INDUSTRY DATA



We have based or derived the market share and industry data we present in this report from
third-party sources, primarily from the Outdoor Advertising Association of America, or OAAA, the Radio Advertising Bureau, or RAB, BIA Financial Network, Inc.s Radio Market Report 2002 and Inside Radio, Incorporateds Who Owns
What?, and audience measurement information from the Arbitron Company. While we believe that these sources are reliable, we can give no assurance that these market share and industry data are accurate in all material respects.



PART I



|ITEM 1. | BUSINESS
|------- | --------



Unless the context indicates otherwise, any reference to we, our and us refers to NextMedia Operating, Inc., and its consolidated subsidiaries, and NextMedia refers
only to NextMedia Operating, Inc., which was incorporated under the laws of the State of Delaware in 2000.



Overview



We are a rapidly growing
out-of-home media company that owns and operates radio stations and outdoor advertising properties throughout the United States. We operate 60 radio stations in 14 small to mid-size markets. Our outdoor advertising business consists of traditional
outdoor properties, including more than 7,000 outdoor advertising displays and alternative advertising displays located in more than 3,000 retail locations across the United States, primarily in 18 of the 20 largest metropolitan statistical areas,
or MSAs. For financial information with respect to our radio broadcasting and outdoor advertising divisions, see Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial
statements included elsewhere in this annual report.



Radio Broadcasting
Division



Radio Station Portfolio



We operate 60 AM and FM radio stations in 14 markets throughout the United States. The
following chart sets forth certain information about the radio stations we own and operate in rated markets.





---

##### Table of Contents

|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|------------------------------------ |  | ----------------- |  | ------------- |  | ---------- |  | ------------------------------- |  | --------------------- |  | --------------------------------------- |  | -------------------------------- |  | ------------------------
|                                     |  | Market Rank       |  |               |  |            |  | Fall 2003                      
|Market/Stations                      |  | 2002RadioRevenues |  | 2002MetroRank |  | Frequency  |  | Format                          |  | Target Demographic(1) |  | Audience Share in Target Demographic(2) |  | AudienceRank inTargetDemographic |  | Market Audience Share(2)
|Wilmington                           |  | 81                |  | 77            |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WJBR-FM                              |  |                   |  |               |  | 99.5       |  | Adult Contemporary              |  | W25-54                |  | 12.3                                    |  | 2                                |  | 8.8%                    
|Reno, NV                             |  | 88                |  | 127           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|KRZQ-FM                              |  |                   |  |               |  | 100.9      |  | Alternative Rock                |  | M18-34                |  | 5.0                                     |  | 8                                |  | 2.5                     
|KTHX-FM                              |  |                   |  |               |  | 100.1      |  | Adult Rock                      |  | P25-54                |  | 5.9                                     |  | 5                                |  | 4.1                     
|KURK-FM(4)                           |  |                   |  |               |  | 92.9       |  | Classic Rock                    |  | M25-54                |  | 4.2                                     |  | 7                                |  | 2.1                     
|KJZS-FM                              |  |                   |  |               |  | 92.1       |  | Smooth Jazz                     |  | P35-54                |  | 6.1                                     |  | 6                                |  | 4.1                     
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 12.8                    
|Saginaw-Bay City-Midland, MI         |  | 91                |  | 130           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WGER-FM                              |  |                   |  |               |  | 106.3      |  | Adult Contemporary              |  | W25-54                |  | 7.6                                     |  | 5                                |  | 4.1                     
|WSGW-AM                              |  |                   |  |               |  | 790        |  | News Talk                       |  | P12+                  |  | 11.1                                    |  | 1                                |  | 11.1                    
|WXQL-FM(5)                           |  |                   |  |               |  | 100.5      |  | Contemporary Hit Radio          |  | W18-34                |  | 6.3                                     |  | 4                                |  | 2.1                     
|WTLZ-FM                              |  |                   |  |               |  | 107.1      |  | Urban                           |  | P18-49                |  | 7.8                                     |  | 4                                |  | 6.0                     
|WCEN-FM                              |  |                   |  |               |  | 94.5       |  | Country                         |  | P25-54                |  | 7.4                                     |  | 3                                |  | 5.6                     
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 28.9                    
|Greenville-New Bern-Jacksonville, NC |  | 98                |  | 84            |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WRNS-AM/FM                           |  |                   |  |               |  | 960/95.1   |  | Country                         |  | P25-54                |  | 12.8                                    |  | 1                                |  | 13.4                    
|WERO-FM                              |  |                   |  |               |  | 93.3       |  | Top 40                          |  | W18-44                |  | 6.8                                     |  | 4                                |  | 4.3                     
|WKOO-FM                              |  |                   |  |               |  | 98.7       |  | Oldies                          |  | P35-64                |  | 3.7                                     |  | 6                                |  | 2.7                     
|WANG-AM/FM                           |  |                   |  |               |  | 1330/105.1 |  | Adult Standards                 |  | P35-64                |  | 0.9                                     |  | 13                               |  | 0.9                     
|WXQR-FM                              |  |                   |  |               |  | 105.5      |  | Rock                            |  | M18-34                |  | 8.8                                     |  | 1                                |  | 3.5                     
|WQSL-FM(3)                           |  |                   |  |               |  | 92.3       |  | Rhythmic Contemporary Hit Radio |  | P18-34                |  | 5.9                                     |  | 1                                |  | 3.7                     
|WQZL-FM(3)                           |  |                   |  |               |  | 101.1      |  | Rhythmic Contemporary Hit Radio |  | P18-34                |  | 5.9                                     |  | 1                                |  | 2.7                     
|WDLX-AM                              |  |                   |  |               |  | 930        |  | News/Talk                       |  | P25-54                |  | 0.8                                     |  | 15                               |  | 0.6                     
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 31.8                    
|Lubbock, TX                          |  | 159               |  | 181           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|KLLL-FM                              |  |                   |  |               |  | 96.3       |  | Country                         |  | P25-54                |  | 10.9                                    |  | 1                                |  | 12.2                    
|KMMX-FM                              |  |                   |  |               |  | 100.3      |  | Hot Adult Contemporary          |  | W25-44                |  | 8.8                                     |  | 4                                |  | 4.4                     
|KONE-FM                              |  |                   |  |               |  | 101.1      |  | Classic Rock                    |  | M25-54                |  | 10.8                                    |  | 2                                |  | 6.8                     
|KBTE-FM (LMA)                        |  |                   |  |               |  | 104.9      |  | Rhythmic Contemporary Hit Radio |  | P18-34                |  | 12.7                                    |  | 2                                |  | 10.1                    
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 33.5                    
|Myrtle Beach, SC                     |  | 163               |  | 167           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WQJM-AM                              |  |                   |  |               |  | 1450       |  | News/Talk Sports                |  | P25-54                |  |                                        |  |                                 |  |                        
|WRNN-FM                              |  |                   |  |               |  | 99.5       |  | News/Talk                       |  | P25-54                |  | 6.3                                     |  | 3                                |  | 8.9                     
|WYAV-FM                              |  |                   |  |               |  | 104.1      |  | Classic Rock                    |  | M25-54                |  | 17.1                                    |  | 1                                |  | 6.3                     
|WKZQ-FM                              |  |                   |  |               |  | 101.7      |  | Active Rock                     |  | M18-34                |  | 11.6                                    |  | 2                                |  | 3.9                     
|WMYB-FM                              |  |                   |  |               |  | 92.1       |  | Adult Contemporary              |  | W25-54                |  | 6.5                                     |  | 2                                |  | 4.3                     
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 23.4                    
|Canton, OH                           |  | 167               |  | 129           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WHBC-FM                              |  |                   |  |               |  | 94.1       |  | Adult Contemporary              |  | W25-54                |  | 19.4                                    |  | 1                                |  | 11.4                    
|WHBC-AM                              |  |                   |  |               |  | 1480       |  | Full Service                    |  | P35-64                |  | 9.7                                     |  | 2                                |  | 13.2                    
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 24.6                    
|Erie, PA                             |  | 171               |  | 166           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WRTS-FM                              |  |                   |  |               |  | 103.7      |  | Contemporary Hit Radio/Top-40   |  | W18-49                |  | 31.8                                    |  | 1                                |  | 19.8                    
|WRKT-FM                              |  |                   |  |               |  | 100.9      |  | Rock                            |  | M25-54                |  | 13.3                                    |  | 2                                |  | 6.9                     
|WFGO-FM                              |  |                   |  |               |  | 94.7       |  | Oldies                          |  | P25-54                |  | 8.1                                     |  | 4                                |  | 7.3                     
|WFNN-AM                              |  |                   |  |               |  | 1330       |  | Sports                          |  | M25-54                |  | 7.2                                     |  | 5                                |  | 3.3                     
|WJET-AM                              |  |                   |  |               |  | 1400       |  | News/Talk                       |  | P25-54                |  | 3.1                                     |  | 9                                |  | 4.3                     
|WUSE-FM                              |  |                   |  |               |  | 93.9       |  | Country                         |  | P25-54                |  | 3.1                                     |  | 9                                |  | 3.3                     
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 44.9                    
|Decatur, IL                          |  | 260               |  | 267           |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|WSOY-FM                              |  |                   |  |               |  | 102.9      |  | Top 40                          |  | W25-44                |  | 21.1                                    |  | 1                                |  | 10.6                    
|WCZQ-FM                              |  |                   |  |               |  | 105.5      |  | Rhythmic Contemporary           |  | P18-34                |  | 10.0                                    |  | 3                                |  | 4.4                     
|WDZQ-FM                              |  |                   |  |               |  | 95.1       |  | Country                         |  | P25-54                |  | 5.0                                     |  | 5                                |  | 5.3                     
|WSOY-AM                              |  |                   |  |               |  | 1340       |  | News/Talk/Sports                |  | P25-54                |  | 8.3                                     |  | 2                                |  | 11.5                    
|WDZ-AM                               |  |                   |  |               |  | 1050       |  | Urban Adult Contemporary        |  | P25-54                |  | 3.3                                     |  | 8                                |  | 4.4                     
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  |                         
|                                     |  |                   |  |               |  |            |  |                                 |  |                       |  |                                         |  |                                  |  | 36.2                    

---

|(1) | P = Persons; M = Men; W = Women.
|--- | --------------------------------



|(2) | Reflects the radio stations share among all radio station signals received in that market.
|--- | -------------------------------------------------------------------------------------------



|(3) | Stations are simulcast.
|--- | -----------------------



|(4) | Formerly KNHK-FM.
|--- | -----------------



|(5) | Formerly WTCF-FM.
|--- | -----------------



2



---

##### Table of Contents

Wilmington, Delaware. Wilmington is the 77th ranked MSA and the 81st ranked radio market in the United States
based on estimated 2002 radio advertising revenue of $26.1 million, of which we had a 25.6% share. According to BIAs Financial Network, Inc.s Radio Market Report 2002, radio advertising revenue in Wilmington grew at a compound rate of
4.8% during the five-year period ended December 31, 2002.



The Wilmington
market has a population of approximately 663,100. Our signal in Wilmington also reaches Philadelphia, including many of its affluent suburban communities. WJBR-FM has been the number one or two rated station in the Wilmington market for the last
five years. In addition, WJBRs citygrade signal over the metropolitan Philadelphia area enables us to attract advertisers seeking to reach residents in Philadelphias affluent suburbs.



Reno, Nevada. Reno is the 127th ranked MSA and the 88th ranked radio market in the
United States based on estimated 2002 radio advertising revenue of $23.6 million, of which we had a 16.9% share. Radio advertising revenue in Reno grew at a compound rate of 8.7% during the five-year period ended December 31, 2002.



The Reno market has a population of approximately 410,800, which has historically grown
faster than the national average. We have capitalized on Renos rapid population growth and popularity as a vacation destination, and believe that our high quality adult programming will enable us to increase our market share and revenue. Reno
continues to present an attractive opportunity due to higher than average population growth.



Saginaw-Bay City-Midland, Michigan is the 130th ranked MSA and the 91st ranked radio market in the United States based on estimated 2002 radio advertising revenue of $22.5 million, of which we had a 40.4%
share. Radio advertising in Saginaw grew at a compound rate of 6.9% during the five-year period ended December 31, 2002.



The Saginaw-Bay City-Midland market has a population of approximately 402,400 and is a local vacation destination for Michigan and the surrounding states. While we have
achieved a leading position in the market in terms of ratings and revenue, we believe the market presents the opportunity for further development and growth.



Greenville-New Bern-Jacksonville, North Carolina. Greenville-New Bern-Jacksonville is the 84th ranked MSA and the 98th ranked radio market in the United States
based on estimated 2002 radio advertising revenue of $21.4 million, of which we had a 38.3% share. Radio advertising revenue in Greenville grew at a compound rate of 4.4% during the five-year period ended December 31, 2002.



The Greenville-New Bern-Jacksonville market is the largest market that Arbitron covers in
terms of geographic area and has a population of approximately 587,400. We operate ten stations in the market, including WRNS-FM, the leading regional country music station in the market. Combined with our radio and outdoor operations in Myrtle
Beach, South Carolina, our stations in this market make us the leading out-of-home media provider in the Coastal Carolina region. We expect our position to help us continue to capitalize on the significant growth opportunities in Greenville-New
Bern-Jacksonville.



Lubbock, Texas. Lubbock is the 181st ranked MSA and
the 159th ranked radio market in the United States based on estimated 2002 radio advertising revenue of $12.2 million, of which we had a 26.8% share. Radio advertising revenue in Lubbock grew at a compound rate of 3.2% during the five-year period
ended December 31, 2002.



The Lubbock market has a population of approximately
246,700. One of our stations, KLLL-FM, is the leading country station in the market, and has featured the top-rated morning show in the market for the last several years. In 2003 we entered into a long term LMA to operate station KBTE-FM. In its
first six months of operation, KBTE-FM became the number two rated station in the market and has positioned our cluster to experience above-average growth.



3



---

##### Table of Contents

Myrtle Beach, South Carolina. Myrtle Beach is the 167th ranked MSA and the 163rd ranked radio market in the United
States based on estimated 2002 radio advertising revenue of $11.8 million, of which we had a 29.2% share. Radio advertising revenue in Myrtle Beach grew at a compound rate of 5.2% during the five-year period ended December 31, 2002.



The Myrtle Beach market has a population of approximately 264,000. Myrtle Beach is one of the
fastest growing cities on the east coast of the United States and is a major vacation destination. Subsequent to entering the market in July 2000, we changed some of the formats and signals in our Myrtle Beach stations and in the fall of 2002 became
the market leader in ratings and revenue. We expect our strong ratings position and our strong performance in the Coastal Carolina region to drive future growth.



Canton, Ohio. Canton is the 129th ranked MSA and the 167th ranked radio market in the United States based on estimated 2002 radio
advertising revenue of $11.7 million, of which we had a 60.6% share. Radio advertising revenue in Canton grew at a compound rate of 4.0% during the five-year period ended December 31, 2002.



The Canton market has a population of approximately 406,500. We believe that Canton
represents a significant growth opportunity for our business because the market is not home to any major television broadcasting station. As a result, the competition for local advertising spending in on-air broadcast space is limited. Our two
stations are Cantons leading radio group in terms of revenue and ratings.



Erie, Pennsylvania. Erie is the 166th ranked MSA and the 171st ranked radio market in the United States based on estimated 2002 radio advertising revenue of $11.1 million, of which we had a 61.0% share. Radio advertising revenue in
Erie grew at a compound rate of 1.6% during the five-year period ended December 31, 2002.



The Erie market has a population of approximately 279,000. We have established our six stations as the leading radio cluster in the market in terms of ratings and revenue. Since entering the market in 2000, we have
acquired an additional FM station, secured an additional AM frequency and consolidated three sites into one facility to streamline our operations and reduce costs.



Decatur, Illinois. Decatur is the 267th ranked MSA and the 260th ranked radio market in the United States based on estimated 2002
radio advertising revenue of $4.9 million, of which we had a 55.1% share. Radio advertising revenue in Decatur grew at a compound rate of 4.6% during the five-year period ended December 31, 2002.



The Decatur market has a population of approximately 113,300. WSOY-AM, which commenced
broadcasting in 1946, is one of the leading news/talk and agricultural information stations in the market. Since acquiring our stations in 2000, we changed the format of WDZ-AM from agricultural to urban, and WCZQ-FM from country to rhythmic
contemporary, targeting African-American and younger audiences, which we believe were previously underserved by Decaturs existing radio stations.



4



---

##### Table of Contents

The following chart sets forth certain information about the radio stations we own and operate in unrated suburban
markets.



|                         |  |           |  |                        |  |                      
|------------------------ |  | --------- |  | ---------------------- |  | ---------------------
|Market/Stations          |  | Frequency |  | Format                 |  | Target Demographic(1)
|Suburban Chicago         |  |           |  |                        |  |                      
|Aurora, IL               |  |           |  |                        |  |                      
|WERV-FM                  |  | 95.9      |  | Classic Hits           |  | P25-54               
|Crystal Lake, IL         |  |           |  |                        |  |                      
|WZSR-FM                  |  | 105.5     |  | Adult Contemporary     |  | W25-54               
|Joliet, IL               |  |           |  |                        |  |                      
|WRXQ-FM                  |  | 100.7     |  | Classic Rock           |  | M25-54               
|WSSR-FM(2)               |  | 96.7      |  | Adult Contemporary     |  | M18-34               
|WJOL-AM                  |  | 1340      |  | News/Talk/Sports       |  | P25-54               
|WCCQ-FM                  |  | 98.3      |  | Country                |  | P25-54               
|Kenosha, WI/Waukegan, IL |  |           |  |                        |  |                      
|WIIL-FM                  |  | 95.1      |  | Rock                   |  | M18-49               
|WXLC-FM                  |  | 102.3     |  | Hot Adult Contemporary |  | W25-44               
|WKRS-AM                  |  | 1220      |  | News/Talk/Sports       |  | P25-54               
|WEXT-FM                  |  | 104.7     |  | Country                |  | P25-54               
|WLIP-AM                  |  | 1050      |  | Adult Standards        |  | P35-64               
|Suburban Dallas          |  |           |  |                        |  |                      
|Sherman-Denison-Ardmore  |  |           |  |                        |  |                      
|KLAK-FM                  |  | 97.5      |  | Adult Contemporary     |  | W25-54               
|KMKT-FM                  |  | 93.1      |  | Country                |  | P25-54               
|KMAD-FM                  |  | 102.3     |  | Classic Rock           |  | M25-54               
|KKAJ-FM                  |  | 95.7      |  | Country                |  | P25-54               
|KVSO-AM                  |  | 1240      |  | Sports/Talk            |  | M25-54               
|KTRX-FM                  |  | 92.7      |  | Classic Rock           |  | M25-54               
|KYNZ-FM                  |  | 106.7     |  | Hot Adult Contemporary |  | W18-49               

---

|(1) | P = Persons; M = Men; W = Women
|--- | -------------------------------



|(2) | Formerly WLLI-FM.
|--- | -----------------



Suburban Chicago. Chicago is the third ranked MSA and the third ranked radio market in the United States based on estimated 2002 radio advertising revenue of
$560.6 million. Radio advertising revenue in Chicago grew at a compound rate of 7.6% during the five-year period ended December 31, 2002. The markets that comprise suburban Chicago are currently non-rated; however, six of our eleven stations have
achieved ratings in metropolitan Chicago.



The greater Chicago metropolitan
area is comprised of 11 counties from Southeast Wisconsin to Northwest Indiana. Our Greater Chicago cluster consists of four adjacent areas within this area: (i) Waukegan-Kenosha, (ii) Crystal Lake, (iii) Joliet and (iv) Aurora-Naperville. Moreover,
our signals in this cluster reach approximately 4.1 million people (representing 45% of Chicagos 9.1 million total population). For purposes of comparison, a standalone market having a population of 3.2 million would constitute the 16th
largest metropolitan area in the United States, ranking immediately below Phoenix, Arizona (3.3 million) and above Minneapolis-St. Paul, Minnesota (3.0 million). The demographic characteristics of the population within our Greater Chicago cluster
are also particularly attractive. For example, the median household income of $58,355 represents 138% of the national average.



Suburban Dallas (Sherman-Denison-Ardmore). Dallas is the 5th ranked MSA and the 5th ranked radio market in the United States based on estimated 2002 radio
advertising revenue of $383.8 million. Radio advertising revenue in Dallas grew at a compound rate of 9.0% during the five-year period ended December 31, 2002. Sherman-Denison-Ardmore, an outlying suburb of northern Dallas and Fort Worth, is
currently a non-rated market.



5



---

##### Table of Contents

Dallas is one of the fastest growing metropolitan centers in the United States and is expanding northward to the suburban
markets that we serve.



Suburban Dallas is defined as three adjacent counties:
(i) Denton, (ii) Collin, and (iii) Grayson. This region includes 1.2 million people (representing 23% of Dallas 5.4 million total population). Each of the individual counties is estimated to grow at a double-digit rate over the five-year
period ended December 31, 2005. For purposes of comparison, a standalone market having a population of 1.2 million would constitute the 49th largest metropolitan area in the U.S., ranking immediately below Memphis, Tennessee (1.2 million) and above
Hartford-New Britain-Middletown, Connecticut (1.2 million).



Our assets within
Suburban Dallas cover Grayson County, which includes (i) Lake Texoma, a popular vacation and recreation area in northern Texas, (ii) Sherman-Denison, a fast-growing metropolitan area north of Dallas and (iii) Ardmore, Oklahoma, immediately north of
the Lake Texoma area in southern Oklahoma. The Sherman-Denison-Ardmore market has as an aggregate population of approximately 295,000.



Advertising Sales



In each of the radio markets we serve, we invest heavily in recruiting and training a large local sales organization to effectively serve our existing and prospective
advertising clients. Our market sales force solicits local and regional advertising for each of our markets. We employ Interep and Katz Media Group as our national advertising representatives to solicit and service our national advertising clients.



Upon the acquisition of a radio station or a cluster of radio stations in a
new market, our salespeople and sales trainees are initially compensated by salary and commissions. As our salespeople and sales trainees gain experience in their markets and become familiar with our standards and accountability systems, we
compensate them exclusively with commissions. The sales organization in each of our markets is configured to complement the formats of our stations, the number of our stations, our air-time inventory, and the relative size of that market.



Our revenue mix between local and national advertising varies significantly by
market. Currently, across all of our markets, approximately 90% of our advertising revenue is local and approximately 10% is national. We believe local advertising represents a more stable revenue source than national advertising. However, we
consider national advertising important because it generally commands a higher dollar rate for each advertising spot than local advertising.



In 2003, no single advertising customer accounted for more than 10% of our consolidated radio broadcasting or total revenues.



Programming



Within each of our network clusters, we target diverse demographic groups with a broad range
of programming formats, including rock, adult contemporary, oldies, news/talk, country and alternative. We believe that this diversity of programming formats enables advertisers to target their audiences more accurately by selecting one or more
stations on which to broadcast their commercials.



We generally broadcast live
local programming daily during the peak listening hours of 6 a.m. to 8 p.m. We design the overall mix of each stations programming to fit the stations specific format, to target specific demographic audiences and to serve its local
community. In determining the format for each of our stations, our station managers, together with our vice president of programming, consider local demographics and programming history to identify programming gaps within the specific market. In
addition, we evaluate whether filling a programming gap would generate sufficient listenership to achieve desired revenue levels.



6



---

##### Table of Contents

Outdoor Advertising Division



Products



We seek to offer advertisers a range of outdoor advertising products and we continually assess opportunities to complement our existing portfolio with new products. Our
inventory of outdoor advertising products consists of both traditional outdoor displays and alternative displays, including:



| |  | Bulletins, which are large advertising faces that range in size from 14 feet high and 48 feet long to 20 feet high and 60 feet long. Advertisements are typically made of a durable
computer printed vinyl that is either wrapped to the billboard face or affixed with a self-adhesive backing. The bulletins are strategically placed in high traffic locations, typically along interstate highways. Billboard structures are durable,
have long useful lives and do not require substantial maintenance.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Wall displays, which are located on the sides of buildings and range in size from 14 feet high and 14 feet long to 60 feet high and 60 feet long. These advertisements are made from
computer generated vinyl. We generally place these displays in large metropolitan areas with substantial amounts of traffic. These displays are durable, have long useful lives and require nominal maintenance.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 8-sheet posters, which are generally 6 feet high and 12 feet wide. Advertisements are applied to a display face by means of a pre-pasted silkscreen or lithographed paper sheets. We
generally place these displays on high- to medium-traffic streets in metropolitan areas.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Indoor displays located in retail locations, such as restaurants, gas stations, bars, retail stores, health clubs and sporting arenas. We install a variety of displays, typically
located in restrooms and dressing rooms and above gas pumps. Because these displays are viewed by specific demographic groups in an isolated environment, they represent a unique opportunity for advertisers to more effectively target these groups.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have more than 2,000 bulletins and wall displays and 3,500
posters. In addition, we have exclusive arrangements with national and local retailers, including restaurant and bar chains and retail stores, to operate indoor advertising displays in more than 3,200 alternative display sites.



Although our outdoor advertising business focuses primarily on bulletins, 8-sheet posters,
wall displays and indoor displays, we also offer a limited number of additional products, including 30-sheet posters and bus shelter displays.



The following table sets forth selected information about traditional outdoor advertising markets among the top fifty ranked markets in which we operate.



|                                   |  |             |  |               |  |           |  |            
|---------------------------------- |  | ----------- |  | ------------- |  | --------- |  | -----------
|Traditional Outdoor Display Market |  | Market Rank |  | # ofBulletins |  | # ofWalls |  | # ofPosters
|New Jersey                         |  | NA          |  | 183           |  |          |  | 2,024      
|San Francisco                      |  | 4           |  |              |  | 30        |  |           
|St. Louis                          |  | 20          |  | 20            |  |          |  |           
|Hartford                           |  | 49          |  | 184           |  |          |  | 144        
|Myrtle Beach                       |  | 167         |  | 757           |  |          |  | 495        
|Northern Colorado                  |  | NA          |  | 563           |  |          |  | 660        
|Missouri                           |  | NA          |  | 703           |  |          |  | 30         
|All other                          |  | NA          |  | 4             |  |          |  | 364        
|Total                              |  |             |  | 2,414         |  | 30        |  | 3,717      
|                                   |  |             |  |               |  |           |  |            



7



---

##### Table of Contents

The following table sets forth selected information about our alternative outdoor advertising markets.



|                           |  |              |  |                      |  |              
|-------------------------- |  | ------------ |  | -------------------- |  | -------------
|Alternative Display Market |  | Market Rank  |  | # of RetailLocations |  | # of Displays
|New York                   |  | 1            |  | 397                  |  | 1,926        
|Los Angeles                |  | 2            |  | 226                  |  | 1,309        
|Chicago                    |  | 3            |  | 170                  |  | 1,195        
|San Francisco              |  | 4            |  | 71                   |  | 409          
|Dallas                     |  | 5            |  | 165                  |  | 882          
|Philadelphia               |  | 6            |  | 139                  |  | 538          
|Houston                    |  | 7            |  | 86                   |  | 474          
|Washington, D.C.           |  | 8            |  | 85                   |  | 178          
|Boston                     |  | 9            |  | 97                   |  | 305          
|Detroit                    |  | 10           |  | 150                  |  | 1,065        
|Atlanta                    |  | 11           |  | 132                  |  | 597          
|Miami                      |  | 12           |  | 58                   |  | 154          
|Puerto Rico                |  | 13           |  |                     |  |             
|Seattle                    |  | 14           |  | 248                  |  | 1,325        
|Phoenix                    |  | 15           |  | 34                   |  | 80           
|Minneapolis/St. Paul       |  | 16           |  | 381                  |  | 3,173        
|San Diego                  |  | 17           |  |                     |  |             
|Nassau-Suffolk             |  | 18           |  |                     |  |             
|Baltimore                  |  | 19           |  | 69                   |  | 281          
|St. Louis                  |  | 20           |  | 71                   |  | 375          
|All Other                  |  | 21 or higher |  | 696                  |  | 2,689        
|                           |  |              |  |                      |  |              
|Total                      |  |              |  | 3,275                |  | 16,955       
|                           |  |              |  |                      |  |              



Advertising Sales



Local advertising currently comprises approximately 70% of our total
outdoor advertising sales.



Our traditional outdoor salespeople have strong
ties with the advertising community and have local market experience, which we believe will enable us to quickly identify and take advantage of new opportunities for building display sites.



We have alternative advertising sales offices in New York, Seattle, San Francisco, Hartford
and Minneapolis. Although we generally employ at least one sales representative in each office who is dedicated exclusively to national sales, we encourage our sales representatives to develop national, regional and local accounts to maximize
occupancy rates and advertising revenues.



Our customer contracts with local
advertisers typically range from four to twelve months for bulletins and from one to twelve months for poster and alternative displays. National advertisers for our outdoor advertising products generally enter into contracts for one to three months.
In addition, advertisers occasionally purchase advertising to promote particular events.



As of December 31, 2003, the average occupancy rate of our bulletins across all of our traditional outdoor markets was approximately 74%. Although we seek to improve both pricing and occupancy across our markets, we
emphasize different goals according to the particular characteristics of each market. We typically enter into contracts with our advertisers to place advertisements in numerous displays at a particular site and we price our displays according to the
product type, location and number of displays covered by a contract.



In 2003,
no single advertising customer accounted for more than 10% of our consolidated outdoor advertising or total revenues.



8



---

##### Table of Contents

Site Leases



We believe that obtaining attractive sites for our displays is critical to generating advertising sales and building our business.
Currently, most of our traditional outdoor displays are located on leased properties; in some instances, however, we purchase the premises on which our display is located or we rely on an easement to use the property. Most of our leases have terms
of 5 to 20 years. We also are developing new sites in our existing markets. However, we generally do not begin construction on a new site until we have pre-sold a certain amount of advertising for that site and expect the new site to achieve our
targeted rate of return.



We lease indoor display sites under exclusive
agreements with either corporate customers, individual franchisees or local proprietors. Most of our alternative display sites are subject to revenue sharing provisions, under which we typically retain 80% to 90% of the revenue. Our leases typically
have terms of three to five years.



In each of our outdoor advertising markets,
we have real estate teams focused on developing new sites. Our director of real estate oversees real estate and lease development, including regulatory issues, across our markets. Our local real estate managers are focused on achieving competitive
lease rates on attractive sites in each of our markets.



In early 2003, we
entered into an agreement with Loews Theatres to place indoor advertising in their theatres in the top 20 MSAs. We believe the addition of this inventory and the distribution outlet it provides will create a significant opportunity to expand our
alternative advertising business.



Installation and
Maintenance



Each of our advertisers pays the production cost of its
displays. While our national customers generally provide their own advertisements, we often assist our local customers in creating or procuring their advertisements. We use two or three printers in each market to create alternative displays and we
have an in-house art department based in Minneapolis that produces alternative displays for our local advertisers. We obtain frames produced specifically for our displays from third party vendors and then assemble the displays in Minneapolis before
we ship them to the installation sites.



We generally employ third party
contractors to paint and post our traditional outdoor advertisements. Our sales force inspects the displays weekly to ensure that the advertisements are both clean and well lit. Depending on the market, we have or employ third party maintenance
crews to regularly monitor and maintain the displays. In most of our markets, we are able to guarantee our advertisers a maximum 48-hour period in which we can replace damaged displays. Our crews also change displays in our 8-sheet posters and
alternative displays at regular intervals in accordance with some of our customer contracts.



During 2002, we restructured our operations in the alternative advertising business to eliminate full-time installation and maintenance offices in certain markets. We have outsourced the installation and maintenance
in these markets to a strategic partner. Since we no longer incur installation and maintenance costs in the related markets unless we sell advertising into those markets, our profitability is less affected by declines in advertising revenue.



Employees



As of January 31, 2004, we had a staff of 613 full-time employees and 359 part-time
employees. We believe that our relations with our employees are good.



Seasonality



Our business experiences seasonal revenue
fluctuations due primarily to fluctuations in advertising expenditures by local and national advertisers, with revenues typically being the lowest in the first calendar



9



---

##### Table of Contents

quarter. In addition, the operating results of certain of our radio stations in any period may be affected by advertising and promotional expenditures that
do not necessarily produce revenues in the period in which the expenditures are made.



Geographic Information



Since our inception, all of our assets
have been located in the United States and all of our revenues have been generated from transactions originating in the United States.



Competition



The out-of-home media industry is highly competitive. Our out-of-home media properties compete for advertising revenues within their respective markets with other out-of-home media properties, as well as with other
forms of local media such as newspapers, magazines, network and cable television, the Internet and direct mail.



Radio Broadcasting Division. The success of each of our radio stations depends largely upon audience ratings and our share of the overall advertising
revenue within a market. Our stations compete for listeners and advertising revenue directly with other radio stations within their respective markets. Radio stations compete for listeners primarily on the basis of program content that appeals to a
particular demographic group. In addition, each radio station competes on the basis of management experience, the stations local audience share in its market, transmitter power, assigned frequency, local program acceptance and the number of
other radio stations and other advertising media in the market area.



The radio
broadcasting industry is subject to competition from new or developing media technologies. For example:



| |  | cable television operators have introduced a service commonly referred to as cable radio which provides cable television subscribers with several high-quality channels
of music, news and other information;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | direct satellite broadcast television and satellite radio broadcast companies are supplying subscribers with several high-quality music channels;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the Internet offers new and diverse forms of program distribution;
| | - | ------------------------------------------------------------------



| |  | satellite digital audio radio technology, initially developed for automotive applications, could result in new high quality satellite radio services; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the introduction of in-band on-channel digital radio and new low-power FM radio could provide radio services in the same bandwidth currently occupied by traditional FM and AM radio
services.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Federal Communications Commission, or FCC, has
adopted licensing and operating rules for satellite delivered audio and awarded two licenses for this service in April 1997. Satellite delivered audio may provide a medium for the delivery by satellite or terrestrial means of multiple new audio
programming formats to local and/or national audiences. Digital technology also may be used by terrestrial radio broadcast stations on broadcasting frequencies, and the FCC has changed its rules to permit AM and FM radio stations to offer digital
sound. We cannot predict what other matters might be considered in the future by the FCC, nor can we assess in advance what impact, if any, the implementation of any of these changes might have on our business.



Outdoor Advertising Division. In each of our outdoor advertising markets, we
face competition from a wide variety of in-home media, including broadcast and cable broadcasting, print media and direct mail marketers, as well as other out-of-home media. We compete primarily on the basis of the location of our displays and, to a
lesser extent, on the cost-per-thousand impressions. According to the OAAA and



10



---

##### Table of Contents

industry reports, the traditional outdoor advertising industry is highly fragmented, with over 1,000 companies operating approximately 200,000 advertising
displays. Similarly, the alternative advertising industry is highly fragmented and characterized by a large number of local operators, many of whom focus on particular products, including products that we currently offer or intend to offer.



On a national level, we compete with a small number of major outdoor
advertising companies such as Clear Channel Communications, Viacom Outdoor and Lamar Advertising Co., as well as with other small and mid-sized operators. In each of our markets, we compete primarily on the basis of advertising rates, the locations
in which we have displays, and the quality of our customer service. Many of our competitors have greater experience and more established customer relationships than we have in the markets in which we currently operate or in which we seek to operate.
We believe we will be able to compete effectively upon entering new markets on the strength of our existing national advertising accounts. Moreover, we believe our strong emphasis on developing local relationships and expertise will enable us to
secure attractive sites at competitive rates and to develop long-term advertising relationships in each of our markets.



Government Regulation



Radio Licensing and Regulation



The radio broadcasting industry is subject to extensive and changing regulation of, among other things, program content, advertising content, technical operations and
business and employment practices. The ownership, operation and sale of radio stations are subject to the jurisdiction of the FCC. Among other things, the FCC:



| |  | assigns frequency bands for broadcasting;
| | - | -----------------------------------------



| |  | determines the particular frequencies, locations and operating power of stations;
| | - | ---------------------------------------------------------------------------------



| |  | issues, renews, revokes and modifies station licenses;
| | - | ------------------------------------------------------



| |  | determines whether to approve changes in ownership or control of station licenses;
| | - | ----------------------------------------------------------------------------------



| |  | regulates equipment used by stations; and
| | - | -----------------------------------------



| |  | adopts and implements regulations and policies that directly affect the ownership, operation and employment practices of stations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------



The FCC is authorized to impose penalties for violations of its rules or the Communications
Act, including the imposition of monetary forfeitures, the issuance of short-term licenses, the imposition of a condition on the renewal of a license, nonrenewal of licenses and the revocation of operating authority.



FCC Licenses. Radio stations operate pursuant to renewable broadcasting
licenses that are ordinarily granted by the FCC for maximum terms of eight years. A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application is pending. During the periods when renewal
applications are pending, petitions to deny license renewals can be filed by interested parties, including members of the public. The FCC is required to hold hearings on a stations renewal application if a substantial or material question of
fact exists as to whether the station has served the public interest, convenience and necessity. If, as a result of an evidentiary hearing, the FCC determines that the licensee has failed to meet certain requirements and that no mitigating factors
justify the imposition of a lesser sanction, then the FCC may deny a license renewal application. Only after a license renewal application is denied will the FCC accept and consider competing applications for the vacant frequency. Historically, the
FCC has generally renewed licenses. We have no reason to believe that our licenses will not be renewed in the ordinary course, although we cannot assure you that any or all of our licenses will be renewed. The non-renewal of one or more of our
licenses could have a material adverse effect on our business.



11



---

##### Table of Contents

Transfer or Assignment of Licenses. The Communications Act prohibits the assignment of broadcast licenses
or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors pertaining to the licensee and the proposed licensee, including:



| |  | compliance with the various rules limiting common ownership of media properties in a given market;
| | - | --------------------------------------------------------------------------------------------------



| |  | the character of the licensee and those persons holding attributable interests in the licensee;
| | - | -----------------------------------------------------------------------------------------------



| |  | history of compliance with the Communications Acts limitations on alien ownership, and
| | - | ---------------------------------------------------------------------------------------



| |  | compliance with other FCC regulations and policies.
| | - | ---------------------------------------------------



To obtain FCC consent to assign or transfer control of a broadcast license, appropriate applications must be filed with the FCC. If the application involves a substantial
change in ownership or control, for example, the transfer or acquisition of 50.0% or more of the voting stock, the application must be placed on public notice for not less than 30 days during which time petitions to deny or other objections against
the application may be filed by interested parties, including members of the public. These types of petitions are filed from time to time with respect to proposed acquisitions. If the FCC grants an assignment or transfer application, interested
parties have 30 days from public notice of the grant to seek reconsideration of that grant. The FCC usually has an additional ten days to set aside the grant on its own motion. An application that does not involve a substantial change in ownership
or control (a pro forma application) is not subject to the public notice and 30-day petition to deny procedure. The pro forma application is nevertheless subject to informal objections that may be filed against it at any time until the
FCC acts on the application. When ruling on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer of control of the broadcast license to any party other
than the assignee or transferee specified in the application.



Multiple
Ownership Rules.The Communications Act and FCC rules and policies impose specific limits on the number of commercial radio stations an entity can own in a single market. These rules and policies may preclude us from acquiring certain
stations we might otherwise seek to acquire. The rules and policies also effectively prevent us from selling stations in a market to a buyer that has reached its ownership limit in the market unless that buyer divests other stations. The local radio
ownership rules are as follows:



| |  | in markets with 45 or more commercial radio stations, ownership is limited to eight commercial stations, no more than five of which can be either AM or FM;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | in markets with 30 to 44 commercial radio stations, ownership is limited to seven commercial stations, no more than four of which can be either AM or FM;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | in markets with 15 to 29 commercial radio stations, ownership is limited to six commercial stations, no more than four of which can be either AM or FM; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | in markets with 14 or fewer commercial radio stations, ownership is limited to five commercial stations or no more than 50.0% of the markets total, whichever is lower, and no
more than three of which can be either AM or FM.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The FCC has
adopted policies providing for special review of a proposed transaction that raises competitive concerns. The FCC uses a 50/70 revenue test to identify these applications. Specifically, an application proposing a radio station
combination having 50% or more of the revenue in an Arbitron metropolitan market or an application that will result in two station owners controlling stations having 70% or more of the revenue in an Arbitron metropolitan market is placed on public
notice with a special legend inviting public comment on the applications impact on competition and diversity in the market. In the past, the FCC has delayed or withheld approval of these applications. The FCC has introduced a policy of
preparing



12



---

##### Table of Contents

draft actions on these applications within six months after filing. Applications determined to be ungrantable due to competition or diversity concerns will
be designated for hearing or, at the applicants option, deferred until after finalization of the rule changes.



The FCCs revised radio/television cross-ownership rule permits a single owner to own up to two television stations, consistent with the FCCs rules on common
ownership of television stations, together with one radio station in all markets. In addition, an owner is permitted to own additional radio stations, not to exceed the local ownership limits for the market, as follows:



| |  | in markets where 20 media voices will remain, an owner may own an additional five radio stations, or, if the owner only has one television station, an additional six radio stations;
and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | in markets where 10 media voices will remain, an owner may own an additional three radio stations.
| | - | --------------------------------------------------------------------------------------------------



A media voice includes each independently owned, full-power television and radio station and each daily newspaper that has a
circulation exceeding 5.0% of the households in the market, plus one voice for all cable television systems operating in the market.



In addition to the limits on the number of radio stations and radio/television combinations that a single owner may own, the FCCs broadcast/newspaper
cross-ownership rule prohibits the same owner from owning a broadcast station and a daily newspaper in the same geographic market.



The FCC generally applies its ownership limitations to attributable interests held by an individual, corporation, partnership or other association. In the case of
corporations controlling broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporations voting stock are generally attributable. In addition, certain
passive investors are attributable if they hold 20.0% or more of the corporations voting stock. The FCC treats all partnership interests as attributable, except for those limited partnership interests that under FCC policies are considered
insulated from material involvement in the management or operation of the media related activities of the partnership. The FCC currently treats limited liability companies like limited partnerships for purposes of
attribution.



The FCC has a rule known as the equity-debt-plus rule that causes
certain otherwise unattributable creditors or investors to be attributable owners of a station. Under this rule, a major programming supplier or a same-market owner will be an attributable owner of a station if the supplier or owner holds debt or
equity, or both, in the station that is greater than 33.0% of the value of the stations total debt plus equity. A major programming supplier includes any programming supplier that provides more than 15.0% of the stations weekly
programming hours. A same-market owner includes any attributable owner of a media company, including broadcast stations, cable television and newspapers, located in the same market as the station, but only if the owners interest in the media
company is attributable under an FCC attribution rule other than the equity-debt-plus rule.



Over the past few years, a number of radio stations have entered into what have commonly been referred to as local marketing agreements (LMAs). While these agreements may take varying forms, under a
typical local marketing agreement, separately owned and licensed radio stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with FCCs rules and policies.
Under these arrangements, separately owned stations could agree to function cooperatively in programming, advertising sales and similar matters, subject to the requirement that the licensee of each station maintain independent control over the
programming and operations of its own station. One typical type of local marketing agreement is a programming agreement between two separately-owned radio stations serving a common service area, whereby the licensee of one station provides
substantial portions of the broadcast programming for airing on the other licensees station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during those program segments.



13



---

##### Table of Contents

The FCCs rules provide that a radio station that brokers more than 15.0% of the weekly broadcast time on another
station serving the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCCs local radio ownership limits. As a result, in a market where we own a radio station, we would not be
permitted to enter into a local marketing agreement with another radio station in the same market if we could not own the brokered station under the multiple ownership rules, unless our programming on the brokered station constituted 15% or less of
the brokered stations programming time on a weekly basis. FCC rules also prohibit a broadcast station from duplicating more than 25.0% of its programming on another station in the same broadcast service, that is AM-AM or FM-FM, through a local
marketing agreement where the brokered and brokering stations which it owns or programs serve substantially the same area.



Joint sales agreements (JSAs) permit broadcasters to sell advertising time on stations owned by others. In the past, the FCC has declined to consider JSAs as
attributable media interests because they do not generally affect programming.



New Multiple Ownership Rules. The FCC adopted revisions to its Multiple Ownership Rules in June 2003. Among other things, these new rules would have the effect of (a) changing the definition of local radio market in Arbitron
rated markets, (b) changing the methodology for counting commonly owned radio stations in non-Arbitron radio markets, (c) relaxing newspaper/broadcasting cross-ownership limitations, and (d) counting JSAs as attributable interests the same way local
marketing agreements are counted. These new rules were appealed in an action before the United States Court of Appeals for the Third Circuit. The Court of Appeals issued an order staying the effective date of the new rules and keeping the prior
rules in effect until resolution of the appeal.



While it is impossible to
predict how the Court of Appeals might rule on the multiple ownership appeal, the new radio market definitions, if implemented, could limit or prevent expansion of our radio holdings in some Arbitron radio markets. Similarly, the attribution of JSAs
could require us to terminate such agreements in at least one market.



Alien Ownership Rules.The Communications Act prohibits the issuance or holding of broadcast licenses by persons who are not U.S. citizens, whom the Communications Act refers to as aliens, including any
corporation if more than 20.0% of its capital stock is owned or voted by aliens. In addition, the FCC may prohibit any corporation from holding a broadcast license if the corporation is controlled by any other corporation of which more than 25.0% of
the capital stock is owned of record or voted by aliens, if the FCC finds that the prohibition is in the public interest. The limited liability company agreement of our indirect parent, NextMedia Investors, LLC, prohibits the ownership, voting and
transfer of our capital stock in violation of these FCC restrictions, and limits the issuance of capital stock or the voting rights such capital stock represents to or for the account of aliens or corporations otherwise subject to domination or
control by aliens in excess of the FCC limits. The certificate of incorporation authorizes our board of directors to enforce these provisions.



Programming and Operations. The Communications Act requires broadcasters to serve the public interest. The FCC gradually has relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a stations community of license. A licensee continues to be required, however, to present
programming that is responsive to community problems, needs and interests and to maintain records demonstrating this responsiveness. Complaints from listeners concerning a stations programming often will be considered by the FCC when it
evaluates renewal applications of a licensee, but listener complaints may be filed at any time. Complaints are required to be maintained in the stations public file and generally may be considered by the FCC at any time. Stations also must pay
regulatory and application fees and follow various rules promulgated under the Communications Act. Those rules regulate, among other things, political

advertising, sponsorship identifications, the advertisement of contests and lotteries, obscene and indecent broadcasts and technical operations, including limits on human exposure to radio frequency radiation.



In November 2002, the FCC adopted new rules prohibiting employment discrimination by
broadcast stations on the basis of race, religion, color, national origin and gender; and requiring broadcasters to



14



---

##### Table of Contents

implement programs to promote equal employment opportunities at their stations. Under these new equal opportunity rules, radio stations are expected to
recruit community-wide for most full time job vacancies. They must undertake certain long term recruitment and training initiatives and file reports with the FCC on their efforts.



Proposed and Recent Changes.Congress and the FCC may in the future consider and adopt new laws, regulations and
policies regarding a wide variety of matters that could affect, directly or indirectly, the operation, ownership and profitability of our radio stations, including the loss of audience share and advertising revenues for our radio stations, and an
inability to acquire additional radio stations or to finance those acquisitions. These matters may include:



| |  | changes in the FCCs cross-interest, multiple ownership and attribution policies;
| | - | ---------------------------------------------------------------------------------



| |  | regulatory fees, spectrum use fees or other fees on FCC licenses;
| | - | -----------------------------------------------------------------



| |  | foreign ownership of broadcast licenses;
| | - | ----------------------------------------



| |  | revisions to the FCCs rules relating to political broadcasting;
| | - | ----------------------------------------------------------------



| |  | technical and frequency allocation matters; and
| | - | -----------------------------------------------



| |  | proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio.
| | - | -------------------------------------------------------------------------------------------------------



The FCC has adopted standards for authorizing and implementing terrestrial digital audio broadcasting technology, using in-band on-channel
technology for AM and FM radio stations. Digital audio broadcastings advantages over traditional analog broadcasting technology include improved sound quality and the ability to offer a greater variety of auxiliary services. In-band on-channel
technology permits an AM or FM station to transmit radio programming in both analog and digital formats, or in digital only formats, using the bandwidth that the radio station is currently licensed to use. It is unclear what effect digital audio
broadcasting regulations will have on our business or the operations of our radio stations.



The FCC has created a new low-power FM (LPFM) radio service, which operates at a maximum power of between 10 and 100 watts in the existing FM commercial and noncommercial band. LPFM stations are used by
governmental and nonprofit organizations to provide noncommercial educational programming or public safety and transportation radio services. No existing broadcaster or other media entity, including us, is permitted to have an ownership interest or
enter into any program or operating agreement with any LPFM station. During the first two years of the new service, applicants must be based in the area that they propose to serve. Applicants will not be permitted to own more than one station
nationwide during the initial two-year period. After the initial two-year period, entities will be allowed to own up to five stations nationwide, and after three years, the limit will be raised to ten stations nationwide. A single person or entity
may not own two LPFM stations whose transmitters are less than seven miles from each other. The authorizations for the new stations will not be transferable.



At this time, it is difficult to assess the competitive impact of the LPFM stations. The LPFM stations must comply with certain technical requirements aimed at protecting
existing FM radio stations from interference, although we cannot be certain of the level of interference that LPFM stations will cause after they begin operating. Moreover, if LPFM stations are licensed in the markets in which we operate our
stations, the low-power stations may compete for listeners. The LPFM stations may also limit our ability to obtain new licenses or to modify our existing facilities, although FCC engineers have conducted interference testing and have concluded that
the new 10-watt power LPFM stations will not produce unacceptable levels of interference to existing FM stations, such as those owned by us.



15



---

##### Table of Contents

Finally, the FCC has adopted procedures for the auction of broadcast spectrum in circumstances where two or more parties
have filed for new or major change applications which are mutually exclusive. Such procedures may limit our efforts to modify or expand the broadcast signals of our stations.



Federal Antitrust Laws.The agencies responsible for enforcing the federal antitrust laws, the Federal Trade Commission
and the Department of Justice, may investigate certain acquisitions. We cannot predict the outcome of any specific FTC or Department of Justice investigation. Any decision by the FTC or the Department of Justice to challenge a proposed acquisition
could affect our ability to consummate an acquisition or to consummate it on terms acceptable to us.



For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Act requires the parties to file Notification and Report Forms concerning antitrust issues with the FTC and the Department of Justice and to
observe specified waiting period requirements before consummating the acquisition. If the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or
negotiations with the investigating agency concerning possible means of addressing those issues, including restructuring the proposed acquisition or divesting assets. In addition, the investigating agency could file suit in federal court to enjoin
the acquisition or to require the divestiture of assets, among other remedies. Acquisitions that are not required to be reported under the Hart-Scott-Rodino Act may be investigated by the FTC or the Department of Justice under the antitrust laws
before or after consummation. In addition, private parties may under certain circumstances bring legal actions to challenge an acquisition under the antitrust laws.



As part of its increased scrutiny of radio station acquisitions, the Department of Justice has stated publicly that it believes that local
marketing agreements, joint sales agreements and other similar agreements customarily entered into in connection with radio station transfers could violate the Hart-Scott-Rodino Act if such agreements take effect prior to the expiration of the
waiting period under the Hart-Scott-Rodino Act. Furthermore, the Department of Justice has noted that joint sales agreements may raise antitrust concerns under Section 1 of the Sherman Act and has challenged joint sales agreements in certain
locations. The Department of Justice also has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to radio station acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the Department of Justice has also investigated transactions that do not meet or exceed these benchmarks and has cleared transactions that do exceed these benchmarks.



Regulation of Outdoor Advertising



The outdoor advertising industry is subject to governmental regulation at the federal, state
and local levels. Federal law, principally the Highway Beautification Act of 1965, established incentives for states to implement legislation to restrict billboards located within 660 feet of, or visible from, interstate and primary highways, except
in commercial or industrial areas. Every state has adopted regulations at least as stringent as the provisions of the Highway Beautification Act, including prohibitions on the construction of new billboards adjacent to federally-aided highways and
the removal at the owners expense and without any compensation of any illegal signs on such highways. The Highway Beautification Act, and the various state statutes implementing it, require the payment of just compensation whenever government
authorities require the removal from federally-aided highways of billboards that have been legally erected and maintained.



Numerous state and local jurisdictions have, in some cases, passed additional and more restrictive regulations on the construction, repair, upgrading, height, size and
location of, and, in some instances, content of advertising copy being displayed on outdoor advertising structures adjacent to federally-aided highways and other thoroughfares. These regulations, often in the form of municipal building, sign or
zoning ordinances, specify minimum standards for the height, size and location of billboards. In some cases, the construction of new billboards or relocation of existing billboards is prohibited. Some jurisdictions also have restricted the ability
to enlarge or upgrade existing billboards, such as converting from wood to steel or from non-illuminated to illuminated structures. From time to time governmental authorities order the removal of billboards by the exercise of eminent domain. We may
be unable to obtain satisfactory compensation for the government-ordered removal of any of our structures.



16



---

##### Table of Contents

Amortization of billboards has also been adopted in varying forms in certain jurisdictions. Amortization permits the
billboard owner to operate its billboard as a non-conforming use for a specified period of time until it has recouped its investment, after which it must remove or otherwise conform its billboard to the applicable regulations at its own cost without
any compensation. Amortization and other regulations requiring the removal of billboards without compensation have been subject to vigorous litigation in state and federal courts and cases have reached differing conclusions as to the
constitutionality of these regulations. To date, regulations in our markets have not materially affected our operations.



As the owner, lessee or operator of various real properties and facilities, we are subject to various federal, state and local environmental laws and regulations.
Historically, compliance with these laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, that compliance with existing or new environmental laws and regulations will not require us to make
significant expenditures of funds.



Available Information



Information about us, including recent filings with the Securities and Exchange Commission,
may be found at our internet website: www.nextmediagroup.net.



|ITEM 2. | PROPERTIES
|------- | ----------



Our principal executive offices are located at 6312 S. Fiddlers Green Circle, Suite 360E, Englewood, Colorado 80111. In each of our radio markets, we typically lease offices, studios and transmitter and antenna sites.
In each of our outdoor advertising markets, we typically lease or have easements on the property on which our billboard and poster displays are located.



No single facility is material to us. We believe that our facilities are generally in good condition and suitable for our operations. However, we continually look for
opportunities to upgrade our facilities and may do so in the future.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



In January 2003, we withheld approximately $1.5 million from PNE Media (which represents a net working capital payment otherwise payable to PNE Media) as an offset to indemnification claims in accordance with the
contribution and purchase and sale agreement related to our 2001 acquisition of certain outdoor advertising assets of PNE Media. In May 2003, PNE Media filed a demand for arbitration for misrepresentations or omissions in connection with its July
2001 investment in NextMedia Investors, LLC, our ultimate parent. PNE Media sought the withheld amount, together with additional unspecified damages. A panel of three arbitrators heard the dispute during a week-long evidentiary hearing in January
2004. In March 2004, the arbitration panel delivered an award that was favorable to us and, after certain set-offs, resulted in a net recovery of approximately $3.6 million. At this time, PNE Media and we are in the process of implementing the
arbitration award.



We are involved in various legal and other
proceedings which are incidental to the conduct of our business. We do not believe that any of these proceedings, if adversely determined, would have a material adverse effect on our financial condition or results of operations.



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



No matters were submitted to a vote of security holders during the fourth quarter of 2003.



17



---

##### Table of Contents

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- | ---------------------------------------------------------------------



All outstanding shares of our common stock are held by our parent, NextMedia Group, Inc. As of March 30, 2004, there were 3,000 shares of
our common stock outstanding.



We have not paid any cash dividends in respect
of our common stock since our inception and we have no present intention to pay any dividends in the foreseeable future. Instead, we intend to retain earnings for working capital and to finance the expansion of our business. Any payment of future
dividends will be at the discretion of our board of directors and will depend upon our earnings, financial condition, capital requirements, level of indebtedness and contractual restrictions, including the provisions of our amended senior credit
facility and provisions applicable to our 10.75% Senior Subordinated Notes due 2011, and any other factors deemed relevant by our board of directors in its sole discretion.



Since our inception, we have not made any sales of equity securities that were not registered under the Securities Act of 1933, as amended.
We have no compensation plans under which our equity securities are authorized for issuance.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



The following table sets forth, for the periods and at the dates indicated, our selected historical and consolidated financial data, in thousands of
dollars, except per share data. You should read this financial data in conjunction with the information contained in or referenced under Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations and Item 8. Consolidated Financial Statements in Parts II and IV of this Annual Report on Form 10-K.



|                                                                                         |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                                         |  | Year Ended December 31,                  |      
|                                                                                         |  | 1999                                     |       |   | 2000 |   |         | 2001 |  |   | 2002    |   |  | 2003 |        
|                                                                                         |  | (in thousands, except per share amounts) |      
|Operating Data:                                                                          |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net revenue                                                                              |  | $                                        | 171   |   |      | $ | 39,820  |      |  | $ | 71,721  |   |  | $    | 91,330  |   |  | $ | 106,959 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                                          | 305   |   |      |   | 25,913  |      |  |   | 46,819  |   |  |      | 59,330  |   |  |   | 66,532  |  
|Corporate expenses                                                                       |  |                                          | 685   |   |      |   | 5,475   |      |  |   | 8,834   |   |  |      | 8,116   |   |  |   | 8,518   |  
|Depreciation and amortization                                                            |  |                                          | 8     |   |      |   | 4,325   |      |  |   | 11,053  |   |  |      | 5,523   |   |  |   | 10,291  |  
|Local marketing agreement fees(1)                                                        |  |                                          | 35    |   |      |   | 2,913   |      |  |   | 20      |   |  |      |        |   |  |   | 42      |  
|Impairment loss                                                                          |  |                                          |      |   |      |   |        |      |  |   |        |   |  |      | 42,956  |   |  |   |        |  
|                                                                                         |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating income (loss)                                                                  |  |                                          | (862  | ) |      |   | 1,194   |      |  |   | 4,995   |   |  |      | (24,595 | ) |  |   | 21,576  |  
|Interest expense, net                                                                    |  |                                          | 6     |   |      |   | 3,805   |      |  |   | 15,815  |   |  |      | 22,444  |   |  |   | 22,369  |  
|Other (income) expense                                                                   |  |                                          |      |   |      |   | 38      |      |  |   | (574    | ) |  |      | (1,370  | ) |  |   | (20,764 | )
|                                                                                         |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income (loss) from continuing operations before income taxes                             |  |                                          | (868  | ) |      |   | (2,649  | )    |  |   | (10,246 | ) |  |      | (45,669 | ) |  |   | 19,971  |  
|Provisions for deferred income taxes                                                     |  |                                          |      |   |      |   |        |      |  |   |        |   |  |      | 4,311   |   |  |   | 10,464  |  
|                                                                                         |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income (loss) from continuing operations                                                 |  |                                          | (868  | ) |      |   | (2,649  | )    |  |   | (10,246 | ) |  |      | (49,980 | ) |  |   | 9,507   |  
|(Income) loss from discontinued operations including loss on disposition                 |  |                                          |      |   |      |   | 189     |      |  |   | 662     |   |  |      | 3,475   |   |  |   | (l      | )
|                                                                                         |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                                        | (868  | ) |      | $ | (2,838  | )    |  | $ | (10,908 | ) |  | $    | (53,455 | ) |  | $ | 9,508   |  
|                                                                                         |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance Sheet Data (at end of period):                                                   |  |                                          |       |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                                                                |  | $                                        | 529   |   |      | $ | 836     |      |  | $ | 30,501  |   |  | $    | 14,446  |   |  | $ | 707     |  
|Working capital                                                                          |  |                                          | 645   |   |      |   | 2,736   |      |  |   | 28,149  |   |  |      | 12,225  |   |  |   | (1,156  | )
|Intangibles assets, net                                                                  |  |                                          | 121   |   |      |   | 284,666 |      |  |   | 408,794 |   |  |      | 388,901 |   |  |   | 452,746 |  
|Total assets                                                                             |  |                                          | 1,355 |   |      |   | 327,067 |      |  |   | 506,537 |   |  |      | 491,980 |   |  |   | 543,377 |  
|Long-term debt                                                                           |  |                                          | 1,520 |   |      |   | 106,945 |      |  |   | 197,102 |   |  |      | 197,276 |   |  |   | 199,634 |  
|Stockholders equity                                                                     |  |                                          | (568  | ) |      |   | 208,382 |      |  |   | 282,631 |   |  |      | 257,368 |   |  |   | 294,055 |  

---

|(1) | Represents fees associated with operating radio stations prior to acquisition. Prior to acquisition, we recognize revenues and related expenses following execution
of a local marketing agreement. Upon our acquisition of assets previously operated under a local marketing agreement, we no longer pay the local marketing fees associated with those assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



---

##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Overview



Our business consists of two out-of-home media divisions: radio broadcasting and outdoor advertising. Our radio broadcasting business consists of radio stations for which
we provide programming and sell on-air advertising time. Our outdoor advertising business includes traditional outdoor advertising displays, such as bulletins and posters, as well as alternative advertising displays in public locations, including
restaurants, health clubs, retail stores and entertainment venues.



Radio Broadcasting Division



We derive our radio
broadcast revenues primarily from the sale of advertising time to local and national advertisers. Our radio division operating expenses consist primarily of employee salaries and commissions, programming expenses, advertising and promotional
expenses, rental for studio premises, rental of transmission tower space and music license royalty fees. We seek to control these expenses by centralizing certain functions, such as finance, accounting, legal, human resources and management
information systems and the overall programming management function and by requiring adherence to strict cost controls at the station level.



Our radio advertising revenues generally reflect the advertising rates that our radio stations can charge and the number of advertisements that we can broadcast without
jeopardizing listener levels and resulting ratings. We typically base our advertising rates upon demand for a stations advertising inventory and its ability to attract audiences in targeted demographic groups, as well as by the number of
stations competing in the market.



Most of our markets are mid-sized or
suburban markets, which typically attract a larger percentage of advertising revenues from local, rather than national, advertising.



The radio broadcast industry typically experiences seasonal revenue fluctuations due primarily to fluctuations in advertising expenditures by local and national
advertisers, with revenues typically being the lowest in the first calendar quarter of each year. A radio stations operating results in any period also may be affected by advertising and promotional expenditures that do not necessarily produce
revenues in the period in which the expenditures are made.



Outdoor Advertising Division



We derive our outdoor
advertising revenues primarily through contracts with local and national advertisers. Our outdoor division operating expenses consist primarily of employee salaries and commissions, rental of sites for advertising displays, costs for the
installation of advertising frames, maintenance and shipping costs, printing of advertisements and production costs.



Our outdoor advertising revenues reflect advertising rates prevailing in the relevant market, the location of our displays and our available inventory. We generally base
our advertising rates on a particular displays exposure, or number of impressions delivered, in relation to the demographics of the particular market and its location within that market. Our outdoor advertising display contracts
typically have terms ranging from one month to one year.



We estimate the
number of impressions delivered by an outdoor display, for example, by estimating the number of individuals viewing the site during a defined period. We apply a similar formula for determining advertising rates for our other display products.
Because roadside bulletin displays are large



19



---

##### Table of Contents

and generate a higher number of impressions than other outdoor products, advertising rates for bulletins are significantly higher than those for our other
outdoor and alternative display products.



Critical Accounting Policies



Our consolidated financial statements are prepared in accordance with
generally accepted accounting principles, which requires us to make certain estimates and assumptions. A summary of our significant accounting policies is provided in Note 1 to our consolidated financial statements. The following section is a
summary of certain aspects of those accounting policies that both require our most difficult, subjective or complex judgments and are most important to the portrayal of our financial condition and results of operations.



Acquisitions. We account for our business acquisitions under the purchase method of
accounting as required by Statement of Financial Accounting Standard (SFAS) No. 141, Business Combinations. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values. The
excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires judgment and often involves the use of significant
estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. These estimates and assumptions affect future amortization expense and gains or
losses recorded on the sale of properties.



Intangible Assets.We record
identified intangible assets, including but not limited to FCC licenses, advertising permits, customer relationships, non-compete agreements, and favorable/unfavorable lease obligations, at their fair value using our estimates and assumptions. These
estimates and assumptions affect future amortization expense and gains or losses recorded on the sale of properties. Goodwill represents the excess of cost over the fair value of tangible assets and identified intangible assets acquired in a
business combination. For indefinite lived intangibles related to acquisitions prior to July 1, 2001, amortization was provided on the straight-line method over the estimated useful lives of the related assets, primarily 40 years, through December
31, 2001. No amortization has been recorded for indefinite lived intangible assets acquired subsequent to July 1, 2001. From January 1, 2002 through present, in accordance with SFAS 142, no amortization has been recorded on any indefinite lived
intangible assets.



Impairment. In January 2002, we adopted SFAS No.
142, Goodwill and Other Intangible Assets (SFAS 142), which changes the accounting for goodwill and intangible assets with indefinite lives, such as FCC licenses and advertising permits, from an amortization method to an impairment-only approach,
and introduces a new model for determining impairment charges. The new model requires us to evaluate our indefinite lived intangible assets and goodwill for impairment at least annually. In applying the new model, we first evaluate our indefinite
lived intangible assets. To the extent that the estimated fair value of the indefinite lived intangible assets is less than the net book value, we record an impairment charge to reduce the net book value to estimated fair value. Subsequent to the
impairment analysis of our indefinite lived intangible assets, we evaluate each of our reporting units (principally our markets) for impairment. If the estimated fair value of our reporting units is less than the net book value, we perform a second
step to quantify the amount of the impairment. In this process, the fair value of each of the assets, including goodwill, is estimated and compared to the related net book value. The shortfall of the fair value below net book value of all of the
assets represents the amount of impairment. Determining the fair value of our indefinite lived intangible assets and reporting units requires judgment and often involves the use of significant estimates and assumptions, including assumptions with
respect to, among other items, future cash inflows and outflows, discount rates and terminal valuation multiples.



Bad debt allowance. We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific
customers inability to meet its financial obligations, we record a specific reserve to reduce receivables to what we believe will be collected. For all other customers, we recognize reserves based on historical experience of bad debts as a
percent of revenues for each business unit, adjusted for relative improvements or deteriorations in collectibility and changes in current economic conditions.



20



---

##### Table of Contents

Income Taxes. We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Judgment
is required in determining our provision for income taxes. Our income tax provision is based on calculations and assumptions that are subject to examination by many different tax authorities. We adjust our income tax provision in the period it is
probable that actual results will differ from our estimates. Tax law and rate changes are reflected in the income tax provision in the period in which such changes are enacted.



We record a valuation allowance to reduce our deferred tax assets to the amount that is likely to be realized. While we consider future
taxable income, if any, in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred
tax asset would increase income in the period a determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be
charged to income in the period such determination was made.



Factors
Affecting Comparability



We commenced operations in late-1999 when our
predecessor by merger completed its first acquisition. Our results of operations from period to period are not comparable because of the impact of the various acquisitions and dispositions that we have completed, as well as our rapid build-up in
personnel in anticipation of additional acquisitions. Moreover, our expected growth through acquisitions is likely to continue to limit the comparability of our results of operations.



21



---

##### Table of Contents

Results of Operations



The following tables present certain summary historical financial data in dollars and as a percentage of net revenues for the periods indicated on a consolidated basis
and for each of our out-of-home media divisions.



|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|---------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | - | ----- | ---- | - | ------- | - |  | ----- |  | - | ------- | - |  | -----
|                                                                                         |  | Year Ended December 31,
|                                                                                         |  | 2001                    |         |   | % |       | 2002 |   |         | % |  | 2003  |  |   | %      
|Consolidated Operating Data:                                                             |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net revenue                                                                              |  | $                       | 71,721  |   |   | 100.0 |      | $ | 91,330  |   |  | 100.0 |  | $ | 106,959 |   |  | 100.0
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 46,819  |   |   | 65.3  |      |   | 59,330  |   |  | 65.0  |  |   | 66,532  |   |  | 62.2 
|Corporate expenses                                                                       |  |                         | 8,834   |   |   | 12.3  |      |   | 8,116   |   |  | 8.9   |  |   | 8,518   |   |  | 8.0  
|Depreciation and amortization                                                            |  |                         | 11,053  |   |   | 15.4  |      |   | 5,523   |   |  | 6.0   |  |   | 10,291  |   |  | 9.6  
|Local marketing agreement fees                                                           |  |                         | 20      |   |   | 0.0   |      |   |        |   |  | 0.0   |  |   | 42      |   |  | 0.0  
|Impairment loss                                                                          |  |                         |        |   |   | 0.0   |      |   | 42,956  |   |  | NM    |  |   |        |   |  | 0.0  
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Operating income (loss)                                                                  |  |                         | 4,995   |   |   | 7.0   |      |   | (24,595 | ) |  | NM    |  |   | 21,576  |   |  | 20.2 
|Interest expense, net                                                                    |  |                         | 15,815  |   |   |       |      |   | 22,444  |   |  |       |  |   | 22,369  |   |  |      
|Other (income) expense                                                                   |  |                         | (574    | ) |   |       |      |   | (1,370  | ) |  |       |  |   | (20,764 | ) |  |      
|Provision for deferred income taxes                                                      |  |                         |        |   |   |       |      |   | 4,311   |   |  |       |  |   | 10,464  |   |  |      
|Discontinued operations                                                                  |  |                         | 662     |   |   |       |      |   | 3,475   |   |  |       |  |   | (1      | ) |  |      
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net income (loss)                                                                        |  | $                       | (10,908 | ) |   |       |      | $ | (53,455 | ) |  |       |  | $ | 9,508   |   |  |      
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Radio Broadcasting Operating Data:                                                       |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net revenues                                                                             |  | $                       | 56,334  |   |   | 100.0 |      | $ | 64,064  |   |  | 100.0 |  | $ | 72,876  |   |  | 100.0
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 36,937  |   |   | 65.6  |      |   | 40,065  |   |  | 62.5  |  |   | 44,432  |   |  | 61.0 
|Depreciation and amortization                                                            |  |                         | 9,684   |   |   | 13.5  |      |   | 3,523   |   |  | 3.9   |  |   | 5,974   |   |  | 8.2  
|LMA fees                                                                                 |  |                         | 20      |   |   | 0.0   |      |   |        |   |  | 0.0   |  |   | 42      |   |  | 0.0  
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Segment operating income                                                                 |  | $                       | 9,693   |   |   | 17.2  |      | $ | 20,476  |   |  | 32.0  |  | $ | 22,428  |   |  | 30.8 
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Outdoor Advertising Operating Data:                                                      |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net revenues                                                                             |  | $                       | 15,387  |   |   | 100.0 |      | $ | 27,266  |   |  | 100.0 |  | $ | 34,083  |   |  | 100.0
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 9,882   |   |   | 64.2  |      |   | 19,265  |   |  | 70.7  |  |   | 22,100  |   |  | 64.8 
|Depreciation and amortization                                                            |  |                         | 1,369   |   |   | 8.9   |      |   | 2,000   |   |  | 7.3   |  |   | 4,317   |   |  | 12.7 
|Impairment loss                                                                          |  |                         |        |   |   | 0.0   |      |   | 42,956  |   |  | NM    |  |   |        |   |  |     
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Segment operating income (loss)                                                          |  |                         | 4,136   |   |   | 26.9  |      | $ | (36,955 | ) |  | NM    |  | $ | 7,666   |   |  | 22.5 
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      



Comparison of Fiscal Year 2003 to
Fiscal Year 2002



Net Revenues.Consolidated net revenues increased
$15.7 million to $107.0 million in 2003 from $91.3 million in 2002. Radio net revenues increased $8.8 million to $72.9 million in 2003 from $64.1 million in 2002. Outdoor advertising net revenues increased $6.8 million to $34.1 million in 2003 from
$27.3 million in 2002. Net revenues increased $12.6 million due to acquisitions, net of dispositions, with the remaining $3.1 million increase attributable to organic growth in the assets that we owned and operated at December 31, 2003. Of the $3.1
million of organic growth, $4.0 million was related to the outdoor division, offset by a decline of $0.9 million in the radio division. We expect 2004 net revenues to exceed 2003 net revenues due to continued acquisition activity and organic growth.



Market Level Expenses, exclusive of depreciation and amortization.Consolidated operating expenses increased $7.2 million to $66.5 million in 2003 from $59.3 million in 2002. Radio operating expenses increased $4.3 million to $44.4 million in 2003 from $40.1 million in 2002. Outdoor advertising operating
expenses increased $2.8 million to $22.1 million in 2003 from $19.3 million in 2002. These increases were attributable primarily to our completion of acquisitions in 2002 and 2003. As a percentage of net revenues, consolidated operating expenses
decreased from 65.0% to 62.2% because revenue growth did not require a proportionate increase in expenses.



22



---

##### Table of Contents

Corporate Expenses. Corporate expenses increased $402,000 to $8.5 million in 2003 from $8.1 million in 2002. This
increase was due primarily to severance costs of $400,000 associated with the reduction of corporate staff in 2002. As a percentage of net revenues, corporate expenses declined from 8.9% to 8.0% because we did not add significant corporate costs in
connection with our acquisitions.



Other Operating Expenses.
Consolidated depreciation and amortization increased $4.8 million to $10.3 million in 2003 from $5.5 million in 2002. Radio depreciation and amortization increased $2.5 million to $6.0 million in 2003 from $3.5 million in 2002. Outdoor advertising
depreciation and amortization increased $2.3 million to $4.3 million in 2003 from $2.0 million in 2002. The increase in radio and outdoor depreciation and amortization was attributable to the acquisitions during the year which resulted in the
addition of depreciable fixed assets and definite lived intangibles which are amortized over their useful lives.



In the fourth quarter of 2003, we conducted our annual evaluation of goodwill and indefinite lived intangible assets pursuant to SFAS 142. As a result of this evaluation,
we identified no impairment. In 2002, we recorded a $43.0 million non-cash impairment loss related to our outdoor advertising assets, $19.6 million of which related to advertising permits and $23.4 million of which related to goodwill. The non-cash
impairment of these indefinite lived intangible assets was primarily caused by unfavorable economic conditions in the outdoor advertising markets in which we operated during 2002. These weak market conditions adversely impacted the cash flow
projections used to determine the fair value of our advertising permits and reporting units and resulted in the non-cash impairment.



Interest and Other Income (Expense) Net.Interest expense, net, was flat at $22.4 million in 2003 due to an increase resulting from indebtedness incurred in
connection with our acquisitions offset by proceeds from our interest rate swaps. Other income (expense), net increased to $20.8 million in 2003 as a result of gains on our asset sales during the year, including $18.9 million on the sale of station
WJTW-FM and $1.7 million on the sale of station WAIT-FM.



Income Tax. In
connection with the adoption of SFAS 142 and suspension of amortization of FCC licenses, advertising permits and goodwill, we expected that our deferred tax liabilities would not reverse within our net operating loss carry-forward period.
Accordingly, we recorded deferred tax expense throughout the year to establish a valuation allowance against net operating loss carry-forwards generated by amortization of goodwill and broadcast licenses that is deductible for tax purposes, but is
no longer amortized.



Discontinued Operations. In 2003, we had no
significant discontinued operations. In 2002, we incurred a loss on discontinued operations of $3.5 million primarily related to the loss on sale of our Panama City, Florida assets.



Net Income (loss). Consolidated net income increased $63.0 million to $9.5 million in 2003 from a $53.5 million loss in 2002 as a
result of the factors described above.



Comparison of Fiscal Year 2002 to
Fiscal Year 2001



Net Revenues.Consolidated net revenues increased
$19.6 million to $91.3 million in 2002 from $71.7 million in 2001. Radio net revenues increased $7.8 million to $64.1 million in 2002 from $56.3 million in 2001. Outdoor advertising net revenues increased $11.9 million to $27.3 million in 2002 from
$15.4 million in 2001. Net revenues increased $11.7 million due to acquisitions with the remaining $7.9 million increase attributable to organic growth in the assets that we owned and operated at December 31, 2002. Of the $7.9 million of organic
growth, $9.6 million was related to the radio division which was offset by a decline of $1.7 million in the outdoor division.



Market Level Expenses, exclusive of depreciation and amortization.Consolidated operating expenses increased $12.5 million to $59.3 million in 2002 from $46.8
million in 2001. Radio operating expenses increased $3.2 million to $40.1 million in 2002 from $36.9 million in 2001. Outdoor advertising operating expenses increased $9.4 million to $19.3 million in 2002 from $9.9 million in 2001. These increases
were



23



---

##### Table of Contents

attributable primarily to our completion of acquisitions in 2001 and 2002. As a percentage of net revenues, consolidated operating expenses decreased
marginally from 65.3% to 65.0%.



Corporate Expenses. Corporate expenses
decreased $700,000 to $8.1 million in 2002 from $8.8 million in 2001. This decrease was due primarily to reductions in salaries due to organizational changes in the fourth quarter of 2001. As a percentage of net revenues, corporate expenses declined
from 12.3% to 8.9% as we reduced corporate costs despite growth through acquisitions and operations.



Other Operating Expenses. Consolidated depreciation and amortization decreased $5.6 million to $5.5 million in 2002 from $11.1 million in 2001. Radio depreciation and amortization decreased $6.2 million to $3.5
million in 2002 from $9.7 million in 2001. Outdoor advertising depreciation and amortization increased $600,000 to $2.0 million in 2002 from $1.4 million in 2001. The decrease in radio depreciation and amortization was attributable primarily to the
adoption of SFAS 142, which required that goodwill and intangible assets with indefinite useful lives no longer be amortized. As a result, we ceased the amortization of FCC licenses and goodwill. The increase in outdoor depreciation and amortization
was attributable to the acquisitions during the year which resulted in the addition of depreciable fixed assets and definite lived intangibles which are amortized over their useful lives.



In the fourth quarter of 2002, we conducted our annual evaluation of goodwill and indefinite lived intangible assets pursuant to SFAS 142.
As a result of this evaluation, we recorded a $43.0 million non-cash impairment loss related to our outdoor advertising assets, $19.6 million of which related to advertising permits and $23.4 million of which related to goodwill. The non-cash
impairment of these indefinite lived intangible assets was primarily caused by unfavorable economic conditions in the outdoor advertising markets in which we operated during 2002. These weak market conditions adversely impacted the cash flow
projections used to determine the fair value of our advertising permits and reporting units and resulted in the non-cash impairment.



Interest and Other Income (Expense) Net.Interest expense, net, increased to $22.4 million in 2002 from $15.8 million in 2001 due to indebtedness incurred in
connection with our acquisitions. Other income (expense), net increased to $1.4 million of income in 2002 as a result of gains on our interest rate swap arrangements.



Income Tax. In connection with the adoption of SFAS 142 and suspension of amortization of FCC licenses, advertising permits and
goodwill, we expected that our deferred tax liabilities would not reverse within our net operating loss carry-forward period. Accordingly, on January 1, 2002, we recorded a one time non-cash charge of $11,600 to deferred tax expense to establish an
additional valuation allowance against our deferred tax assets. We recorded additional deferred tax expense throughout the year to establish a valuation allowance against net operating loss carry-forwards generated by amortization of goodwill and
broadcast licenses that is deductible for tax purposes, but is no longer amortized.



This deferred tax expense was partially offset by the tax benefit associated with the $43.0 million impairment loss on goodwill. As a result of the impairment loss, a significant portion of our deferred tax liability, resulting from the
difference between book and tax amortization of goodwill, was reversed. Consequently, we recorded a deferred tax benefit of $15.4 million during the fourth quarter offsetting previously recognized expense of $19.7 million.



Discontinued Operations. In the second quarter of 2002, we entered into an agreement
to sell the assets of radio stations, WYOO-FM, WPCF-AM, WQJM-FM, WILN-FM and WYYX-FM in exchange for approximately $5.5 million. This sale was completed in January 2003. The assets sold consist primarily of FCC licenses, broadcast equipment and
accounts receivable. We recorded a loss of approximately $3.3 million in discontinued operations in the second quarter for the difference between the carrying value of this reporting unit and the expected proceeds of the sale, less expected selling
costs. No tax benefit was recognized in connection with this loss. We classified the remaining carrying value of the assets to be sold as held for sale on the balance sheet and the results of operations for this reporting unit have been classified
as discontinued operation in all periods presented. During the year ended December 31, 2002, these assets



24



---

##### Table of Contents

generated net revenues of approximately $807,000. Management decided to sell these assets because we believe there are alternative uses of capital which may
provide a higher return on investment.



Net Loss. Consolidated net loss
increased $42.6 million to $53.5 million in 2002 from $10.9 million in 2001 as a result of the factors described above.



Liquidity and Capital Resources



Sources of Funds



Our cash and cash equivalents balance at December 31, 2003 was approximately $707,000 compared to $14.4 million at December 31, 2002. The decrease was due primarily to
acquisitions, capital expenditures and financing costs partially offset by cash from operations and previously committed equity capital contributions.



Net cash provided by (used in) operating activities was $6.9 million and $(302,000) in 2003 and 2002, respectively. The increase in our net cash provided by operating
activities was due primarily to growth in revenue and cash flow due to acquisitions completed during 2002 and 2003. During the second half of 2002 and January 2003, we completed several acquisitions funded substantially with equity contributions,
which had a positive impact on ongoing cash from operations.



Net cash provided
by financing activities was $28.7 million and $27.6 million in 2003 and 2002, respectively. Net cash used in investing activities was $49.4 million and $43.3 million in 2003 and 2002, respectively. These cash flows primarily reflect borrowings,
capital contributions and expenditures for acquisitions and dispositions.



As
of December 31, 2003 we had net operating loss carry forwards of approximately $71.4 million, which are available to reduce future federal and state income taxes. The federal net operating loss carry forwards begin to expire at various times
commencing in 2020.



Uses of Funds



We use a significant portion of our capital resources to consummate acquisitions. Through
December 31, 2003, we funded our acquisitions from: (i) equity capital contributions of approximately $354.0 million from NextMedia Investors, funded by equity investments from several private investment funds and our senior management, (ii)
aggregate borrowings of approximately $202.0 million, and (iii) cash from operations. We expect to obtain financing for future acquisitions through the incurrence of debt, additional equity contributions, internally generated funds or a combination
of the foregoing. There can be no assurance, however, that external financing will be available to us on terms we consider favorable or that cash flow from operations will be sufficient to fund our ongoing liquidity requirements.



Credit Facility and Senior Subordinated Notes



On July 31, 2000, we entered into a credit agreement with various banks (the Revolving
Credit Facility). The Revolving Credit Facility, as amended, consists of a $75.0 million revolving loan facility. Amounts available under the Revolving Credit Facility began reducing quarterly beginning in October 2003. The maximum amount
available for borrowing at March 1, 2004 was $69,375 as a result of the reduction



25



---

##### Table of Contents

beginning in October 2003. By December 31, 2004, the maximum amount available for borrowing will have been reduced to $63,000 as a result of further
reductions. The Revolving Credit Facility matures on July 31, 2007. Included within the Revolving Credit Facility is $30.0 million available to us for the issuance of letters of credit. At December 31, 2003, $2,904 of letters of credit were
outstanding. Amounts available for borrowing under the Revolving Credit Facility are determined based on certain leverage requirements.



Our senior credit facility contains customary restrictive covenants that, among other things, limit our ability to incur additional indebtedness and liens in connection
therewith, pay dividends and make capital expenditures above specified limits. Under the senior credit facility, we must satisfy specified financial covenants, such as a maximum total leverage ratio, a maximum senior leverage ratio and a minimum
ratio of consolidated EBITDA to consolidated net cash interest expense. As of December 31, 2003, we were in compliance with all of these covenants. After taking into account our restrictive covenants, as of March 1, 2004, we had approximately
$22.0 million of borrowing capacity under our credit facility.



On July
5, 2001, we completed an offering of $200.0 million of our 10.75% senior subordinated notes due 2011. Under the terms of the notes, semi-annual interest payments of approximately $10.8 million are due January 1 and July 1 of each year. The indenture
governing the notes contains certain restrictive covenants that, among other things, limit our ability to incur additional indebtedness and pay dividends. As of December 31, 2003, we were in compliance with all of these covenants.



Capital Expenditures



Capital expenditures in the year ended December 31, 2003 decreased to $5.0 million from
approximately $6.4 million for the year ended December 31, 2002 due to reduced expenditures for the consolidation of radio broadcasting facilities and new outdoor advertising site development. The following table sets forth our capital expenditures
for the twelve months ended December 31, 2002 and 2003. Recurring capital expenditures are related to the maintenance of our existing broadcast facilities and outdoor structures. Non-recurring capital expenditures are related primarily to radio
signal upgrades and facility consolidations. Revenue producing capital expenditures are related to the construction of new outdoor structures which management believes will generate future revenue.



|                           |  |                                       |       |                                       |   |      
|-------------------------- |  | ------------------------------------- | ----- | ------------------------------------- | - | -----
|                           |  | Twelve Months Ended December 31, 2002 |       | Twelve Months Ended December 31, 2003
|                           |  | (in thousands)                       
|Recurring                  |  | $                                     | 1,489 |                                       | $ | 2,019
|Non-recurring              |  |                                       | 1,017 |                                       |   | 517  
|Revenue producing          |  |                                       | 3,935 |                                       |   | 2,506
|                           |  |                                       |       |                                       |   |      
|Total capital expenditures |  | $                                     | 6,441 |                                       | $ | 5,042
|                           |  |                                       |       |                                       |   |      



26



---

##### Table of Contents

Commitments and Contractual Obligations



The following table sets forth future payments due under our debt and lease obligations as of
December 31, 2003 (in thousands):



|                    |  |                                   |         |                                 |   |        |  |   |        
|------------------- |  | --------------------------------- | ------- | ------------------------------- | - | ------ |  | - | -------
|                    |  | 103⁄4% SeniorSubordinated Notes (1) |         | Non-CancellableOperating Leases |   | Total 
|2004                |  | $                                 |        |                                 | $ | 5,727  |  | $ | 5,727  
|2005                |  |                                   |        |                                 |   | 5,247  |  |   | 5,247  
|2006                |  |                                   |        |                                 |   | 4,564  |  |   | 4,564  
|2007                |  |                                   |        |                                 |   | 3,730  |  |   | 3,730  
|2008 and thereafter |  | $                                 | 200,000 |                                 | $ | 28,657 |  | $ | 228,657
|                    |  |                                   |         |                                 |   |        |  |   |        
|                    |  | $                                 | 200,000 |                                 | $ | 47,925 |  | $ | 247,925
|                    |  |                                   |         |                                 |   |        |  |   |        

---

|(1) | In each year from 2004 through 2010, we will make semi-annual cash interest payments of $10,750.
|--- | ------------------------------------------------------------------------------------------------



We believe that cash from operations, together with available borrowings under our senior
credit facility, will be sufficient to permit us to meet our financial obligations and to fund our existing operations for the foreseeable future.



On November 7, 2002, Standard & Poors Ratings Services placed our B+ corporate credit rating on credit watch with negative implications. If we were downgraded
by Standard & Poors, our ability to raise capital on acceptable terms or at all could be impaired.



Inflation



To date, our results of
operations have not been affected materially by inflation.



Recent
Accounting Pronouncements



In June 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (FASB) No. 143, Accounting for Asset Retirement Obligations (SFAS 143). SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from
acquisition, construction, development and/or the normal operation of a long-lived asset. SFAS 143 is effective for financial statements for fiscal years beginning after June 15, 2002. On January 1, 2003 we adopted SFAS 143 Accounting for Asset
Retirement Obligations.Some of our lease agreements and easements require that we remove our owned equipment located on the premises at the termination of the applicable lease or easement should it not be renewed. This equipment typically
consists of advertising displays or transmitting equipment. We do not believe that these potential future obligations will have a material impact on our financial position or results of operations.



In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN
46), Consolidation of Variable Interest Entities. FIN 46 must be applied to interests in variable interest entities created before February 1, 2003 beginning in the first interim or annual period beginning after March 15, 2004. For
variable interest entities created after February 1, 2003, FIN 46 is effective for the first interim period after December 31, 2003. During the three month period ended September 30, 2003, we entered into an LMA agreement to operate a station in the
Lubbock, Texas market. We considered the applicability of FIN 46 to this LMA agreement and determined that, in this case, the LMA agreement did not meet the criteria established by FIN 46 for consolidation. Consequently, the adoption of FIN 46 has
not had a material impact on our financial statements.



In November 2002, the
Emerging Issues Task Force reached a consensus on Issue No. 00-21, Revenue Arrangement with Multiple Deliverables (EITF No. 00-21). This issue addresses how revenue arrangements with multiple deliverables should be divided
into separate units of accounting and how the arrangement consideration should be allocated to the identified separate accounting units. EITF No. 00-21 is effective for fiscal periods beginning after June 15, 2003. Where multiple elements exist in
an arrangement, the arrangement fee is allocated to the different elements based upon verifiable objective evidence of the fair value of the elements. The adoption of EITF No. 00-21 did not have a material impact on our financial statements.



In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 provides for certain changes in the accounting treatment of derivative contracts. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, except for certain
provisions that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, which should continue to be applied in accordance with their respective effective dates. The guidance should
be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on our financial statements.



27



---

##### Table of Contents

Also in May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity. This new statement changes the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. It requires that those instruments be classified as liabilities in
the balance sheets. Most of the guidance in SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of our first interim period beginning after June 15, 2003. The
adoption of SFAS No. 150 did not have a material impact on our financial statements.



SAB 104 was released in December 2003. SAB 104 updates interpretative guidance in the codification of staff accounting bulletins to provide consistent accounting guidance on revenue recognition. We adopted SAB 104 in December 2003 with no
impact to our financial statements or our financial reporting.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



From January 2002 through January 2004, we were party to various interest rate swap agreements with aggregate notional amounts ranging from $75.0 million to $100.0
million. Pursuant to these swaps, we paid a floating rate of interest and received a fixed rate of interest on the notional amount. Pursuant to the swaps, we received net interest proceeds of $950,000 and $2.0 million in 2002 and 2003, respectively.
We recognized quarterly income or expense to record the swaps at fair value during the periods they were outstanding. In February 2004, we terminated the existing swaps, realized a $1.6 million gain, and received proceeds of $1.6 million. We are no
longer party to any swaps.



Our remaining long-term debt has a fixed interest
rate. Consequently, we do not believe we are currently exposed to any material interest rate or market risk in connection with our remaining long-term debt.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



The consolidated financial statements and related notes are included in Part IV of this Form 10-K, beginning on page F-1.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Based on their evaluation of our disclosure controls and procedures conducted within 90 days of the date of filing this report on Form 10-K, our principal executive
officer and our principal financial officer have concluded that, as of the date of their evaluation, our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as
amended) are effective.



There have been no significant changes in our internal
controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this annual report on Form 10-K.



28



---

##### Table of Contents

PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------



The names of our executive officers, directors and senior officers and their respective ages and positions are as follows:



|                     |  |     |  |                                                                              
|-------------------- |  | --- |  | -----------------------------------------------------------------------------
|Name                 |  | Age |  | Position                                                                     
|Carl E. Hirsch       |  | 57  |  | Director, Executive Chairman of the Board                                    
|Steven Dinetz        |  | 57  |  | Director, President and Chief Executive Officer                              
|Sean Stover          |  | 41  |  | Senior Vice President and Chief Financial Officer                            
|Samuel Skip Weller |  | 48  |  | President and Co-Chief Operating Officer of the Radio Division               
|Jeffrey Dinetz       |  | 45  |  | Executive Vice President and Co-Chief Operating Officer of the Radio Division
|Jim Matalone         |  | 42  |  | President and Chief Operating Officer of the Outdoor Division                
|Schuyler Hansen      |  | 35  |  | Chief Accounting Officer, Treasurer and Assistant Secretary                  
|Matthew Leibowitz    |  | 53  |  | Secretary                                                                    



Carl E. Hirsch has been our Executive
Chairman of the Board since our inception and Executive Chairman of the Board of NextMedia Investors LLC since its inception. From February 1997 to March 1999, Mr. Hirsch was President and Chief Executive Officer of OmniAmerica, Inc., a broadcast
and telecommunications tower company. From January 1991 to February 1997, Mr. Hirsch was the Chairman and Chief Executive Officer of OmniAmerica Group, a multimarket radio station group operator.



Steven Dinetz has been our President and Chief Executive Officer since our inception and
President and Chief Executive Officer of NextMedia Investors LLC since its inception. From October 1998 to March 1999, Mr. Dinetz was the President and Chief Operating Officer of Capstar Broadcasting Company. From 1993 to 1997, Mr. Dinetz was
President and Chief Executive Officer of Chancellor Broadcasting.



Sean Stover
has been our Senior Vice President and Chief Financial Officer since our inception. From October 1996 to November 1999, Mr. Stover was a partner in the mergers and acquisitions practice of PricewaterhouseCoopers LLP. Mr. Stover has an MBA from
Northwestern Universitys Kellogg Graduate School of Business.



Samuel
Skip Weller has been President and Co-Chief Operating Officer of our radio division since our inception. From September 1998 to October 1999, Mr. Weller was retired. From January 1996 to September 1998, Mr. Weller was Executive Vice
President and Regional Manager for Chancellor Media Corporation and AMFM, Inc., overseeing 24 radio stations in Denver, Phoenix, Pittsburgh, Long Island and Sacramento.



Jeffrey Dinetz has been the Executive Vice President and Co-Chief Operating Officer of our radio division since January 2001. From October
1997 to December 1999, Mr. Dinetz was a Vice President and Regional Manager of the midwestern markets of Connoisseur Communications. From January 1996 to September 1997, he was Vice President and General Manager of WHTZ-FM for Chancellor
Broadcasting Company. Jeffrey Dinetz is the nephew of Steven Dinetz.



Jim
Matalone has been the President and Chief Operating Officer of the outdoor division since February 2001. From April 1999 to May 2000, Mr. Matalone served as the Chief Operating Officer of Advantage Outdoor Inc. From October 1996 to April 1999, Mr.
Matalone served as the Northeast Regional Manager for Universal Outdoor Holdings. From April 1994 to September 1996, Mr. Matalone served as general manager for Trade Advantage, a division of PLA, an outdoor advertising company.



Schuyler Hansen has been our Treasurer, Chief Accounting Officer and Assistant Secretary
since September 2001. From July 1999 to September 2000, Mr. Hansen was Senior Vice President and Chief Accounting Officer of AMFM Inc., formerly Chancellor Broadcasting Company. Prior to that, Mr. Hansen was a Director in the mergers and
acquisitions practice of PricewaterhouseCoopers LLP. Mr. Hansen has an MBA from the University of Texas at Austin Graduate School of Business.



Matthew Leibowitz has been our Secretary since our inception. Since 1981, Mr. Leibowitz has run the law firm of Leibowitz & Associates, P.A., which he founded. Mr.
Leibowitz has a J.D. from the University of Miami School of Law.



29



---

##### Table of Contents

Audit Committee



The Audit Committee of the Board of Directors of NextMedia Group, Inc. is comprised of Messrs. James M. McElwee and Lawrence S. Sorrel, and performs the functions of an
audit committee with respect to us. Mr. McElwee is a Genral Partner at Weston Presidio Capital III and Mr. Sorrel is a Managing Partner at Tailwind Capital Partners LLC, an affiliate of Thomas Weisel Capital Partners, L.P. The Audit Committee makes
recommendations concerning the engagement of independent public accountants, reviews with the independent public accountants the scope and results of the audit engagement, approves professional services provided by the independent public
accountants, reviews the independence of the independent public accountants, considers the range of audit and non-audit fees and reviews the adequacy of our internal accounting controls. We have determined that the Audit Committee does not include a
financial expert as defined in Item 401 of Regulation S-K. We believe that the Audit Committee members are sufficiently sophisticated in financial matters to adequately carry out their responsibilities as members of the Audit Committee.



Code of Ethics



We currently have a general code of ethics that applies to all of our employees, including the Chief Executive Officer and the Principal
Financial Officer. We expect to amend our code of ethics in 2004 to address the elements of financial reporting and disclosure as defined in Item 406 of Regulation S-K under the Securities Exchange Act of 1934.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



The following table sets forth, for the year ended December 31, 2003, the compensation paid to the chief executive officer and the other four most highly-paid executives
in 2003. We have not granted any stock options.



|                                                                              |  |                     |  |                        |         |       |   |         |  |  
|----------------------------------------------------------------------------- |  | ------------------- |  | ---------------------- | ------- | ----- | - | ------- |  | -
|                                                                              |  | Annual Compensation |  | All Other Compensation
|Name and Principal Position                                                   |  | Year                |  | Salary                 |         | Bonus |  
|Carl E. Hirsch                                                                |  | 2003                |  | $                      | 300,000 |       | $ |        |  | 
|Executive Chairman of the Board                                               |  | 2002                |  | $                      | 300,000 |       |   |        |  | 
|                                                                              |  | 2001                |  | $                      | 300,000 |       | $ | 100,000 |  | 
|                                                                              |  |                     |  |                       
|Steven Dinetz                                                                 |  | 2003                |  | $                      | 300,000 |       | $ |        |  | 
|President and Chief Executive Officer                                         |  | 2002                |  | $                      | 300,000 |       | $ | 300,000 |  | 
|                                                                              |  | 2001                |  | $                      | 300,000 |       | $ | 100,000 |  | 
|                                                                              |  |                     |  |                       
|Sean Stover                                                                   |  | 2003                |  | $                      | 287,500 |       | $ | 172,500 |  | 
|Senior Vice President and Chief Financial Officer                             |  | 2002                |  | $                      | 270,000 |       | $ | 175,000 |  | 
|                                                                              |  | 2001                |  | $                      | 270,000 |       | $ | 130,000 |  | 
|                                                                              |  |                     |  |                       
|Samuel Weller                                                                 |  | 2003                |  | $                      | 287,500 |       | $ | 70,000  |  | 
|President and Co-Chief Operating Officer of the Radio Division                |  | 2002                |  | $                      | 275,000 |       | $ | 175,000 |  | 
|                                                                              |  | 2001                |  | $                      | 270,833 |       | $ | 130,000 |  | 
|                                                                              |  |                     |  |                       
|Jeffrey Dinetz                                                                |  | 2003                |  | $                      | 272,500 |       | $ | 45,000  |  | 
|Executive Vice President and Co-Chief Operating Officer of the Radio Division |  | 2002                |  | $                      | 260,000 |       | $ | 160,000 |  | 
|                                                                              |  | 2001                |  | $                      | 258,333 |       | $ | 100,000 |  | 



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | --------------------------------------------------------------



Our parent company, NextMedia Group, Inc., owns 100% of our outstanding shares of common stock. NextMedia Group, Inc. is a wholly owned subsidiary of NextMedia Investors
LLC.



30



---

##### Table of Contents

The following table sets forth the amount of NextMedia Investors LLC membership interests beneficially owned by our
directors as of March 29, 2004. The address of our directors is c/o NextMedia Operating, Inc. 6312 S. Fiddlers Green Circle, Suite 360E, Englewood, CO 80111.



|               |  |                          |  |                                              |  |                  |  
|-------------- |  | ------------------------ |  | -------------------------------------------- |  | ---------------- | -
|Title of Class |  | Name of Beneficial Owner |  | Amount and Nature of Beneficial Ownership    |  | Percent of Class |  
|Class A        |  | Carl E. Hirsch           |  | 12.2 million of membership interests, direct |  | 4.2              | %
|Class B        |  |                          |  | 13.6 units, direct                           |  | 26.3             | %
|Class A        |  | Steven Dinetz            |  | 12.2 million of membership interests, direct |  | 4.2              | %
|Class B        |  |                          |  | 13.6 units, direct                           |  | 26.3             | %



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------



NextMedia Investors Limited Liability Company Agreement



NextMedia Investors was established pursuant to a limited liability company agreement, dated as of February 28, 2000, and amended and restated as of April 17, 2000 and as
of June 13, 2001. The NextMedia Investors limited liability company agreement provides for three classes of membership interests: Class A, Class B and Class C membership interests.



The Class A members consist of Thomas Weisel Capital Partners, L.P., Weston Presidio Capital III, LP, Alta Communications VIII, LP, GS
Capital Partners 2000, LP, PNE Media LLC and their respective affiliates, Steven Dinetz, Carl E. Hirsch and certain of the other Class B members listed below. Under the terms of the agreement, each Class A member has made capital contributions to
fund investment opportunities.



The Class B members consist of Steven Dinetz,
Carl E. Hirsch, Samuel Weller, Jeffrey Dinetz, Sean Stover, Schuyler Hansen, Allen Stieglitz, Steven Smith, Matthew Leibowitz, James Matalone, Scot McArtor, Bruce Washburn and Michael Morrill. Approximately 53.0 percent of the authorized Class B
membership interests are currently issued and outstanding. The Class B Members are not required to make capital contributions to NextMedia Investors in their capacity as Class B members.



Under the terms of the agreement, NextMedia Investors may issue non-voting Class C membership interests. Currently there are thirteen Class
C members representing an aggregate deemed capital contribution of approximately $10.0 million. The Class C members are not required to make additional capital contributions to NextMedia Investors.



In the event that NextMedia Investors makes any distribution, the distribution will be paid
first to certain Class A and Class C members based on a formula set forth in the agreement, generally until such members have recovered their total contributions. A portion of the excess over amounts contributed by Class A and Class C members in
addition to a portion of the excess over amounts contributed by Class A members and Class C members prior to June 13, 2001 and before the distribution of other contributed amounts will be distributed to the Class B members based on a formula set
forth in the agreement, and the Class A members and Class C members will be entitled to the remaining amounts. In general, the portion to be received by the Class B members, which will be allocated among them in proportion to their respective Class
B membership interests, will equal approximately 13.8% with respect to capital contributed or committed as of the date hereof. This percentage will decline in accordance with the terms of the agreement in the event that additional equity is
contributed after the date hereof.



Under the terms of the limited liability
company agreement, the board of directors of NextMedia Investors shall be comprised of nine seats, two of which may be designated by Thomas Weisel Capital Partners, two of which may be designated by the holders of the Class B interests who are
Management Members (as such term is defined in the NextMedia Investors limited liability company agreement), one of which may be designated by Weston Presidio Capital, one of which may be designated by Alta Communications, two of which may be
designated by GS Capital Partners. The board seats designated by GS Capital Partners are nonvoting.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------



Aggregate fees were billed to us by our principal accountants, PricewaterhouseCoopers LLP, for audit services related to the two most recent fiscal years and for other
professional services billed in the most recent two fiscal years were as follows:



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2002 |         | 2003
|Audit Fees         |  | $    | 300,952 |      | $ | 332,402
|Audit-Related Fees |  |      | 79,346  |      |   |       
|Tax Fees           |  |      | 255,650 |      |   | 138,218
|All Other Fees     |  |      |        |      |   |       
|                   |  |      |         |      |   |        
|Total              |  | $    | 635,948 |      | $ | 470,620
|                   |  |      |         |      |   |        



31



---

##### Table of Contents

PART IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
|-------- | ---------------------------------------------------------------



| | (a) | Documents filed as part of this report:
| | --- | ---------------------------------------



| | 1. | Financial Statements. See Index to Consolidated Financial Statements on page F-1 of this Form 10-K.
| | -- | ---------------------------------------------------------------------------------------------------



| | 2. | Financial Statement Schedules. None.
| | -- | ------------------------------------



| | 3. | Exhibits:
| | -- | ---------



|              |  |                                                                                                                                                                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                           
|              | 
|3.01*         |  | Certificate of Incorporation of NextMedia Operating, Inc.                                                                                                                                                                                                                             
|              | 
|3.02*         |  | Certificate of Amendment to the Certificate of Incorporation of NextMedia Operating, Inc.                                                                                                                                                                                             
|              | 
|3.03*         |  | Bylaws of NextMedia Operating, Inc.                                                                                                                                                                                                                                                   
|              | 
|4.01*         |  | Indenture dated as of July 5, 2001 between NextMedia Operating, Inc., the Guarantors named therein and U.S. Bank Trust Company, N.A., as trustee, with respect to the 10 3/4% Senior
Subordinated Notes due 2011.                                                                     
|              | 
|4.02*         |  | Form of 10 3/4% Senior Subordinated Note due 2011 (included in Exhibit 4.1).                                                                                                                                                                                                          
|              | 
|4.03*         |  | Registration Rights Agreement dated June 28, 2001, among NextMedia Operating, Inc., Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Deutsche Banc Alex. Brown Inc., CIBC
World Markets Corp. and Thomas Weisel Partners LLC.                                            
|              | 
|4.04***       |  | Supplemental Indenture, dated as of March 13, 2002, to be effective as of July 5, 2001, among Crickett Ltd. and Chesapeake Outdoor Enterprises, Inc., each as Guarantor, NextMedia Operating,
Inc., the other Guarantors named therein and U.S. Bank National Association, as trustee.



32



---

##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                 
|               | 
|4.05***        |  | Supplemental Indenture, dated as of August 30, 2002, among NextMedia Northern Colorado, Inc., as Guarantor, NextMedia Operating, Inc., the other Guarantors named therein and U.S. Bank
National Association, as trustee.                                                                   
|               | 
|10.01*         |  | Credit Agreement, dated as of July 31, 2000, by and among NextMedia Group, Inc., NextMedia Operating, Inc., a guarantor thereunder, the lenders party thereto and Bankers Trust Company as
Administrative Agent.                                                                            
|               | 
|10.02*         |  | First Amendment to the Credit Agreement, dated as of December 13, 2000, among NextMedia Group, Inc., NextMedia Operating, Inc., NextMedia Group II, Inc., the lenders from time to time party
to the Credit Agreement, and Bankers Trust Company, as administrative agent.                  
|               | 
|10.03*         |  | Second Amendment to the Credit Agreement, dated as of May 14, 2001, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement, and
Bankers Trust Company, as administrative agent.                                                
|               | 
|10.04*         |  | Third Amendment and Consent to the Credit Agreement, dated as of June 22, 2001, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit
Agreement, and Bankers Trust Company, as administrative agent.                                    
|               | 
|10.05*         |  | Fourth Amendment to the Credit Agreement, dated as of December 20, 2001, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement,
and Bankers Trust Company, as administrative agent.                                           
|               | 
|10.06***       |  | Fifth Amendment to the Credit Agreement, dated as of June 25, 2002, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement, and
Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company), as administrative agent.   
|               | 
|10.07**        |  | Sixth Amendment to the Credit Agreement, dated as of October 15, 2002, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement, and
Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company), as administrative agent.
|               | 
|10.08*         |  | Asset Purchase Agreement, dated as of August 16, 1999, among NextMedia Group, LLC and Rambaldo Communications, Inc., Rambaldo AM Communications, Inc. and Rambaldo AM Broadcasting
Company.                                                                                                 
|               | 
|10.09*         |  | Asset Purchase Agreement, dated as of October 1, 1999, between NextMedia Group, LLC and Empire Broadcasting System LLP.                                                                                                                                                                     
|               | 
|10.10*         |  | Asset Purchase Agreement, dated as of October 2, 1999, between NextMedia Group, LLC and Styles Broadcasting of Alabama, Inc.                                                                                                                                                                
|               | 
|10.11*         |  | Asset Purchase Agreement, dated as of October 21, 1999, between NextMedia Group, LLC and The Jet Broadcasting Co., Inc.                                                                                                                                                                     
|               | 
|10.12*         |  | Asset Purchase Agreement, dated as of November 18, 1999 among NextMedia Outdoor, L.L.C., Promote It, Inc. d/b/a Gas Station Advertising Network and Jim and Lori Baxter.                                                                                                                    



33



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                   
|              | 
|10.13*        |  | Asset Purchase Agreement, dated as of November 20, 1999, between NextMedia Group, LLC and Wilmington WJBR-FM, L.L.C.                                                                                                                                                                          
|              | 
|10.14*        |  | Asset Purchase Agreement, dated as of December 6, 1999, between NextMedia Group, LLC and Salt Broadcasting LLC.                                                                                                                                                                               
|              | 
|10.15*        |  | Asset Purchase Agreement, dated as of February 11, 2000, among NextMedia Group, LLC and Pinnacle Broadcasting Company, Inc., WSOY Decatur, Inc., Pinnacle Southeast, Inc., Pinnacle Myrtle
Corp., Atlantic Towers, Inc., El Paso and Lubbock, Inc., WFXC & WDUR, Inc., and Pinnacle S.C., Inc.
|              | 
|10.16*        |  | Asset Purchase Agreement, dated as of February 16, 2000 between NextMedia Group, LLC and Hirsch Broadcasting Group, LP.                                                                                                                                                                       
|              | 
|10.17*        |  | Asset Purchase Agreement, dated as of February 22, 2000, among NextMedia Group, LLC and Lake Broadcasting, Inc. and Red River Radio, Inc.                                                                                                                                                     
|              | 
|10.18*        |  | Asset Purchase Agreement, dated as of May 11, 2000, between NextMedia Group, Inc. and AJ Indoor Advertising, Inc.                                                                                                                                                                             
|              | 
|10.19*        |  | Asset Purchase Agreement, dated as of June 15, 2000, between NextMedia Group, Inc. and Beaverkettle Company.                                                                                                                                                                                  
|              | 
|10.20*        |  | Asset Purchase Agreement, dated as of June 30, 2000, between NextMedia Operating, Inc. and Belvidere Broadcasting, L.P.                                                                                                                                                                       
|              | 
|10.21*        |  | Asset Purchase Agreement, dated as of June 30, 2000, between NextMedia Operating, Inc. and Pride Communications, LLC.                                                                                                                                                                         
|              | 
|10.22*        |  | Asset Exchange Agreement, dated as of August 31, 2000, among NextMedia Operating, Inc. and Cumulus Broadcasting Inc., Cumulus Wireless Services, Inc., Cumulus Licensing Corp., and the Myrtle
Beach Stations Trust.                                                                          
|              | 
|10.23*        |  | Asset Purchase Agreement, dated as of August 31, 2000, between Myrtle Beach Stations Trust and Fidelity Broadcasting Corporation.                                                                                                                                                             
|              | 
|10.24*        |  | KLAK-FM Option Agreement, dated as of October 10, 2000, among First Broadcasting Company, L.P., NextMedia Licensing, Inc. and NextMedia Operating, Inc.                                                                                                                                       
|              | 
|10.25*        |  | Asset Purchase Agreement, dated as of December 28, 2000, among NextMedia Group II, Inc., NextMedia Licensing, Inc., Regent Broadcasting of Erie, Inc. and Regent Licensee of Erie,
Inc.                                                                                                       
|              | 
|10.26*        |  | Asset Purchase Agreement, dated as of January 1, 2001, among NextMedia Operating, Inc. and NextMedia Licensing, Inc. and Radioworks, Inc., WFVR, Inc. and WKKD, Inc.                                                                                                                          
|              | 
|10.27*        |  | Asset Purchase Agreement, dated as of January 31, 2001, among NextMedia Outdoor, Inc. and CityVision, LLC, CityVision Connecticut, LLC and CityVision Massachusetts, LLC.                                                                                                                     
|              | 
|10.28*        |  | Asset Purchase Agreement, dated as of January 31, 2001, between NextMedia Operating, Inc. and Fairview Radio, Inc.                                                                                                                                                                            



34



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                         
|              | 
|10.29*        |  | Amendment No. 1 to the Asset Exchange Agreement, dated April 30, 2001, among NextMedia Operating, Inc. and Cumulus Broadcasting Inc., Cumulus Wireless Services, Inc., Cumulus Licensing Corp.,
and the Myrtle Beach Stations Trust.
|              | 
|10.30*        |  | Asset Purchase Agreement, dated as of June 13, 2001, between NextMedia Outdoor, Inc. and Great Advertising, LLC.                                                                                                                    
|              | 
|10.31*        |  | Asset Purchase Agreement, dated as of June 13, 2001, between NextMedia Outdoor, Inc. and Great Outdoor, Inc.                                                                                                                        
|              | 
|10.32*        |  | Asset Purchase Agreement, dated as of June 13, 2001, between NextMedia Outdoor, Inc. and Media Displays, Inc.                                                                                                                       
|              | 
|10.33*        |  | Contribution and Purchase and Sale Agreement, dated as of June 13, 2001, among NextMedia Investors, LLC, NextMedia Outdoor, Inc. and PNE Media, LLC.                                                                                
|              | 
|10.34*        |  | Amendment No. 2 to Asset Purchase Agreement, dated as of August 7, 2001, among NextMedia Outdoor, Inc. and CityVision, LLC, CityVision Mid-America, LLC, CityVision Connecticut, LLC and
CityVision Massachusetts, LLC.             
|              | 
|10.35*        |  | Asset Purchase Agreement, dated as of October 16, 2001, among Capital Advertising, Inc., Capital Media II, Inc., and Capital Outdoor, Inc. and NextMedia.                                                                           
|              | 
|10.36*        |  | Asset Purchase Agreement, dated as of October 26, 2001 between Sailing Billboards Outdoor Media, LLC and NextMedia Outdoor, Inc.                                                                                                    
|              | 
|10.37*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Carl E. Hirsch.                                                                                                                                  
|              | 
|10.38*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Steven Dinetz.                                                                                                                                   
|              | 
|10.39*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Sean Stover.                                                                                                                                     
|              | 
|10.40*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Samuel Weller.                                                                                                                                   
|              | 
|10.41*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Jeffrey Dinetz.                                                                                                                                  
|              | 
|10.42*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Steven Smith.                                                                                                                                    
|              | 
|10.43*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Schuyler Hansen.                                                                                                                                 
|              | 
|10.44*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Outdoor, Inc., NextMedia Group, Inc. and James Matalone.                                                                                                         



35



---

##### Table of Contents

|              |  |                                                                                                                                                               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                   
|              | 
|10.45*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Outdoor, Inc., NextMedia Group, Inc. and Scot McArtor.                                     
|              | 
|10.46***      |  | Purchase Agreement, dated as of October 30, 2002, by and among Wilks Broadcasting, LLC, Wilks License Co. LLC, NextMedia Operating, Inc. and NM Licensing LLC.
|              | 
|21.1+         |  | List of subsidiaries of NextMedia Operating, Inc.                                                                                                             
|              | 
|31.1+         |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                           
|              | 
|31.2+         |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                           
|              | 
|32.1+         |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            
|              | 
|32.2+         |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            

---

|+ | Filed herewith.
|- | ---------------



|* | Incorporated herein by reference to our Registration Statement on Form S-4/A, dated April 8, 2002.
|- | --------------------------------------------------------------------------------------------------



|** | Incorporated herein by reference to our quarterly report on Form 10-Q, dated November 14, 2002.
|-- | -----------------------------------------------------------------------------------------------



|*** | Incorporated herein by reference to our annual report on Form 10-K, dated March 27, 2003.
|--- | -----------------------------------------------------------------------------------------



| | (b) | Reports on Form 8-K:
| | --- | --------------------



On March 11, 2004, we filed a Current Report on Form 8-K announcing earnings results for the year ended December 31, 2003.



36



---

##### Table of Contents

INDEX TO FINANCIAL STATEMENTS



NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



|                                                                                                     |  |     
|---------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                     |  | Page
|Report of Independent Auditors                                                                       |  | F-2 
|                                                                                                     | 
|Consolidated Balance Sheets as of December 31, 2002 and 2003                                         |  | F-3 
|                                                                                                     | 
|Consolidated Statements of Operations for the Years Ended December 31, 2001, 2002 and 2003           |  | F-4 
|                                                                                                     | 
|Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2001, 2002 and 2003 |  | F-5 
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2002 and 2003           |  | F-6 
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | F-7 



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



To the
Stockholder of

NextMedia Operating, Inc.



In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders equity and cash flows present
fairly, in all material respects, the financial position of NextMedia Operating, Inc. and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



As discussed in Note 1 to the accompanying consolidated financial statements, the Company changed its method of accounting for goodwill on
January 1, 2002, as required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.



/s/ PRICEWATERHOUSECOOPERS LLP



Denver, Colorado

March 29, 2004



F-2



---

##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



|                                                                                              |  |                  |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                              |  | December 31,2002 |         |   | December 31,2003 |  
|Assets                                                                                        |  |                  |         |   |                  |   |         |  
|Current assets:                                                                               |  |                  |         |   |                  |   |         |  
|Cash and cash equivalents                                                                     |  | $                | 14,446  |   |                  | $ | 707     |  
|Accounts receivable, net of allowance for doubtful accounts of $1,248 and 1,111, respectively |  |                  | 14,407  |   |                  |   | 16,452  |  
|Prepaid expenses and other current assets                                                     |  |                  | 2,225   |   |                  |   | 3,209   |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Total current assets                                                                          |  |                  | 31,078  |   |                  |   | 20,368  |  
|Property and equipment, net                                                                   |  |                  | 52,916  |   |                  |   | 58,016  |  
|Other assets                                                                                  |  |                  | 13,674  |   |                  |   | 12,247  |  
|Goodwill, net                                                                                 |  |                  | 34,922  |   |                  |   | 63,590  |  
|Advertising permits                                                                           |  |                  | 94,142  |   |                  |   | 103,555 |  
|FCC licenses, net                                                                             |  |                  | 256,410 |   |                  |   | 276,997 |  
|Easements, net                                                                                |  |                  | 2,467   |   |                  |   | 2,595   |  
|Other intangibles, net                                                                        |  |                  | 960     |   |                  |   | 6,009   |  
|Assets held for sale                                                                          |  |                  | 5,411   |   |                  |   |        |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Total assets                                                                                  |  | $                | 491,980 |   |                  | $ | 543,377 |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Liabilities and Stockholders Equity                                                          |  |                  |         |   |                  |   |         |  
|Current liabilities:                                                                          |  |                  |         |   |                  |   |         |  
|Accounts payable                                                                              |  | $                | 2,481   |   |                  | $ | 1,699   |  
|Accrued expenses                                                                              |  |                  | 15,740  |   |                  |   | 17,484  |  
|Deferred revenue                                                                              |  |                  | 622     |   |                  |   | 516     |  
|Other                                                                                         |  |                  | 10      |   |                  |   | 1,825   |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Total current liabilities                                                                     |  |                  | 18,853  |   |                  |   | 21,524  |  
|Long-term debt                                                                                |  |                  | 197,276 |   |                  |   | 199,634 |  
|Deferred tax liability                                                                        |  |                  | 16,396  |   |                  |   | 26,858  |  
|Other long-term liabilities                                                                   |  |                  | 2,087   |   |                  |   | 1,306   |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Total liabilities                                                                             |  |                  | 234,612 |   |                  |   | 249,322 |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Commitments and contingencies (Note 8)                                                        |  |                  |         |   |                  |   |         |  
|Stockholders equity:                                                                         |  |                  |         |   |                  |   |         |  
|Common stock, no par value, 3,000 shares authorized, issued and outstanding, respectively     |  |                  | 1       |   |                  |   | 1       |  
|Additional paid-in capital                                                                    |  |                  | 325,436 |   |                  |   | 352,615 |  
|Accumulated deficit                                                                           |  |                  | (68,069 | ) |                  |   | (58,561 | )
|                                                                                              |  |                  |         |   |                  |   |         |  
|Total stockholders equity                                                                    |  |                  | 257,368 |   |                  |   | 294,055 |  
|                                                                                              |  |                  |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                    |  | $                | 491,980 |   |                  | $ | 543,377 |  
|                                                                                              |  |                  |         |   |                  |   |         |  



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



F-3



---

##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)



|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                       |  | Years ended December 31, |        
|                                                                                                                       |  | 2001                     |         |   | 2002 |   |         | 2003 | 
|Gross revenue                                                                                                          |  | $                        | 76,936  |   |      | $ | 99,047  |      |  | $ | 116,001 |  
|Less: agency commissions                                                                                               |  |                          | 5,215   |   |      |   | 7,717   |      |  |   | 9,042   |  
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Net revenue                                                                                                            |  |                          | 71,721  |   |      |   | 91,330  |      |  |   | 106,959 |  
|Market level expenses, exclusive of depreciation and amortization, shown separately below                              |  |                          | 46,819  |   |      |   | 59,330  |      |  |   | 66,532  |  
|Corporate expenses                                                                                                     |  |                          | 8,834   |   |      |   | 8,116   |      |  |   | 8,518   |  
|Depreciation and amortization                                                                                          |  |                          | 11,053  |   |      |   | 5,523   |      |  |   | 10,291  |  
|Local marketing agreement fees                                                                                         |  |                          | 20      |   |      |   |        |      |  |   | 42      |  
|Impairment loss                                                                                                        |  |                          |        |   |      |   | 42,956  |      |  |   |        |  
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Total operating expenses                                                                                               |  |                          | 66,726  |   |      |   | 115,925 |      |  |   | 85,383  |  
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Operating income (loss)                                                                                                |  |                          | 4,995   |   |      |   | (24,595 | )    |  |   | 21,576  |  
|Other (income) expense:                                                                                                |  |                          |         |   |      |   |         |      |  |   |         |  
|Interest expense, net                                                                                                  |  |                          | 15,815  |   |      |   | 22,444  |      |  |   | 22,369  |  
|Other income                                                                                                           |  |                          | (574    | ) |      |   | (1,370  | )    |  |   | (20,764 | )
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations before taxes                                                                  |  |                          | (10,246 | ) |      |   | (45,669 | )    |  |   | 19,971  |  
|Provision for deferred income taxes                                                                                    |  |                          |        |   |      |   | 4,311   |      |  |   | 10,464  |  
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations                                                                               |  |                          | (10,246 | ) |      |   | (49,980 | )    |  |   | 9,507   |  
|Discontinued operations (Note 2):                                                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|(Income) loss from discontinued operations (including loss on disposal of $3,272 for the year ended December 31, 2002) |  |                          | 662     |   |      |   | 3,475   |      |  |   | (1      | )
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                                                      |  | $                        | (10,908 | ) |      | $ | (53,455 | )    |  | $ | 9,508   |  
|                                                                                                                       |  |                          |         |   |      |   |         |      |  |   |         |  



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



F-4



---

##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(Dollars in thousands)



|                                                                       |  |              |   |  |                          |     |                    |  |   |         |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | --- | ------------------ |  | - | ------- |  | - | ------- | - |  | - | ------- | -
|                                                                       |  | Common Stock |   |  | AdditionalPaid-InCapital |     | AccumulatedDeficit |  |   | Total   | 
|                                                                       |  | Shares       |   |  | Amount                   |     |                    |  |  
|Balance, December 31, 2000                                             |  | 3,001,010    |   |  | $                        | 31  |                    |  | $ | 212,057 |  | $ | (3,706  | ) |  | $ | 208,382 |  
|Merger of NextMedia Group II, Inc. into NextMedia Group, Inc. (Note 1) |  | (3,000,010   | ) |  |                          | (30 | )                  |  |   | 30      |  |   |        |   |  |   |        |  
|Issuance of shares in connection with merger (Note1)                   |  | 2,000        |   |  |                          |    |                    |  |   |        |  |   |        |   |  |   |        |  
|Capital contributions from Parent, net                                 |  |             |   |  |                          |    |                    |  |   | 85,115  |  |   |        |   |  |   | 85,115  |  
|Vesting of Parent Company Class B membership units                     |  |             |   |  |                          |    |                    |  |   | 42      |  |   |        |   |  |   | 42      |  
|Net loss                                                               |  |             |   |  |                          |    |                    |  |   |        |  |   | (10,908 | ) |  |   | (10,908 | )
|                                                                       |  |              |   |  |                          |     |                    |  |   |         |  |   |         |   |  |   |         |  
|Balance, December 31, 2001                                             |  | 3,000        |   |  |                          | 1   |                    |  |   | 297,244 |  |   | (14,614 | ) |  |   | 282,631 |  
|Capital contributions from Parent, net                                 |  |             |   |  |                          |    |                    |  |   | 28,113  |  |   |        |   |  |   | 28,113  |  
|Vesting of Parent Company Class B membership units                     |  |             |   |  |                          |    |                    |  |   | 79      |  |   |        |   |  |   | 79      |  
|Net loss                                                               |  |             |   |  |                          |    |                    |  |   |        |  |   | (53,455 | ) |  |   | (53,455 | )
|                                                                       |  |              |   |  |                          |     |                    |  |   |         |  |   |         |   |  |   |         |  
|Balance, December 31, 2002                                             |  | 3,000        |   |  |                          | 1   |                    |  |   | 325,436 |  |   | (68,069 | ) |  |   | 257,368 |  
|Capital contributions from Parent, net                                 |  |             |   |  |                          |    |                    |  |   | 27,100  |  |   |        |   |  |   | 27,100  |  
|Vesting of Parent Company Class B membership units                     |  |             |   |  |                          |    |                    |  |   | 79      |  |   |        |   |  |   | 79      |  
|Net income (loss)                                                      |  |             |   |  |                          |    |                    |  |   |        |  |   | 9,508   |   |  |   | 9,508   |  
|                                                                       |  |              |   |  |                          |     |                    |  |   |         |  |   |         |   |  |   |         |  
|Balance, December 31, 2003                                             |  | 3,000        |   |  | $                        | 1   |                    |  | $ | 352,615 |  | $ | (58,561 | ) |  | $ | 294,055 |  
|                                                                       |  |              |   |  |                          |     |                    |  |   |         |  |   |         |   |  |   |         |  



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



F-5



---

##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)



|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                   |  | Years ended December 31, |         
|                                                                                                   |  | 2001                     |          |   | 2002 |   |         | 2003 | 
|Cash Flows From Operating Activities                                                               |  |                          |          |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                                  |  | $                        | (10,908  | ) |      | $ | (53,455 | )    |  | $ | 9,508   |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                          |          |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                                      |  |                          | 11,379   |   |      |   | 5,572   |      |  |   | 10,291  |  
|Non-cash interest expense                                                                          |  |                          | 728      |   |      |   | 1,256   |      |  |   | 1,238   |  
|Provision for bad debt expense                                                                     |  |                          | 1,773    |   |      |   | 1,034   |      |  |   | 888     |  
|Non-cash compensation expense                                                                      |  |                          | 42       |   |      |   | 79      |      |  |   | 79      |  
|Loss/(Gain) on sale of properties                                                                  |  |                          | (1,354   | ) |      |   | 3,321   |      |  |   | (21,848 | )
|Unrealized (gain) loss on interest rate swap                                                       |  |                          |         |   |      |   | (1,853  | )    |  |   | 118     |  
|Provision for deferred taxes                                                                       |  |                          |         |   |      |   | 4,311   |      |  |   | 10,464  |  
|Impairment loss                                                                                    |  |                          |         |   |      |   | 42,956  |      |  |   |        |  
|Changes in assets and liabilities, net of effect of acquisitions:                                  |  |                          |          |   |      |   |         |      |  |   |         |  
|Accounts receivable                                                                                |  |                          | (3,385   | ) |      |   | (2,143  | )    |  |   | (2,958  | )
|Prepaid expenses and other current assets                                                          |  |                          | (1,035   | ) |      |   | (214    | )    |  |   | (947    | )
|Accounts payable                                                                                   |  |                          | 728      |   |      |   | (372    | )    |  |   | (878    | )
|Accrued expenses                                                                                   |  |                          | 11,325   |   |      |   | (741    | )    |  |   | 1,090   |  
|Deferred revenue                                                                                   |  |                          | 234      |   |      |   | (54     | )    |  |   | (111    | )
|Other current liabilities                                                                          |  |                          | (23      | ) |      |   | 1       |      |  |   | 13      |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) operating activities                                                |  |                          | 9,504    |   |      |   | (302    | )    |  |   | 6,947   |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Cash Flows From Investing Activities                                                               |  |                          |          |   |      |   |         |      |  |   |         |  
|Purchase of equipment                                                                              |  |                          | (7,077   | ) |      |   | (6,441  | )    |  |   | (5,042  | )
|Payments for acquisitions, net of cash acquired                                                    |  |                          | (112,953 | ) |      |   | (38,449 | )    |  |   | (81,250 | )
|Proceeds from sale of properties, net                                                              |  |                          | 5,442    |   |      |   | 1,581   |      |  |   | 36,908  |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                                              |  |                          | (114,588 | ) |      |   | (43,309 | )    |  |   | (49,384 | )
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Cash Flows From Financing Activities                                                               |  |                          |          |   |      |   |         |      |  |   |         |  
|Proceeds from Senior Subordinated Notes                                                            |  |                          | 197,020  |   |      |   |        |      |  |   |        |  
|Proceeds from revolving credit facilities                                                          |  |                          | 18,000   |   |      |   |        |      |  |   | 44,000  |  
|Repayment of revolving credit facilities                                                           |  |                          | (124,945 | ) |      |   |        |      |  |   | (42,000 | )
|Equity capital contributions from Parent, net                                                      |  |                          | 53,465   |   |      |   | 28,113  |      |  |   | 27,100  |  
|Payments of financing related costs                                                                |  |                          | (8,408   | ) |      |   | (711    | )    |  |   | (90     | )
|Other                                                                                              |  |                          | (383     | ) |      |   | 154     |      |  |   | (312    | )
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Net cash provided by financing activities                                                          |  |                          | 134,749  |   |      |   | 27,556  |      |  |   | 28,698  |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                          | 29,665   |   |      |   | (16,055 | )    |  |   | (13,739 | )
|Cash and cash equivalents at beginning of period                                                   |  |                          | 836      |   |      |   | 30,501  |      |  |   | 14,446  |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                        | 30,501   |   |      | $ | 14,446  |      |  | $ | 707     |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Supplemental Cash Flow Information                                                                 |  |                          |          |   |      |   |         |      |  |   |         |  
|Cash payments during the period for:                                                               |  |                          |          |   |      |   |         |      |  |   |         |  
|Interest                                                                                           |  | $                        | 5,742    |   |      | $ | 22,318  |      |  | $ | 22,969  |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Taxes                                                                                              |  | $                        |         |   |      | $ |        |      |  | $ |        |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  
|Non-Cash Investing and Financing Activities:                                                       |  |                          |          |   |      |   |         |      |  |   |         |  
|Capital contribution in the form of outdoor advertising assets                                     |  | $                        | 31,650   |   |      | $ |        |      |  | $ |        |  
|                                                                                                   |  |                          |          |   |      |   |         |      |  |   |         |  



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



F-6



---

##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



|1. | Organization and Summary of Significant Accounting Policies
|-- | -----------------------------------------------------------



The Company



NextMedia Operating, Inc. and its subsidiaries (the Company), operates two advertising media segments: a group of radio broadcast
stations in fourteen small and mid-sized markets and an outdoor advertising business.



The Company is an indirect wholly-owned subsidiary of NextMedia Group, Inc., a wholly-owned subsidiary of NextMedia Investors LLC, (the Parent) an investment partnership formed by Thomas Weisel
Merchant Banking Partners, Weston Presidio Capital, Alta Communications, Inc., GS Capital Partners 2000 L.P. and management of the Company.



The consolidated financial statements include the accounts of NextMedia Operating, Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated upon consolidation.



Prior to
January 10, 2001, the operations of the Company took place through three entities, NextMedia Operating, Inc., and its subsidiaries, NextMedia Group II, Inc. and NextMedia Outdoor LLC. NextMedia Group II, Inc. and NextMedia Outdoor LLC were
effectively controlled by NextMedia Operating, Inc. based on its ownership of 99.99% of the economic interest of NextMedia Group II, Inc. and NextMedia Outdoor LLC and the existence of common management. By January 10, 2001, NextMedia Group II, Inc.
and NextMedia Outdoor LLC were merged into NextMedia Operating, Inc. Since this was a combination of entities under common control, there was no change in accounting basis. Accordingly, the results for 2001 and future periods have been consolidated.



NextMedia Operating, Inc. was formed in early 2000. NextMedia
Group II, Inc. was formed in late 1999 (as NextMedia Group, LLC and converted to NextMedia Group II, Inc. in early 2000). NextMedia Outdoor LLC was formed in late 1999. The Company commenced operations in late 1999 with the acquisition of an 80%
interest in GSA Network, an outdoor advertising company, for $300.



Use of
Estimates



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



Reclassifications



Certain prior year amounts have been reclassified in order to conform with
the current year presentation. In the fourth quarter of 2003, the Company determined that it had acquired certain previously unrecognized intangible assets (advertising permits and easements) in connection with certain of its outdoor advertising
acquisitions. As a result, the Company has reclassified from goodwill and property and equipment the estimated fair value of the advertising permits and easements at the respective dates of their acquisition. Since the book basis of the advertising
permits exceeds their tax basis, the Company has recorded the additional deferred tax impact of the reclassification. This basis difference, previously in goodwill, was formerly accounted for as a permanent difference in accordance with SFAS 109,
paragraph 30. These adjustments had no effect on the Companys historical statements of operations, cash flow or shareholders equity. The notes to the financial statements have been adjusted to reflect the impact of this reclassification
in all periods presented.



F-7



---

##### Table of Contents

The chart below demonstrates the effect of the advertising permit and easement reclassifications in 2002,
including the additional deferred tax impact of the advertising permits:



|                            |  |                    |         |   |                  |   |         |                  |  |   |         |  
|--------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|Account                     |  | PreviouslyReported |         |   | Reclassification |   |         | Reclassifed 2002 | 
|Property and equipment, net |  | $                  | 53,103  |   |                  | $ | (187    | )                |  | $ | 52,916  |  
|Easements, net              |  |                    |        |   |                  |   | 2,467   |                  |  |   | 2,467   |  
|Goodwill, net               |  |                    | 119,259 |   |                  |   | (84,337 | )                |  |   | 34,922  |  
|Advertising permits, net    |  |                    |        |   |                  |   | 94,142  |                  |  |   | 94,142  |  
|Deferred tax liabilities    |  |                    | (4,311  | ) |                  |   | (12,085 | )                |  |   | (16,396 | )
|                            |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Total                       |  | $                  | 168,051 |   |                  | $ |        |                  |  | $ | 168,051 |  
|                            |  |                    |         |   |                  |   |         |                  |  |   |         |  



Revenue Recognition



The Company recognizes revenues in accordance with SEC Staff Accounting
Bulletin 104. The primary source of the Companys radio revenues is the sale of broadcasting time for local, regional and national advertising. The primary source of the Companys outdoor/indoor display advertising revenue is the sale of
signage space. Revenues for radio broadcasting advertisements are recognized when the commercial is broadcast. Revenues for outdoor/indoor sign advertising contracts are recognized ratably over the period in which advertisement displays are posted
in the display units. Payments received in advance of billings are recorded as deferred revenue and recognized over the remaining period of the contract, generally less than one year in duration.



Trade Agreements



The Company trades commercial air time and display advertising for goods and services used principally for promotional,
sales and other business activities. An asset and liability are recorded at the fair market value of the goods or services received. Trade revenue is recorded and the liability relieved when commercials are broadcast or displayed and the trade
expense is recorded and the asset relieved when goods or services are received or used. The net trade asset or liability is included in current assets or liabilities in the accompanying financial statements. The Company recognized trade revenue and
expense in the indicated periods as follows:



|                                              |  |                          |       |      |   |       |  |   |      
|--------------------------------------------- |  | ------------------------ | ----- | ---- | - | ----- |  | - | -----
|                                              |  | Years ended December 31,
|                                              |  | 2001                     |       | 2002 |   | 2003 
|Trade revenue, included in gross revenue      |  | $                        | 3,934 |      | $ | 5,238 |  | $ | 5,043
|Trade expense, included in operating expenses |  |                          | 3,763 |      |   | 5,301 |  |   | 5,072



Cash Equivalents



The Company considers liquid investments with maturities at date of purchase
of three months or less to be cash equivalents.



Accounts receivable



Accounts receivable are recorded at cost, net of
allowance for doubtful accounts. The Company evaluates the collectibility of its accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customers inability to meet its financial
obligations, it records a specific reserve to reduce receivables to what it believes will be collected. For all other customers, the Company recognizes reserves based on historical experience of bad debts as a percent of revenues for each business
unit, adjusted for relative improvements or deteriorations in collectibility and changes in current economic conditions. The allowance for doubtful accounts is reconciled as follows for the years indicated:



|                                                |  |                          |       |   |      |   |        |  
|----------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ------ | -
|                                                |  | Years ended December 31, |      
|                                                |  | 2002                     |       |   | 2003 |  
|Allowance for doubtful accountsopening balance |  | $                        | 1,209 |   |      | $ | 1,248  |  
|Provision for bad debt expense                  |  |                          | 959   |   |      |   | 888    |  
|Write-offs                                      |  |                          | (920  | ) |      |   | (1,025 | )
|                                                |  |                          |       |   |      |   |        |  
|Allowance for doubtful accountsclosing balance |  | $                        | 1,248 |   |      | $ | 1,111  |  
|                                                |  |                          |       |   |      |   |        |  



F-8



---

##### Table of Contents

Property and Equipment



Assets acquired in business combinations are accounted for using the purchase method of accounting and are recorded at their estimated fair value as of
the acquisition date. Property and equipment additions are recorded at cost. Depreciation of property and equipment is determined using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are
capitalized and amortized using the straight-line method over the shorter of the lease terms or the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred.



Impairment



The Company reviews long-lived assets for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future net cash flows expected to be generated by the asset group. If such assets are considered
to be impaired, the impairment charge recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. The cost of assets retired or otherwise disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in income.



Acquisitions



The Company accounts for business acquisitions under the purchase method of accounting as required by Statement of Financial
Accounting Standard (SFAS) No. 141, Business Combinations. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated
fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires judgment and often involves the use of significant estimates and assumptions, including assumptions with
respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. These estimates and assumptions affect future amortization expense and gains or losses recorded on the sale of properties.



Intangible Assets



The Company records identified intangible assets at their estimated fair value upon acquisition. Goodwill represents the
excess of cost over the fair value of tangible assets and identifiable intangible assets. For indefinite lived intangibles related to acquisitions prior to July 1, 2001, amortization was provided on the straight-line method over the estimated useful
lives of the related assets, primarily 40 years, through December 31, 2001. No amortization has been recorded for indefinite lived intangible assets acquired subsequent to July 1, 2001. From January 1, 2002 through present, in accordance with SFAS
142, no amortization has been recorded on any indefinite lived intangible assets.



In January 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), which changes the accounting for goodwill and intangible assets with indefinite lives, such as FCC licenses and
advertising permits, from an amortization method to an impairment-only approach, and introduces a new model for determining impairment charges. The new model requires the Company to evaluate its indefinite lived intangible assets and goodwill for
impairment at least annually. In applying the new model, the Company first evaluated its indefinite lived intangible assets. To the extent that the estimated fair value of the indefinite lived intangible assets is less than the net book value, the
Company records an impairment charge to reduce the net book value to estimated fair value. Subsequent to the impairment analysis of the Companys indefinite lived intangible assets, the Company evaluates each of its reporting units (principally
its markets) for impairment. If the estimated fair value of the reporting units is less than the net book value, the Company performs a second step to quantify the amount of the impairment. In this process, the fair value of each of the assets,
including goodwill, is estimated and compared to the related net book value. The shortfall of the fair value below net book value of all of the assets represents the amount of impairment. Determining the fair value of the Companys indefinite
lived intangible assets and reporting units requires judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to, among other items, future cash inflows and outflows, discount rates and
terminal valuation multiples.



F-9



---

##### Table of Contents

Debt Issuance Costs



Debt issue costs which consist of legal, professional, commissions and financing fees incurred in connection with the issuance of the Senior Subordinated
Notes and the Revolving Credit Facility are included in other non-current assets and are being amortized over the term of the related agreements on the interest method. During the years ended December 31, 2001, 2002 and 2003, the Company recognized
interest expense related to amortization of debt issuance costs of approximately $728, $1,256 and $1,238, respectively.



Concentration of Credit Risks



In the opinion of management, credit risk with respect to accounts receivable is limited due to the large number of diversified customers and the
geographic diversification of the Companys customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible accounts receivable are maintained.



Local Marketing Agreements



The Company enters into local marketing agreements (LMAs)
with respect to certain radio stations it intends to acquire. The Company operates the stations under the LMA whereby the Company agrees to purchase from the broadcast station licensee certain broadcast time and provide programming to and sell
advertising on the stations during the purchased time. Fees incurred pursuant to LMAs are recognized as operating expenses. The Companys financial statements include broadcasting revenues and operating expenses of stations marketed under LMAs.
The LMA generally terminates upon the closing of the acquisition of the station(s). The company operated four radio stations under LMAs at some point during the year ended December 31, 2001 but did not operate any radio stations under LMAs during
the year ended December 31, 2002. During the year ended December 31, 2003, the Company entered into an LMA to operate a station in the Lubbock, Texas market pursuant to an LMA agreement.



Income Taxes



Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their
financial reporting amounts based on enacted tax laws and statutory tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized.



Derivatives



Periodically, the Company enters into interest rate swap agreements to modify the interest characteristics of its
outstanding debt. These agreements involve the exchange of amounts based on a fixed interest rate for amounts based on variable interest rates over the life of the agreement without an exchange of the notional amount upon which the payments are
based. The differential to be paid or received as interest rates change is recognized as interest expense. The fair value of the swap agreements and changes in the fair value as a result of changes in market interest rates are recognized in these
consolidated financial statements.



Comprehensive Income



The Company has adopted Statement of Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130). SFAS 130 establishes standards for reporting and displaying



F-10



---

##### Table of Contents

comprehensive income and its components in a full set of general purpose financial statements. There was no difference between the Companys net loss
and its total comprehensive loss in any periods presented.



Recent
Accounting Pronouncements



In June 2001, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards (FASB) No. 143, Accounting for Asset Retirement Obligations (SFAS 143). SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that
result from acquisition, construction, development and/or the normal operation of a long-lived asset. SFAS 143 is effective for financial statements for fiscal years beginning after June 15, 2002. On January 1, 2003 the Company adopted SFAS 143
Accounting for Asset Retirement Obligations.Some of the Companys lease agreements and easements require that we remove our owned equipment located on the premises at the termination of the applicable lease or easement should it not be
renewed. This equipment typically consists of advertising displays or transmitting equipment. The Company does not believe that these potential future obligations will have a material impact on the Companys financial position or results of
operations.



In January 2003, the Financial Accounting
Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 must be applied to interests in variable interest entities created before February 1, 2003 beginning in the first interim or
annual period beginning after March 15, 2004. For variable interest entities created after February 1, 2003, FIN 46 is effective for the first interim period after December 31, 2003. During the three month period ended September 30, 2003, the
Company entered into an LMA agreement to operate a station in the Lubbock, Texas market. The Company considered the applicability of FIN 46 to this LMA agreement and determined that, in this case, the LMA agreement did not meet the criteria
established by FIN 46 for consolidation. Consequently, the adoption of FIN 46 has not had a material impact on the Companys financial statements.



In November 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21, Revenue Arrangement with Multiple Deliverables
(EITF No. 00-21). This issue addresses how revenue arrangements with multiple deliverables should be divided into separate units of accounting and how the arrangement consideration should be allocated to the identified separate
accounting units. EITF No. 00-21 is effective for fiscal periods beginning after June 15, 2003. Where multiple elements exist in an arrangement, the arrangement fee is allocated to the different elements based upon verifiable objective evidence of
the fair value of the elements. The adoption of EITF No. 00-21 did not have a material impact on our financial statements.



In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 provides for
certain changes in the accounting treatment of derivative contracts. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, except for certain provisions that relate to SFAS No. 133 Implementation Issues that have been
effective for fiscal quarters that began prior to June 15, 2003, which should continue to be applied in accordance with their respective effective dates. The guidance should be applied prospectively. The adoption of SFAS No. 149 did not have a
material impact on the Companys financial statements.



Also in May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This new statement changes the accounting for certain financial instruments that,
under previous balance sheets. Most of the guidance in SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the Companys first interim period beginning
after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on the Companys financial statements.



SAB 104 was released in December 2003. SAB 104 updates interpretative guidance in the codification of staff accounting bulletins to provide consistent
accounting guidance on revenue recognition. The Company adopted SAB 104 in December 2003 with no impact to our financial statements or its financial reporting.



|2. | Acquisitions and Dispositions
|-- | -----------------------------



Part of the Companys operating strategy is to expand through prudent acquisition of broadcasting and outdoor advertising properties. The Company
acquired each of the advertising assets identified below to help achieve this objective. In seeking acquisition opportunities, the Company generally seeks; (i) assets in markets with a demographic propensity for growth (ie. population growth above
average, above average growth in retail sales, etc.), (ii) markets where the Company believes it can



F-11



---

##### Table of Contents

assemble a group of assets generating over $1,000 in annual cash flow from operations, and (iii) assets in markets where the Company believes it can become a
leader in terms of ratings, revenue share, or number of advertising faces.



As the Company typically negotiates and determine purchase price based on estimated future cash flows generated by the assets acquired, the purchase price of its acquisitions is typically more than the historical cost
to construct the assets. As a result, there is generally a residual amount of the purchase price in excess of the fair value of the tangible and identifiable intangible assets that is assigned to goodwill.



The Company completed 12 acquisitions during the year ended December 31,
2001. The aggregate purchase price for these acquisitions (including acquisition costs) was $141,189, in cash and non-cash capital contributions from the Parent. During 2002, we completed six outdoor advertising acquisitions with purchase prices
greater than $750 and several smaller outdoor advertising acquisitions with an aggregate purchase price of $1,514. The aggregate purchase price of our 2002 acquisitions was $37,964 in cash, $28,113 of which was funded with equity contributions from
the Companys Parent made during the year. The aggregate purchase price of our 2003 acquisitions was $80,934 in cash, which were funded with (i) proceeds of $27,100 from equity contributions from the Companys Parent, (ii) borrowings under
the Companys Senior Credit Facility, (iii) proceeds of $37,836 from asset sales, and (iv) cash generated from operations.



The acquisitions were accounted for by the purchase method of accounting. As such, the accompanying consolidated balance sheet includes the acquired
assets and liabilities and the statement of operations includes the results of operations of the acquired entities from their respective dates of acquisition. A summary of the transactions is presented below:



|                                                             |  |                    |  |               |        
|------------------------------------------------------------ |  | ------------------ |  | ------------- | -------
|Transaction                                                  |  | Date ofAcquisition |  | PurchasePrice
|2001:                                                        |  |                    |  |               |        
|CitiVision, Inc.                                             |  | 28 February        |  | $             | 4,206  
|Cumulus Broadcasting                                         |  | 30 April           |  |               | 2,158  
|Radioworks                                                   |  | 30 April           |  |               | 3,583  
|KMAD                                                         |  | 15 June            |  |               | 562    
|PNE Media                                                    |  | 5 July             |  |               | 92,953 
|GAESS Outdoor                                                |  | 5 July             |  |               | 10,141 
|Scenic Outdoor                                               |  | 6 October          |  |               | 161    
|Fairview Radio                                               |  | 15 October         |  |               | 4,326  
|Capital Outdoor                                              |  | 16 October         |  |               | 8,951  
|Sailing Billboards Outdoor Media, LLC                        |  | 26 October         |  |               | 12,093 
|AMI, LLC                                                     |  | 19 December        |  |               | 855    
|Onsite Advertising Services, LLC                             |  | 27 December        |  |               | 1,200  
|                                                             |  |                    |  |               |        
|                                                             |  |                    |  | $             | 141,189
|                                                             |  |                    |  |               |        
|2002:                                                        |  |                    |  |               |        
|Philcor Media, LLC                                           |  | 4 January          |  | $             | 1,811  
|Camden Outdoor, LLC                                          |  | 30 April           |  |               | 1,899  
|AMI, LLC                                                     |  | 12 July            |  |               | 820    
|Flack Outdoor (acquired 100% of the voting equity interests) |  | 30 August          |  |               | 25,730 
|Matt Outdoor                                                 |  | Various            |  |               | 4,461  
|Klein Outdoor Advertising, Inc                               |  | Various            |  |               | 1,729  
|Miscellaneous other acquisitions                             |  | Various            |  |               | 1,514  
|                                                             |  |                    |  |               |        
|                                                             |  |                    |  | $             | 37,964 
|                                                             |  |                    |  |               |        
|2003:                                                        |  |                    |  |               |        
|Wilks Broadcasting, LLC                                      |  | 6 January          |  | $             | 55,753 
|Matt Outdoor                                                 |  | 8 January          |  |               | 409    
|Chuckie Broadcasting Company                                 |  | 31 January         |  |               | 5,807  
|NJ Outdoor Advertising                                       |  | 19 February        |  |               | 4,083  
|Outdoor Partnership, LLC                                     |  | 14 March           |  |               | 1,374  
|CitiVision                                                   |  | 2 April            |  |               | 392    
|Impact Marketing                                             |  | 15 April           |  |               | 571    
|Prime Outdoor                                                |  | 18 June            |  |               | 1,010  
|Great Outdoor Advertising                                    |  | 21 August          |  |               | 2,243  
|KC Signs                                                     |  | 30 September       |  |               | 218    
|Patriot                                                      |  | 8 December         |  |               | 2,024  
|AllVision                                                    |  | Various            |  |               | 2,632  
|Citadel Broadcasting Company (KNHK-FM)                       |  | 15 December        |  |               | 4,332  
|Red Peak Tower                                               |  | 31 December        |  |               | 86     
|                                                             |  |                    |  |               |        
|                                                             |  |                    |  | $             | 80,934 
|                                                             |  |                    |  |               |        



F-12



---

##### Table of Contents

An allocation of the aggregate purchase prices to the fair values of the assets acquired and liabilities
assumed is presented below.



|                                                |  |                    |         |   |      |   |        |      |  |   |        |  
|----------------------------------------------- |  | ------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                |  | As of December 31, |        
|                                                |  | 2001               |         |   | 2002 |   |        | 2003 | 
|Current assets                                  |  | $                  |        |   |      | $ | 337    |      |  | $ | 76     |  
|Property and equipment                          |  |                    | 12,836  |   |      |   | 11,816 |      |  |   | 6,380  |  
|FCC licenses                                    |  |                    | 10,290  |   |      |   | 177    |      |  |   | 29,994 |  
|Goodwill  radio division                       |  |                    |        |   |      |   |       |      |  |   | 26,628 |  
|Goodwill  outdoor division(1)                  |  |                    | 22,185  |   |      |   | 19,849 |      |  |   | 3,639  |  
|Advertising permits                             |  |                    | 100,471 |   |      |   | 13,296 |      |  |   | 9,413  |  
|Easements                                       |  |                    | 2,280   |   |      |   | 187    |      |  |   | 160    |  
|Customer base, non-compete agreements and other |  |                    |        |   |      |   | 475    |      |  |   | 5,316  |  
|Current liabilities                             |  |                    |        |   |      |   | (1,521 | )    |  |   | (672   | )
|Long-term liabilities                           |  |                    | (6,873  | ) |      |   | (6,652 | )    |  |   |       |  
|                                                |  |                    |         |   |      |   |        |      |  |   |        |  
|                                                |  | $                  | 141,189 |   |      | $ | 37,964 |      |  | $ | 80,934 |  
|                                                |  |                    |         |   |      |   |        |      |  |   |        |  



|(1) | Approximately $8,774 and $6,138 of the goodwill acquired in 2001 and 2002, respectively, is not deductible for tax purposes.
|--- | ----------------------------------------------------------------------------------------------------------------------------



During the year ended December 31, 2001, the Parent issued its Class C stock
to the seller for part of the PNE Media assets, which was valued at $31,650 and contributed these assets to the Company. The value assigned to the shares of stock issued in connection with the acquisition was determined based on concurrent cash
sales of stock.



In October and November 2001, the Company sold
a radio frequency and related radio station assets in Erie, Pennsylvania for an aggregate of $5,442 with a resultant gain of $1,354.



During the year ended December 31, 2002, the Company sold radio station WKKD-AM located in Aurora, Illinois for approximately $800. The Company received
additional proceeds of approximately $781 in connection with the disposition of various non-core assets and pieces of real property.



F-13



---

##### Table of Contents

In the second quarter of 2002, we entered into an agreement to sell the assets of radio stations,
WYOO-FM, WPCF-AM, WQJM-FM, WILN-FM and WYYX-FM in exchange for approximately $5,500 in cash. This sale was completed in January 2003. The assets sold consist primarily of FCC licenses, broadcast equipment and accounts receivable. We recorded a loss
of approximately $3,272 in discontinued operations in the second quarter of 2002 for the difference between the carrying value of this reporting unit and the expected proceeds of the sale, less expected selling costs. We classified the remaining
carrying value of the assets to be sold as held for sale on the balance sheet and the results of operations for this reporting unit were classified as discontinued operations in all periods presented. During the year ended December 31, 2002, these
assets generated net revenues of approximately $807. Management decided to sell these assets because we believe there are alternative uses of capital which may provide a higher return on investments.



In September of 2003, the Company sold certain of the assets of WJTW-FM
licensed to Joliet, Illinois to Hispanic Broadcasting Corporation for $21,000 in cash and recognized a $18,900 gain related to the disposition. In October of 2003, the Company sold the assets of WAIT-FM licensed to Crystal Lake, Illinois to Newsweb
Corporation for $8,250 in cash and recognized a $1,653 gain related to the disposition. In December of 2003, the Company sold the assets of KSRN-FM licensed to Reno, Nevada to Lazer Broadcasting Corp for $2,500 in cash and recognized a $760 gain
related to the disposition.



Subsequent to certain
acquisitions, the Company collects amounts for receivables and other assets, which were not purchased. Such amounts are remitted periodically to the sellers and at December 31, 2002 and 2003, $1.5 million and $1.3 million, respectively, were due to
sellers.



The following unaudited pro forma income statement
information has been prepared as if the significant acquisitions and dispositions made during the years ended December 31, 2002 and 2003 had occurred on January 1, 2002. The pro forma income statement information is not necessarily indicative of the
results, which actually would have occurred if these acquisitions had been consummated on January 1, 2002.



|               |  |                          |         |   |      |   |        
|-------------- |  | ------------------------ | ------- | - | ---- | - | -------
|               |  | Years ended December 31,
|               |  | 2002                     |         |   | 2003
|Net revenues   |  | $                        | 103,266 |   |      | $ | 106,403
|Total expenses |  |                          | 138,464 |   |      |   | 96,498 
|               |  |                          |         |   |      |   |        
|Net loss       |  | $                        | (52,592 | ) |      | $ | 9,905  
|               |  |                          |         |   |      |   |        



In January 2004, in
exchange for its outdoor advertising assets in New York, New York and Baltimore, Maryland, the Company acquired outdoor advertising assets in Myrtle Beach, South Carolina. While the company has not finalized its purchase accounting for the
acquisition of the assets in Myrtle Beach, South Carolina, it expects to allocate a significant portion of the acquisition cost to indefinite lived intangibles in the form of either advertising permits or goodwill.



In February 2004, the Company completed its previously announced acquisition
of WCCQ-FM licensed to Crest Hill, Illinois for $14,000 in cash. The Company funded the acquisition with borrowings under its credit facility. While the Company has not finalized its purchase accounting for the acquisition of these assets, it
expects to allocate a significant portion of the acquisition cost to indefinite lived intangibles in the form of either FCC licenses or goodwill.



F-14



---

##### Table of Contents

|3. | Prepaid expenses and other current assets
|-- | -----------------------------------------



Prepaid expenses and other current assets consist of the following:



|                                   |  |                         |       |      |   |      
|---------------------------------- |  | ----------------------- | ----- | ---- | - | -----
|                                   |  | Years endedDecember 31,
|                                   |  | 2002                    |       | 2003
|Prepaid rent                       |  | $                       | 1,227 |      | $ | 1,282
|Other receivables                  |  |                         |      |      |   | 1,248
|Prepaid insurance, taxes and other |  |                         | 998   |      |   | 679  
|                                   |  |                         |       |      |   |      
|                                   |  | $                       | 2,225 |      | $ | 3,209
|                                   |  |                         |       |      |   |      



|4. | Property and Equipment
|-- | ----------------------



Property and equipment consist of the following:



|                              |  |                 |      |                    |        |      |  |   |         |  
|----------------------------- |  | --------------- | ---- | ------------------ | ------ | ---- |  | - | ------- | -
|                              |  | DepreciableLife |      | As of December 31, |       
|                              |  |                 | 2002 |                    |        | 2003 | 
|Land and improvements         |  |                |      | $                  | 5,198  |      |  |   | 5,729   |  
|Construction in progress      |  |                |      |                    | 935    |      |  |   | 870     |  
|Buildings and improvements    |  | 20              |      |                    | 8,308  |      |  |   | 9,893   |  
|Leasehold improvements        |  | 10              |      |                    | 1,971  |      |  |   | 1,833   |  
|Broadcast equipment           |  | 5  20          |      |                    | 7,042  |      |  |   | 8,445   |  
|Office equipment              |  | 7               |      |                    | 1,691  |      |  |   | 1,814   |  
|Computer software and systems |  | 3  5           |      |                    | 1,638  |      |  |   | 1,930   |  
|Tower and antennae            |  | 5  20          |      |                    | 3,250  |      |  |   | 4,931   |  
|Vehicles                      |  | 3               |      |                    | 1,376  |      |  |   | 1,734   |  
|Furniture and fixtures        |  | 7               |      |                    | 1,176  |      |  |   | 1,319   |  
|Advertising displays          |  | 3  15          |      |                    | 29,461 |      |  |   | 34,654  |  
|                              |  |                 |      |                    |        |      |  |   |         |  
|                              |  |                 |      |                    | 62,046 |      |  |   | 73,152  |  
|Less accumulated depreciation |  |                 |      |                    | (9,130 | )    |  |   | (15,136 | )
|                              |  |                 |      |                    |        |      |  |   |         |  
|                              |  |                 |      | $                  | 52,916 |      |  | $ | 58,016  |  
|                              |  |                 |      |                    |        |      |  |   |         |  



Depreciation expense
for the years ended December 31, 2002 and 2003 was $4,975 and $6,254, respectively.



F-15



---

##### Table of Contents

|5. | Intangible Assets
|-- | -----------------



Intangible assets consist of the following:



|                                                                                |  |                      |      |                    |         |      |  |         |  
|------------------------------------------------------------------------------- |  | -------------------- | ---- | ------------------ | ------- | ---- |  | ------- | -
|                                                                                |  | Estimated UsefulLife |      | As of December 31, |        
|                                                                                |  |                      | 2002 |                    |         | 2003 | 
|Gross:                                                                          |  |                      |      |                    |         |      |  |         |  
|FCC licenses                                                                    |  |                     |      | $                  | 265,471 |      |  | 285,755 |  
|Goodwill                                                                        |  |                     |      |                    | 35,848  |      |  | 64,516  |  
|Advertising permits                                                             |  |                     |      |                    | 94,142  |      |  | 103,555 |  
|Easements                                                                       |  |                     |      |                    | 2,467   |      |  | 2,595   |  
|Definite lived intangibles, primarily customer base and non-compete agreements  |  | 1-15                 |      |                    | 2,356   |      |  | 11,441  |  
|                                                                                |  |                      |      |                    |         |      |  |         |  
|                                                                                |  |                      |      | $                  | 400,284 |      |  | 467,862 |  
|                                                                                |  |                      |      |                    |         |      |  |         |  
|Less, accumulated amortization:                                                 |  |                      |      |                    |         |      |  |         |  
|FCC licenses                                                                    |  |                      |      | $                  | (9,061  | )    |  | (8,758  | )
|Goodwill                                                                        |  |                      |      |                    | (926    | )    |  | (926    | )
|Advertising permits                                                             |  |                      |      |                    |        |      |  |        |  
|Easements                                                                       |  |                      |      |                    |        |      |  |        |  
|Definite lived intangibles, primarily customer base and non-compete agreements  |  |                      |      |                    | (1,396  | )    |  | (5,432  | )
|                                                                                |  |                      |      |                    |         |      |  |         |  
|                                                                                |  |                      |      | $                  | (11,383 | )    |  | (15,116 | )
|                                                                                |  |                      |      |                    |         |      |  |         |  
|Net:                                                                            |  |                      |      |                    |         |      |  |         |  
|FCC licenses                                                                    |  |                      |      | $                  | 256,410 |      |  | 276,997 |  
|Goodwill                                                                        |  |                      |      |                    | 34,922  |      |  | 63,590  |  
|Advertising permits                                                             |  |                      |      |                    | 94,142  |      |  | 103,555 |  
|Easements                                                                       |  |                      |      |                    | 2,467   |      |  | 2,595   |  
|Definite lived intangibles, primarily customer base and non- compete agreements |  |                      |      |                    | 960     |      |  | 6,009   |  
|                                                                                |  |                      |      |                    |         |      |  |         |  
|                                                                                |  |                      |      | $                  | 388,901 |      |  | 452,746 |  
|                                                                                |  |                      |      |                    |         |      |  |         |  



Indefinite Lived Intangibles



In the first quarter of 2002, the Company completed its
transitional assessment of goodwill and other identifiable intangibles in accordance with SFAS No. 142. The Company believes that FCC licenses, easements and advertising permits are indefinite-lived intangibles under the new standard. The
Companys transitional assessment did not identify any impairments in goodwill or its other indefinite-lived intangibles. Amortization of goodwill and indefinite-lived intangibles ceased upon adoption of SFAS No. 142.



The table below compares the net loss reported for the year ended December
31, 2001 as if SFAS No. 142 was adopted January 1, 2001:



|                                               |  |                          |         |  
|---------------------------------------------- |  | ------------------------ | ------- | -
|                                               |  | Years ended December 31, |        
|                                               |  | 2001                     |        
|Net loss                                       |  | $                        | (10,908 | )
|Add back goodwill and FCC license amortization |  |                          | 7,288   |  
|Related tax effect                             |  |                          | (2,915  | )
|                                               |  |                          |         |  
|Adjusted net loss                              |  | $                        | (6,535  | )
|                                               |  |                          |         |  



F-16



---

##### Table of Contents

Activity affecting the Companys indefinite-lived intangibles during 2002 and 2003 is summarized
below:



|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  
|---------------------------------- |  | ----------- | ------- | - | -------- | - | ------- | ------------------ |  | - | --------- | - |  | - | ----- | -
|                                   |  | FCCLicenses |         |   | Goodwill |   |         | AdvertisingPermits |  |   | Easements |  
|Gross balance at December 31, 2001 |  | $           | 274,556 |   |          | $ | 40,802  |                    |  | $ | 100,471   |   |  | $ | 2,280 |  
|Additions due to acquisition       |  |             |        |   |          |   | 19,849  |                    |  |   | 13,296    |   |  |   | 187   |  
|Reductions due to dispositions     |  |             | (9,262  | ) |          |   | (5      | )                  |  |   |          |   |  |   |      |  
|Reduction due to impairment loss   |  |             |        |   |          |   | (23,331 | )                  |  |   | (19,625   | ) |  |   |      |  
|Other(1)                           |  |             | 177     |   |          |   | (1,467  | )                  |  |   |          |   |  |   |      |  
|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  
|Gross balance at December 31, 2002 |  |             | 265,471 |   |          |   | 35,848  |                    |  |   | 94,142    |   |  |   | 2,467 |  
|Accumulated amortization           |  |             | (9,061  | ) |          |   | (926    | )                  |  |   |          |   |  |   |      |  
|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  
|Net balance at December 31, 2002   |  | $           | 256,410 |   |          | $ | 34,922  |                    |  | $ | 94,142    |   |  | $ | 2,467 |  
|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  
|Gross balance at December 31, 2002 |  | $           | 265,471 |   |          | $ | 35,848  |                    |  | $ | 94,142    |   |  | $ | 2,467 |  
|Additions due to acquisition       |  |             | 29,994  |   |          |   | 30,267  |                    |  |   | 9,413     |   |  |   | 160   |  
|Reductions due to disposition      |  |             | (9,710  | ) |          |   |        |                    |  |   |          |   |  |   | (32   | )
|Other(1)                           |  |             |        |   |          |   | (1,599  | )                  |  |   |          |   |  |   |      |  
|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  
|Gross balance at December 31, 2003 |  |             | 285,755 |   |          |   | 64,516  |                    |  |   | 103,555   |   |  |   | 2,595 |  
|Accumulated amortization           |  |             | (8,758  | ) |          |   | (926    | )                  |  |   |          |   |  |   |      |  
|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  
|Net balance at December 31, 2003   |  | $           | 276,997 |   |          | $ | 63,590  |                    |  | $ | 103,555   |   |  | $ | 2,595 |  
|                                   |  |             |         |   |          |   |         |                    |  |   |           |   |  |   |       |  

---

|(1) | Other consists of adjustments to finalize preliminary purchase accounting for acquisitions completed in earlier periods. The Companys purchase accounting for
recent acquisitions is preliminary and subject to receipt of final appraisals.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While FCC licenses are renewed annually, under current regulations, the renewal is conditioned only on continued compliance with the terms of the license and payment of the annual license fee. As a result, as long as
the Company continues to comply with the license terms and pays the annual fee (both of which are within the Companys control) the license will not expire or be revoked. Additionally, the Company believes that there are no current competitive
forces which threaten the viability of FCC licenses as a useful asset in the long term. Consequently, the Company believes that the license has an indefinite life as defined by SFAS 142. The Companys billboard permits are issued in perpetuity
by state and local governments and are transferable or renewable at little or no cost. Permits typically include the location for which the permit allows the Company the right to operate an advertising structure. The Companys permits are
located on either owned or leased land. In cases where the Companys permits are located on leased land, the leases are typically renewed indefinitely. In the rare circumstances that the Company loses its lease, the Company will occasionally
obtain permission to relocate the permit or bank it with the municipality for future use. The Companys easement rights are permanent; consequently, they have an indefinite life.



In the fourth quarter of 2002, the Company conducted its annual evaluation of goodwill and identifiable intangible assets
pursuant to SFAS No. 142. As a result of this evaluation, the Company recorded a $42,956 non-cash impairment loss related to its outdoor advertising assets, $19,625 of which related to advertising permits and $23,331 of which related to goodwill.
The non-cash impairment of these indefinite lived intangible assets was primarily caused by unfavorable economic conditions in the outdoor advertising markets in which we operated during 2002. These weak market conditions adversely impacted the cash
flow projections used to determine the fair value of the Companys reporting units and resulted in the non-cash impairment of goodwill and advertising permits related to those reporting units.



F-17



---

##### Table of Contents

Definite-lived Intangibles



The Company has definite-lived intangible assets that continue to be amortized in accordance with SFAS 142. These assets
consist primarily of customer relationships and non-compete agreements which are amortized over their lives. In accordance with the transitional requirements of SFAS 142, the Company reassessed the useful lives of these intangibles and made no
material changes to their useful lives.



Total amortization
expense from definite-lived intangibles for the years ended December 31, 2001, 2002 and 2003 was approximately $561, $597 and $4,036, respectively. The following table presents the Companys estimate of amortization expense for each of the five
succeeding fiscal years for definite-lived intangibles as of December 31, 2003:



|     |  |   |      
|---- |  | - | -----
|2004 |  | $ | 2,145
|2005 |  |   | 1,242
|2006 |  |   | 748  
|2007 |  |   | 492  
|2008 |  |   | 340  



|6. | Accrued Expenses
|-- | ----------------



Accrued expenses consist of the following:



|                                    |  |                    |        |      |   |       
|----------------------------------- |  | ------------------ | ------ | ---- | - | ------
|                                    |  | As of December 31,
|                                    |  | 2002               |        | 2003
|Accrued compensation and bonuses    |  | $                  | 1,298  |      | $ | 1,198 
|Accrued commissions                 |  |                    | 579    |      |   | 839   
|Accrued interest                    |  |                    | 10,253 |      |   | 10,753
|Accrued property taxes              |  |                    | 415    |      |   | 352   
|Accrued rents                       |  |                    | 574    |      |   | 643   
|Unfavorable leases                  |  |                    | 405    |      |   | 347   
|Accrued franchise taxes             |  |                    | 461    |      |   | 331   
|Accrued legal and professional fees |  |                    | 696    |      |   | 1,044 
|Accrued insurance costs             |  |                    | 530    |      |   | 550   
|Accrued music license fees          |  |                    | 61     |      |   | 572   
|Other                               |  |                    | 468    |      |   | 855   
|                                    |  |                    |        |      |   |       
|                                    |  | $                  | 15,740 |      | $ | 17,484
|                                    |  |                    |        |      |   |       



|7. | Long-Term Debt
|-- | --------------



Long-term debt consists of the following:



|                          |  |                    |         |   |      |   |         |  
|------------------------- |  | ------------------ | ------- | - | ---- | - | ------- | -
|                          |  | As of December 31, |        
|                          |  | 2002               |         |   | 2003 |  
|Revolving Credit Facility |  | $                  |        |   |      |   | 2,000   |  
|Senior Subordinated Notes |  |                    | 200,000 |   |      |   | 200,000 |  
|Unamortized discount      |  |                    | (2,724  | ) |      |   | (2,366  | )
|                          |  |                    |         |   |      |   |         |  
|Total long-term debt      |  | $                  | 197,276 |   |      | $ | 199,634 |  
|                          |  |                    |         |   |      |   |         |  



F-18



---

##### Table of Contents

Revolving Credit Facility



On July 31, 2000, the Company entered into a credit agreement with various banks (the Revolving Credit
Facility). The Revolving Credit Facility, as amended, consists of a $75,000 revolving loan facility. Amounts available under the Revolving Credit Facility began reducing quarterly beginning in October 2003. The maximum amount available for
borrowing at March 1, 2004 was $69,375 as a result of the reductions beginning in October 2003. By December 31, 2004, the maximum amount available for borrowing will have been reduced to $63,000 as a result of further reductions. The Revolving
Credit Facility matures on July 31, 2007. Included within the Revolving Credit Facility is $30,000 available to the Company for the issuance of letters of credit. At December 31, 2003, $2,904 of letters of credit were outstanding. Amounts available
for borrowing under the Revolving Credit Facility are determined based on certain leverage requirements.



Borrowings under the Revolving Credit Facility bear interest at a rate based, at the option of the Company, on (i) a base rate defined as the higher of
the Prime Lending Rate at such time and one-half of 1% in excess of the overnight Federal Funds Rate at such time plus an incremental rate or (ii) the Eurodollar rate plus an incremental rate. The Company pays fees on the aggregate unused portion of
the loan commitment based on the leverage ratio for the most recent quarter ended. Commitment fees were $391, $745 and $371 in 2001, 2002 and 2003, respectively. In addition, the Company is required to pay letter of credit fees.



The Revolving Credit Facility contains customary restrictive covenants which,
among other things and with certain exceptions, limit the ability of the Company to incur additional indebtedness and liens, pay dividends and make capital expenditures above specified limits. Under the Revolving Credit Facility, the Company is
required to satisfy certain financial covenants such as maximum total leverage ratio, maximum senior leverage ratio and minimum consolidated EBITDA to consolidated net cash interest expense. The Company was in compliance with all applicable
covenants during all periods presented. After taking into account our restrictive covenants, as of March 1, 2004, we had approximately $22,000 of borrowing capacity on the Revolving Credit Facility.



NextMedia Group, Inc. and its subsidiaries have collateralized the Revolving
Credit Facility by granting a first priority-perfected pledge of its assets including, without limitation, the capital stock of NextMedia Operating, Inc. and its subsidiaries and affiliates. NextMedia Group, Inc. guarantees the obligations of the
Company, its direct wholly-owned subsidiary, under the Revolving Credit Facility, and each of the Companys subsidiaries has guaranteed the obligations of the Company under the Revolving Credit Facility. The Company (and all its subsidiaries)
are prohibited from dividending or transferring monies or assets to NextMedia Group, Inc. except for very limited purposes, including the payment of general corporate expenses and taxes.



Senior Subordinated Notes



On July 5, 2001, the Company issued $200.0 million in aggregate principal amount of its 103⁄4% Senior Subordinated Notes due July 1, 2011 (the
Notes). The Notes are general unsecured obligations of the Company, subordinated to all senior indebtedness of the Company, and are guaranteed on a senior subordinated basis, jointly and severally, by all of the Companys
subsidiaries. The subsidiary guarantors are wholly owned subsidiaries of the Company. The Company may redeem the Notes, in whole or in part, at any time on or after July 1, 2006 at prices ranging from 105.375% at July 1, 2006 and declining to 100%
after July 1, 2009, plus in each case accrued and unpaid interest. In addition, prior to July 1, 2004, the Company may redeem up to 35% of the original aggregate principal amount of the Notes at a price equal to 110.75% plus accrued and unpaid
interest, out of the proceeds of one or more public equity offerings. Upon the occurrence of a change in control (as defined in the Note indenture), holders of the Notes can require the Company to repurchase the Notes and the Company will be
required to make an offer to purchase the Notes at a price of 101%, plus accrued and unpaid interest. The Notes indenture contains limitations on incurrence of additional indebtedness, and restricted payments, including a restriction on the payment
of dividends to NextMedia Operating, Inc. unless certain financial conditions are



F-19



---

##### Table of Contents

met, as well as other restrictive covenants. Interest is payable on the Notes on January 1 and July 1 of each year.



There are no maturities or sinking fund requirements related to outstanding
long-term debt until 2011.



Interest Rate Swaps



From January 2002 through January 2004, the Company was party to various
interest rate swap agreements (the Swaps) with aggregate notional amounts ranging from $75,000 to $100,000. Pursuant to the Swaps, the Company paid a floating rate of interest on the notional amount and received a fixed rate of interest
on the notional amount. Pursuant to the Swaps, the Company received net interest proceeds of $950 and $1,976 in 2002 and 2003, respectively. The Company recognizes quarterly income or expense to record the Swaps at fair value during the periods they
were outstanding. In February 2004, the Company terminated the existing Swaps, realized a $1,600 gain, and received proceeds of $1,600. The Company is no longer party to any Swaps.



|8. | Commitments and Contingencies
|-- | -----------------------------



Leases



The Company leases office, studio, tower space and space to display advertising structures under various non-cancelable operating leases expiring through 2018. Rent expense for the years ended December 31, 2001, 2002
and 2003 was approximately $4,513, $9,104 and $10,296, respectively. Contingent rentals are included in certain leases for advertising space and are determined based on a percentage of net revenue. Future minimum lease commitments are as follows:



|                        |  |   |       
|----------------------- |  | - | ------
|Year ended December 31: |  |   |       
|2004                    |  | $ | 5,727 
|2005                    |  |   | 5,247 
|2006                    |  |   | 4,564 
|2007                    |  |   | 3,730 
|Thereafter              |  |   | 28,657
|                        |  |   |       
|                        |  | $ | 47,925
|                        |  |   |       



Equity Interests Granted to
Management



In connection with the formation of NextMedia
Investors, LLC (Note 1), Class B ownership units of NextMedia Investors, LLC were granted to certain members of management of the Company. The Class B units provide a 12.9% interest in the capital in excess of the amount of capital committed by the
Class A members of NextMedia Investors, LLC upon the occurrence of a defined liquidity event. The interest vests over four years. Vesting accelerates in the event of a change of control. No expense has been recorded by the Company related to the
Class B units issued to management as the grant price equaled fair value at the date of grant.



Additional Class B ownership units of NextMedia Investors, LLC were granted to certain members of management in 2001, providing for an additional 0.9% interest, with like vesting provisions. Non-cash compensation
expense of $315 in aggregate, is recorded ratably over the vesting period as the fair value at the date of grant exceeded the grant price.



Legal



In January 2003, the Company withheld approximately $1.5 million from PNE Media (which represents a net working capital payment otherwise payable to PNE Media) as an offset to indemnification claims in accordance with
the contribution and purchase and sale agreement related to the Companys 2001 acquisition of certain outdoor advertising assets of PNE Media. In May 2003, PNE Media filed a demand for arbitration for misrepresentations or omissions in
connection with its July 2001 investment in NextMedia Investors, LLC, the Companys ultimate parent. PNE Media sought the withheld amount, together with additional unspecified damages. A panel of three arbitrators heard the dispute during a
week-long evidentiary hearing in January 2004. In March 2004, the arbitration panel delivered an award that was favorable to the Company and, after certain set-offs, resulted in a net recovery of approximately $3.6 million. At this time, PNE Media
and the Company are in the process of implementing the arbitration award.



The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not
have a material impact on the consolidated financial position or results of operations or cash flows of the Company.



F-20



---

##### Table of Contents

Guarantees



The Company has no indirect or direct guarantees of indebtedness of others.



|9. | Income Taxes
|-- | ------------



The Company has not provided any current United States federal or state income tax provision or benefit as it has experienced operating losses since its
inception. The Company has provided a valuation allowance on the net deferred tax asset exclusive of the deferred tax liability for indefinite lived intangibles as discussed below.



The Company adopted SFAS No. 142 on January 1, 2002. SFAS No. 142 does not change the requirements of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, for recognition of deferred taxes related to indefinite lived intangibles and tax-deductible goodwill. As a result of adopting SFAS No. 142, a deferred tax benefit for the difference between
book and tax amortization on the Companys indefinite lived intangibles and goodwill will no longer be recognized as these assets are no longer amortized for book purposes. As the majority of the Companys deferred tax liability recorded
on the balance sheet relates to the difference between book and tax basis of FCC licenses and goodwill, the deferred tax liability will not reverse over time unless impairment charges are recognized on FCC licenses or goodwill, or the FCC licenses
or assets supporting the goodwill are sold.



In connection with
the suspension of amortization of FCC licenses and goodwill for accounting purposes, we expected that our deferred tax liabilities would not reverse within our net operating loss carry-forward period. Accordingly, on January 1, 2002, we recorded a
one time non-cash charge of $11,600 to deferred tax expense to establish an additional valuation allowance against our deferred tax assets. We recorded additional deferred tax expense throughout the year to establish a valuation allowance against
net operating loss carry-forwards generated by amortization of goodwill and FCC licenses that is deductible for tax purposes, but is no longer amortized in the financial statements.



As a result of the December 31, 2002 $42,956 impairment loss on goodwill and advertising permits discussed in Note 5, a
significant portion of the Companys deferred tax liability, resulting from the difference between book and tax amortization of goodwill, was reversed. Consequently, we recorded a deferred tax benefit of $15,341 during the fourth quarter
offsetting previously recognized expense of $19,652.



As of
December 31, 2003 the Company has net operating loss carryforwards of approximately $71,420, related to United States federal and state jurisdictions. The federal net operating loss begins to expire at various times beginning in 2021.



The provision for income taxes consists of the following:



|                           |  |                         |   |      |   |       |  |   |       
|-------------------------- |  | ----------------------- | - | ---- | - | ----- |  | - | ------
|                           |  | Years ended December 31
|                           |  | 2001                    |   | 2002 |   | 2003 
|Current:                   |  |                         |   |      |   |       |  |   |       
|Federal                    |  | $                       |  |      | $ |      |  | $ |      
|State                      |  |                         |  |      |   |      |  |   |      
|                           |  |                         |   |      |   |       |  |   |       
|Total current              |  |                         |  |      |   |      |  |   |      
|                           |  |                         |   |      |   |       |  |   |       
|Deferred                   |  |                         |   |      |   |       |  |   |       
|Federal                    |  |                         |  |      |   | 3,846 |  |   | 9,337 
|State                      |  |                         |  |      |   | 465   |  |   | 1,127 
|                           |  |                         |   |      |   |       |  |   |       
|Total deferred             |  |                         |  |      |   | 4,311 |  |   | 10,464
|                           |  |                         |   |      |   |       |  |   |       
|Provision for income taxes |  | $                       |  |      | $ | 4,311 |  | $ | 10,464
|                           |  |                         |   |      |   |       |  |   |       



F-21



---

##### Table of Contents

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Companys deferred tax assets and liabilities are as follows:



|                                    |  |                   |         |   |      |   |         |      |  |   |         |  
|----------------------------------- |  | ----------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                    |  | As of December 31 |        
|                                    |  | 2001              |         |   | 2002 |   |         | 2003 | 
|Deferred tax assets:                |  |                   |         |   |      |   |         |      |  |   |         |  
|Net operating loss carryforward     |  | $                 | 16,747  |   |      | $ | 28,075  |      |  | $ | 27,997  |  
|Accrued liabilities                 |  |                   | 475     |   |      |   | 925     |      |  |   | 794     |  
|Other                               |  |                   | 805     |   |      |   | 1,664   |      |  |   | 563     |  
|                                    |  |                   |         |   |      |   |         |      |  |   |         |  
|Total deferred tax assets           |  |                   | 18,027  |   |      |   | 30,664  |      |  |   | 29,354  |  
|                                    |  |                   |         |   |      |   |         |      |  |   |         |  
|Deferred tax liabilities:           |  |                   |         |   |      |   |         |      |  |   |         |  
|Property, equipment and intangibles |  |                   | (20,347 | ) |      |   | (20,955 | )    |  |   | (30,409 | )
|Other                               |  |                   | 26      |   |      |   | (1,093  | )    |  |   | (680    | )
|                                    |  |                   |         |   |      |   |         |      |  |   |         |  
|Total deferred tax liabilities      |  |                   | (20,321 | ) |      |   | (22,047 | )    |  |   | (31,089 | )
|                                    |  |                   |         |   |      |   |         |      |  |   |         |  
|Net deferred tax assets/liabilities |  |                   | (2,294  | ) |      |   | 8,617   |      |  |   | (1,735  | )
|Valuation allowance                 |  |                   | (4,579  | ) |      |   | (25,013 | )    |  |   | (25,123 | )
|                                    |  |                   |         |   |      |   |         |      |  |   |         |  
|Net deferred tax liabilities        |  | $                 | (6,873  | ) |      | $ | (16,396 | )    |  | $ | (26,858 | )
|                                    |  |                   |         |   |      |   |         |      |  |   |         |  



The net change in the
valuation allowance for deferred income taxes in 2002 was $20,434. The Company has provided a valuation allowance against the net deferred tax asset, excluding the deferred tax liability for amortization of intangibles, because the Company believes
the realization of those tax benefits is not more likely than not. Due to the adoption of SFAS 142, the Company has determined that the deferred tax liability related to amortization of intangibles meets the indefinite reversal criteria of SFAS 109,
and therefore, the determination of the generation of future taxable income related to the reversal of the deferred tax liability must be considered separately. The change in the valuation allowance differs from the amount shown in the effective
rate reconciliation by $1,362. This difference is due to the valuation allowance allocable to discontinued operations.



The provision (benefit) for income taxes differs from the amount computed by applying the U.S. federal income tax rate of 35% to income (loss) before
income taxes as follows for the year ended:



|                                                           |  |                         |        |   |      |   |         |      |  |   |       
|---------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------
|                                                           |  | Years ended December 31
|                                                           |  | 2001                    |        |   | 2002 |   |         | 2003
|US federal income tax expense (benefit) at statutory rate  |  | $                       | (3,586 | ) |      | $ | (15,984 | )    |  | $ | 6,990 
|State income taxes                                         |  |                         | (461   | ) |      |   | (1,619  | )    |  |   | 849   
|Change in valuation allowance(1)                           |  |                         | 3,547  |   |      |   | 19,072  |      |  |   | 2,582 
|Other permanent items, principally non-deductible goodwill |  |                         | 500    |   |      |   | 2,842   |      |  |   | 43    
|                                                           |  |                         |        |   |      |   |         |      |  |   |       
|Provision for deferred income taxes                        |  | $                       |       |   |      | $ | 4,311   |      |  | $ | 10,464
|                                                           |  |                         |        |   |      |   |         |      |  |   |       

---

|(1) | The change in the valuation allowance affecting the rate reconciliation does not equal the total change in the valuation allowance in 2003 due to changes in the valuation allowance
resulting from purchase accounting.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-22



---

##### Table of Contents

|10. | Segment Data
|--- | ------------



The Company determined that two reportable operating segmentsradio broadcasting and outdoor advertisingbest reflect how the Company is
currently managed.



The radio broadcasting segment is comprised
of radio stations and networks for which the Company is the licensee or for which the Company programs and sells on-air advertising time under local marketing agreements. At December 31, 2003, the radio broadcasting segment included 60 radio
stations owned and operated by the Company. All of these stations operate in domestic markets. The radio broadcasting segment also operates various radio networks.



The outdoor advertising segment includes traditional outdoor advertising displays, such as roadside bulletins, posters and
transit displays that the Company owns or operates under lease arrangements, as well as advertising displays that the Company installs in public locations, including restaurants, health clubs, retail stores and entertainment venues. At December 31,
2003, the outdoor advertising segment owned or operated over 7,000 outdoor billboard displays and, indoor advertising display faces in more than 3,000 retail locations across the United States. All of these displays are located in domestic markets.



The accounting policies of the segments are the same as those
described in the summary of significant accounting policies in Note 1. There are no intersegment sales or transfers.



There are no customers that comprise greater than 10% of the consolidated revenues of the Company for the years presented.



|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|----------------------------------------------------------------------------------------- |  | ------------------------ | ------ | ---- | - | ------- | ---- |  | - | -------
|                                                                                          |  | Years ended December 31,
|                                                                                          |  | 2001                     |        | 2002 |   |         | 2003
|Net revenue:                                                                              |  |                          |        |      |   |         |      |  |   |        
|Radio Broadcasting                                                                        |  | $                        | 56,334 |      | $ | 64,064  |      |  | $ | 72,876 
|Outdoor Advertising                                                                       |  |                          | 15,387 |      |   | 27,266  |      |  |   | 34,083 
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Consolidated                                                                              |  |                          | 71,721 |      |   | 91,330  |      |  |   | 106,959
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Market level expenses, exclusive of depreciation and amortization shown separately below: |  |                          |        |      |   |         |      |  |   |        
|Radio Broadcasting                                                                        |  |                          | 36,937 |      |   | 40,065  |      |  |   | 44,432 
|Outdoor Advertising                                                                       |  |                          | 9,882  |      |   | 19,265  |      |  |   | 22,100 
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Consolidated                                                                              |  |                          | 46,819 |      |   | 59,330  |      |  |   | 66,532 
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Depreciation and amortization:                                                            |  |                          |        |      |   |         |      |  |   |        
|Radio Broadcasting                                                                        |  |                          | 9,684  |      |   | 3,523   |      |  |   | 5,974  
|Outdoor Advertising                                                                       |  |                          | 1,369  |      |   | 2,000   |      |  |   | 4,317  
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Consolidated                                                                              |  |                          | 11,053 |      |   | 5,523   |      |  |   | 10,291 
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Other segment costs:                                                                      |  |                          |        |      |   |         |      |  |   |        
|Local marketing agreement fees - Radio Broadcasting                                       |  |                          | 20     |      |   |        |      |  |   | 42     
|Impairment loss-Outdoor Advertising                                                       |  |                          |       |      |   | 42,956  |      |  |   |       
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|Segment Profit:                                                                           |  |                          |        |      |   |         |      |  |   |        
|Radio Broadcasting                                                                        |  |                          | 9,693  |      |   | 20,476  |      |  |   | 22,428 
|Outdoor Advertising                                                                       |  |                          | 4,136  |      |   | (36,955 | )    |  |   | 7,666  
|                                                                                          |  |                          |        |      |   |         |      |  |   |        
|                                                                                          |  |                          | 13,829 |      |   | (16,479 | )    |  |   | 30,094 



F-23



---

##### Table of Contents

|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                      |  | Years ended December 31, |        
|                                                      |  | 2001                     |         |   | 2002 |   |         | 2003 | 
|Corporate Expenses                                    |  |                          | 8,834   |   |      |   | 8,116   |      |  |   | 8,518   |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Operating income (loss)                               |  |                          | 4,995   |   |      |   | (24,595 | )    |  |   | 21,576  |  
|Interest expense, net                                 |  |                          | 15,815  |   |      |   | 22,444  |      |  |   | 22,369  |  
|Other (income) expense                                |  |                          | (574    | ) |      |   | (1,370  | )    |  |   | (20,764 | )
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Income (Loss) from continuing operations before taxes |  | $                        | (10,246 | ) |      | $ | (45,669 | )    |  |   | 19,971  |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                      |  | Years Ended December 31, |        
|                                                      |  | 2001                     |         |   | 2002 |   |         | 2003 | 
|Total identifiable assets:                            |  |                          |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                    |  | $                        | 343,588 |   |      | $ | 323,543 |      |  | $ | 357,810 |  
|Outdoor Advertising                                   |  |                          | 162,947 |   |      |   | 168,437 |      |  |   | 185,567 |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Consolidated                                          |  | $                        | 506,537 |   |      | $ | 491,980 |      |  |   | 543,377 |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Goodwill, net:                                        |  |                          |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                    |  | $                        |        |   |      | $ |        |      |  | $ | 26,628  |  
|Outdoor Advertising                                   |  |                          | 39,876  |   |      |   | 34,922  |      |  |   | 36,962  |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Consolidated                                          |  |                          | 39,876  |   |      | $ | 34,922  |      |  |   | 63,590  |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Additions to long lived assets:                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                    |  | $                        | 10,448  |   |      | $ | 2,088   |      |  | $ | 68,967  |  
|Outdoor Advertising                                   |  |                          | 109,378 |   |      |   | 54,887  |      |  |   | 17,930  |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Consolidated                                          |  | $                        | 119,826 |   |      | $ | 56,975  |      |  | $ | 86,897  |  
|                                                      |  |                          |         |   |      |   |         |      |  |   |         |  



|11. | Fair Value of Financial Instruments
|--- | -----------------------------------



The carrying value of receivables, payables and accrued expenses approximate fair value due to the short maturity of these instruments. The fair value of
long-term debt is estimated at $226,000 at December 31, 2003 based on current market rates.



|12. | Supplemental Guarantor Information
|--- | ----------------------------------



The Companys senior subordinated notes are guaranteed on a senior subordinated basis, jointly and severally, by all of the Companys
subsidiaries (the Guarantor Subsidiaries). The Company has collateralized the revolving credit facility by granting a first priority-perfected pledge of its assets including, without limitation, the capital stock of the Company
and its subsidiaries.



F-24



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Balance Sheet

December 31, 2002



|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|---------------------------------------------------------------- |  | -------------------- | ------- | --------------------- | - | ------- | ------------------ |  | - | -------- | - |  | - | -------
|                                                                 |  | NextMediaGroup, Inc. |         | GuarantorSubsidiaries |   |         | EliminatingEntries |  |   | Total   
|Assets                                                           |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Current assets:                                                  |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Cash and cash equivalents                                        |  | $                    | 14,951  |                       | $ | (505    | )                  |  | $ |         |   |  | $ | 14,446 
|Accounts receivable, net                                         |  |                      | 9,974   |                       |   | 4,433   |                    |  |   |         |   |  |   | 14,407 
|Prepaid and other current assets                                 |  |                      | 426     |                       |   | 1,799   |                    |  |   |         |   |  |   | 2,225  
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total current assets                                             |  |                      | 25,351  |                       |   | 5,727   |                    |  |   |         |   |  |   | 31,078 
|Property and equipment, net                                      |  |                      | 23,511  |                       |   | 29,405  |                    |  |   |         |   |  |   | 52,916 
|Intangibles, net                                                 |  |                      | 438     |                       |   | 388,463 |                    |  |   |         |   |  |   | 388,901
|Other                                                            |  |                      | 13,634  |                       |   | 1,252   |                    |  |   | (1,212   | ) |  |   | 13,674 
|Assets held for sale                                             |  |                      | 486     |                       |   | 4,925   |                    |  |   |         |   |  |   | 5,411  
|Investment in subsidiaries                                       |  |                      | 410,963 |                       |   |        |                    |  |   | (410,963 | ) |  |   |       
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total assets                                                     |  | $                    | 474,383 |                       | $ | 429,772 |                    |  | $ | (412,175 | ) |  | $ | 491,980
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Liabilities and Stockholders Equity                             |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Current liabilities:                                             |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Accounts payable, accrued expenses and other current liabilities |  | $                    | 14,936  |                       | $ | 5,129   |                    |  | $ | (1,212   | ) |  | $ | 18,853 
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total current liabilities                                        |  |                      | 14,936  |                       |   | 5,129   |                    |  |   | (1,212   | ) |  |   | 18,853 
|Long-term debt                                                   |  |                      | 197,276 |                       |   |        |                    |  |   |         |   |  |   | 197,276
|Other long-term liabilities                                      |  |                      | 4,803   |                       |   | 13,680  |                    |  |   |         |   |  |   | 18,483 
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total liabilities                                                |  |                      | 217,015 |                       |   | 18,809  |                    |  |   | (1,212   | ) |  |   | 234,612
|Stockholders equity                                             |  |                      | 257,368 |                       |   | 410,963 |                    |  |   | (410,963 | ) |  |   | 257,368
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total liabilities and stockholders equity                       |  | $                    | 474,383 |                       | $ | 429,772 |                    |  | $ | (412,175 | ) |  | $ | 491,980
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        



F-25



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Balance Sheet

December 31, 2003



|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|---------------------------------------------------------------- |  | -------------------- | ------- | --------------------- | - | ------- | ------------------ |  | - | -------- | - |  | - | -------
|                                                                 |  | NextMediaGroup, Inc. |         | GuarantorSubsidiaries |   |         | EliminatingEntries |  |   | Total   
|Assets                                                           |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Current assets:                                                  |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Cash and cash equivalents                                        |  | $                    | 1,138   |                       | $ | (431    | )                  |  | $ |         |   |  | $ | 707    
|Accounts receivable, net                                         |  |                      | 11,181  |                       |   | 5,271   |                    |  |   |         |   |  |   | 16,452 
|Prepaid and other current assets                                 |  |                      | 1,665   |                       |   | 1,544   |                    |  |   |         |   |  |   | 3,209  
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total current assets                                             |  |                      | 13,984  |                       |   | 6,384   |                    |  |   |         |   |  |   | 20,368 
|Property and equipment, net                                      |  |                      | 25,924  |                       |   | 32,092  |                    |  |   |         |   |  |   | 58,016 
|Intangibles, net                                                 |  |                      | 30,569  |                       |   | 422,177 |                    |  |   |         |   |  |   | 452,746
|Other assets                                                     |  |                      | 6,632   |                       |   | 807     |                    |  |   | 4,808    |   |  |   | 12,247 
|Investment in subsidiaries                                       |  |                      | 447,196 |                       |   |        |                    |  |   | (447,196 | ) |  |   |       
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total assets                                                     |  | $                    | 524,305 |                       | $ | 461,460 |                    |  | $ | (442,388 | ) |  | $ | 543,377
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Liabilities and Stockholders Equity                             |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Current liabilities:                                             |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Accounts payable, accrued expenses and other current liabilities |  | $                    | 15,518  |                       | $ | 1,198   |                    |  | $ | 4,808    |   |  | $ | 21,524 
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total current liabilities                                        |  |                      | 15,518  |                       |   | 1,198   |                    |  |   | 4,808    |   |  |   | 21,524 
|Long-term debt                                                   |  |                      | 199,634 |                       |   |        |                    |  |   |         |   |  |   | 199,634
|Other long-term liabilities                                      |  |                      | 15,098  |                       |   | 13,066  |                    |  |   |         |   |  |   | 28,164 
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total liabilities                                                |  |                      | 230,250 |                       |   | 14,264  |                    |  |   | 4,808    |   |  |   | 249,322
|Stockholders equity                                             |  |                      | 294,055 |                       |   | 447,196 |                    |  |   | (447,196 | ) |  |   | 294,055
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        
|Total liabilities and stockholders equity                       |  | $                    | 524,305 |                       | $ | 461,460 |                    |  | $ | (442,388 | ) |  | $ | 543,377
|                                                                 |  |                      |         |                       |   |         |                    |  |   |          |   |  |   |        



F-26



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Year Ended December
31, 2001



|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------ | ------------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                         |  | NextMediaGroup, Inc. |         |   | GuarantorSubsidiaries |   |        | EliminatingEntries |  |   | Total  |  
|Net revenue                                                                              |  | $                    | 56,334  |   |                       | $ | 15,387 |                    |  | $ |       |   |  | $ | 71,721  |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                      | 36,937  |   |                       |   | 9,882  |                    |  |   |       |   |  |   | 46,819  |  
|Corporate expenses                                                                       |  |                      | 5,441   |   |                       |   | 3,393  |                    |  |   |       |   |  |   | 8,834   |  
|Depreciation and amortization                                                            |  |                      | 3,359   |   |                       |   | 7,694  |                    |  |   |       |   |  |   | 11,053  |  
|Local marketing agreement fees                                                           |  |                      | 20      |   |                       |   |       |                    |  |   |       |   |  |   | 20      |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Operating income (loss)                                                                  |  |                      | 10,577  |   |                       |   | (5,582 | )                  |  |   |       |   |  |   | 4,995   |  
|Interest expense, net                                                                    |  |                      | 15,812  |   |                       |   | 3      |                    |  |   |       |   |  |   | 15,815  |  
|Other income                                                                             |  |                      | (574    | ) |                       |   |       |                    |  |   |       |   |  |   | (574    | )
|Equity in loss of subsidiaries                                                           |  |                      | 5,797   |   |                       |   |       |                    |  |   | (5,797 | ) |  |   |        |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Income (loss) before provision for income taxes                                          |  |                      | (10,458 | ) |                       |   | (5,585 | )                  |  |   | 5,797  |   |  |   | (10,246 | )
|Provision for deferred income taxes                                                      |  |                      |        |   |                       |   |       |                    |  |   |       |   |  |   |        |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Net income (loss) from continuing operations                                             |  |                      | (10,458 | ) |                       |   | (5,585 | )                  |  |   | 5,797  |   |  |   | (10,246 | )
|Loss on discontinued operations                                                          |  |                      | 450     |   |                       |   | 212    |                    |  |   |       |   |  |   | 662     |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | (10,908 | ) |                       | $ | (5,797 | )                  |  | $ | 5,797  |   |  | $ | (10,908 | )
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  



F-27



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Year Ended December
31, 2002



|                                                                                         |  |                      |         |   |                       |   |         |                    |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | ------------------ |  | - | ------- | - |  | - | ------- | -
|                                                                                         |  | NextMediaGroup, Inc. |         |   | GuarantorSubsidiaries |   |         | EliminatingEntries |  |   | Total   |  
|Net revenue                                                                              |  | $                    | 64,064  |   |                       | $ | 27,266  |                    |  | $ |        |   |  | $ | 91,330  |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                      | 40,065  |   |                       |   | 19,265  |                    |  |   |        |   |  |   | 59,330  |  
|Corporate expenses                                                                       |  |                      | 5,609   |   |                       |   | 2,507   |                    |  |   |        |   |  |   | 8,116   |  
|Depreciation and amortization                                                            |  |                      | 3,523   |   |                       |   | 2,000   |                    |  |   |        |   |  |   | 5,523   |  
|Impairment loss                                                                          |  |                      |        |   |                       |   | 42,956  |                    |  |   |        |   |  |   | 42,956  |  
|                                                                                         |  |                      |         |   |                       |   |         |                    |  |   |         |   |  |   |         |  
|Operating income (loss)                                                                  |  |                      | 14,867  |   |                       |   | (39,462 | )                  |  |   |        |   |  |   | (24,595 | )
|Interest expense, net                                                                    |  |                      | 22,447  |   |                       |   | (3      | )                  |  |   |        |   |  |   | 22,444  |  
|Other income                                                                             |  |                      | (1,267  | ) |                       |   | (103    | )                  |  |   |        |   |  |   | (1,370  | )
|Equity in loss of subsidiaries                                                           |  |                      | 42,628  |   |                       |   |        |                    |  |   | (42,628 | ) |  |   |        |  
|                                                                                         |  |                      |         |   |                       |   |         |                    |  |   |         |   |  |   |         |  
|Income (loss) before provision for income taxes                                          |  |                      | (48,941 | ) |                       |   | (39,356 | )                  |  |   | 42,628  |   |  |   | (45,669 | )
|Provision for deferred income taxes                                                      |  |                      | 4,311   |   |                       |   |        |                    |  |   |         |   |  |   | 4,311   |  
|Net income (loss) from continuing operations                                             |  |                      | (53,252 | ) |                       |   | (39,356 | )                  |  |   | 42,628  |   |  |   | (49,980 | )
|Loss on discontinued operations                                                          |  |                      | 203     |   |                       |   | 3,272   |                    |  |   |        |   |  |   | 3,475   |  
|                                                                                         |  |                      |         |   |                       |   |         |                    |  |   |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | (53,455 | ) |                       | $ | (42,628 | )                  |  | $ | 42,628  |   |  | $ | (53,455 | )
|                                                                                         |  |                      |         |   |                       |   |         |                    |  |   |         |   |  |   |         |  



F-28



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Year Ended December
31, 2003



|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------ | ------------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                         |  | NextMediaGroup, Inc. |         |   | GuarantorSubsidiaries |   |        | EliminatingEntries |  |   | Total  |  
|Net revenue                                                                              |  | $                    | 72,876  |   |                       | $ | 34,083 |                    |  | $ |       |   |  | $ | 106,959 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                      | 44,432  |   |                       |   | 22,100 |                    |  |   |       |   |  |   | 66,532  |  
|Corporate expenses                                                                       |  |                      | 6,197   |   |                       |   | 2,321  |                    |  |   |       |   |  |   | 8,518   |  
|Depreciation and amortization                                                            |  |                      | 5,974   |   |                       |   | 4,317  |                    |  |   |       |   |  |   | 10,291  |  
|Local marketing agreement fees                                                           |  |                      | 42      |   |                       |   |       |                    |  |   |       |   |  |   | 42      |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Operating income (loss)                                                                  |  |                      | 16,231  |   |                       |   | 5,345  |                    |  |   |       |   |  |   | 21,576  |  
|Interest expense, net                                                                    |  |                      | 22,369  |   |                       |   |       |                    |  |   |       |   |  |   | 22,369  |  
|Other income                                                                             |  |                      | (20,762 | ) |                       |   | (2     | )                  |  |   |       |   |  |   | (20,764 | )
|Equity in loss of subsidiaries                                                           |  |                      | (5,347  | ) |                       |   |       |                    |  |   | 5,347  |   |  |   |        |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Income (loss) before provision for income taxes                                          |  |                      | 19,971  |   |                       |   | 5,347  |                    |  |   | (5,347 | ) |  |   | 19,971  |  
|Provision for deferred income taxes                                                      |  |                      | 10,464  |   |                       |   |       |                    |  |   |       |   |  |   | 10,464  |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Net income (loss) from continuing operations                                             |  |                      | 9,507   |   |                       |   | 5,347  |                    |  |   | (5,347 | ) |  |   | 9,507   |  
|Loss on discontinued operations                                                          |  |                      | (1      | ) |                       |   |       |                    |  |   |       |   |  |   | (1      | )
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  
|Net income (loss)                                                                        |  | $                    | 9,508   |   |                       | $ | 5,347  |                    |  | $ | (5,347 | ) |  | $ | 9,508   |  
|                                                                                         |  |                      |         |   |                       |   |        |                    |  |   |        |   |  |   |         |  



F-29



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Year Ended December
31, 2001



|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|----------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------ | ------------------ |  | ----- | - |  | - | -------- | -
|                                                |  | NextMediaGroup, Inc. |          |   | GuarantorSubsidiaries |   |        | EliminatingEntries |  | Total |  
|Net cash provided by (used in) operations       |  | $                    | 8,446    |   |                       | $ | 1,058  |                    |  | $     |  |  | $ | 9,504    |  
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Cash Flows From Investing Activities            |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Purchase of equipment                           |  |                      | (3,892   | ) |                       |   | (3,185 | )                  |  |       |  |  |   | (7,077   | )
|Payments for acquisitions, net of cash acquired |  |                      | (112,953 | ) |                       |   |       |                    |  |       |  |  |   | (112,953 | )
|Proceeds from sale of broadcasting properties   |  |                      | 5,442    |   |                       |   |       |                    |  |       |  |  |   | 5,442    |  
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Net cash used in investing activities           |  |                      | (111,403 | ) |                       |   | (3,185 | )                  |  |       |  |  |   | (114,588 | )
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Cash Flows From Financing Activities            |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Proceeds from Senior Subordinated Notes         |  |                      | 197,020  |   |                       |   |       |                    |  |       |  |  |   | 197,020  |  
|Proceeds from revolving credit facilities       |  |                      | 18,000   |   |                       |   |       |                    |  |       |  |  |   | 18,000   |  
|Repayment of revolving credit facilities        |  |                      | (124,945 | ) |                       |   |       |                    |  |       |  |  |   | (124,945 | )
|Capital contributions from Parent               |  |                      | 53,465   |   |                       |   |       |                    |  |       |  |  |   | 53,465   |  
|Payments of financing related costs             |  |                      | (8,408   | ) |                       |   |       |                    |  |       |  |  |   | (8,408   | )
|Other                                           |  |                      | (1,456   | ) |                       |   | 1,073  |                    |  |       |  |  |   | (383     | )
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Net cash provided by financing activities       |  |                      | 133,676  |   |                       |   | 1,073  |                    |  |       |  |  |   | 134,749  |  
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Net increase in cash                            |  |                      | 30,719   |   |                       |   | (1,054 | )                  |  |       |   |  |   | 29,665   |  
|Cash at beginning of period                     |  |                      | 325      |   |                       |   | 511    |                    |  |       |  |  |   | 836      |  
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  
|Cash at end of period                           |  | $                    | 31,044   |   |                       | $ | (543   | )                  |  | $     |  |  | $ | 30,501   |  
|                                                |  |                      |          |   |                       |   |        |                    |  |       |   |  |   |          |  



F-30



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Year Ended December
31, 2002



|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|----------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------ | ------------------ |  | ----- | - |  | - | ------- | -
|                                                |  | NextMediaGroup, Inc. |         |   | GuarantorSubsidiaries |   |        | EliminatingEntries |  | Total |  
|Net cash provided by (used in) operations       |  | $                    | (4,420  | ) |                       | $ | 4,118  |                    |  | $     |  |  | $ | (302    | )
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Cash Flows From Investing Activities            |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Purchase of equipment                           |  |                      | (2,088  | ) |                       |   | (4,353 | )                  |  |       |  |  |   | (6,441  | )
|Payments for acquisitions, net of cash acquired |  |                      | (38,449 | ) |                       |   |       |                    |  |       |  |  |   | (38,449 | )
|Proceeds from sale of broadcasting properties   |  |                      | 1,581   |   |                       |   |       |                    |  |       |  |  |   | 1,581   |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Net cash used in investing activities           |  |                      | (38,956 | ) |                       |   | (4,353 | )                  |  |       |  |  |   | (43,309 | )
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Cash Flows From Financing Activities            |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Capital contributions from Parent               |  |                      | 28,113  |   |                       |   |       |                    |  |       |  |  |   | 28,113  |  
|Payments of financing related costs             |  |                      | (711    | ) |                       |   |       |                    |  |       |  |  |   | (711    | )
|Other                                           |  |                      | (119    | ) |                       |   | 273    |                    |  |       |  |  |   | 154     |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Net cash provided by financing activities       |  |                      | 27,283  |   |                       |   | 273    |                    |  |       |  |  |   | 27,556  |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Net decrease in cash                            |  |                      | (16,093 | ) |                       |   | 38     |                    |  |       |   |  |   | (16,055 | )
|Cash at beginning of period                     |  |                      | 31,044  |   |                       |   | (543   | )                  |  |       |  |  |   | 30,501  |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Cash at end of period                           |  | $                    | 14,951  |   |                       | $ | (505   | )                  |  | $     |  |  | $ | 14,446  |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  



F-31



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Year Ended December
31, 2003



|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|----------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------ | ------------------ |  | ----- | - |  | - | ------- | -
|                                                |  | NextMediaGroup, Inc. |         |   | GuarantorSubsidiaries |   |        | EliminatingEntries |  | Total |  
|Net cash provided by (used in) operations       |  | $                    | 3,844   |   |                       | $ | 3,103  |                    |  | $     |  |  | $ | 6,947   |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Cash Flows From Investing Activities            |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Purchase of equipment                           |  |                      | (2,013  | ) |                       |   | (3,029 | )                  |  |       |  |  |   | (5,042  | )
|Payments for acquisitions, net of cash acquired |  |                      | (81,250 | ) |                       |   |       |                    |  |       |  |  |   | (81,250 | )
|Proceeds from sale of broadcasting properties   |  |                      | 36,908  |   |                       |   |       |                    |  |       |  |  |   | 36,908  |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Net cash used in investing activities           |  |                      | (46,355 | ) |                       |   | (3,029 | )                  |  |       |  |  |   | (49,384 | )
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Cash Flows From Financing Activities            |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Proceeds from revolving credit facilities       |  |                      | 44,000  |   |                       |   |       |                    |  |       |  |  |   | 44,000  |  
|Repayment of revolving credit facilities        |  |                      | (42,000 | ) |                       |   |       |                    |  |       |  |  |   | (42,000 | )
|Capital contributions from Parent               |  |                      | 27,100  |   |                       |   |       |                    |  |       |  |  |   | 27,100  |  
|Payments of financing related costs             |  |                      | (90     | ) |                       |   |       |                    |  |       |  |  |   | (90     | )
|Other                                           |  |                      | (312    | ) |                       |   |       |                    |  |       |  |  |   | (312    | )
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Net cash provided by financing activities       |  |                      | 28,698  |   |                       |   |       |                    |  |       |  |  |   | 28,698  |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Net increase in cash                            |  |                      | (13,813 | ) |                       |   | 74     |                    |  |       |  |  |   | (13,739 | )
|Cash at beginning of period                     |  |                      | 14,951  |   |                       |   | (505   | )                  |  |       |  |  |   | 14,446  |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  
|Cash at end of period                           |  | $                    | 1,138   |   |                       | $ | (431   | )                  |  | $     |  |  | $ | 707     |  
|                                                |  |                      |         |   |                       |   |        |                    |  |       |   |  |   |         |  



F-32



---

##### Table of Contents

SIGNATURES



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



NEXTMEDIA OPERATING, INC.(Registrant)By:

/s/    STEVEN DINETZSteven Dinetz,President and Chief Executive OfficerDate:

March 30, 2004




Pursuant to the requirements of
the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                      |  |                                                                                            |  |               
|------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | --------------
|Signature                             |  | Title                                                                                      |  | Date          
|                                      |  |                                                                                           
|/s/    CARL E.
HIRSCHCarl E.
Hirsch   |  | Executive Chairman of the Board                                                            |  | March 30, 2004
|                                      |  |                                                                                           
|/s/    STEVEN
DINETZSteven
Dinetz     |  | Director, President and Chief Executive Officer (Principal Executive Officer)              |  | March 30, 2004
|                                      |  |                                                                                           
|/s/    SEAN R.
STOVERSean R.
Stover   |  | Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |  | March 30, 2004
|                                      |  |                                                                                           
|/s/    SCHUYLER
HANSENSchuyler
Hansen |  | Vice President and Chief Accounting Officer (Principal Accounting Officer)                 |  | March 30, 2004



37



---

##### Table of Contents

INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                           
|              | 
|3.01*         |  | Certificate of Incorporation of NextMedia Operating, Inc.                                                                                                                                                                                                                             
|              | 
|3.02*         |  | Certificate of Amendment to the Certificate of Incorporation of NextMedia Operating, Inc.                                                                                                                                                                                             
|              | 
|3.03*         |  | Bylaws of NextMedia Operating, Inc.                                                                                                                                                                                                                                                   
|              | 
|4.01*         |  | Indenture dated as of July 5, 2001 between NextMedia Operating, Inc., the Guarantors named therein and U.S. Bank Trust Company, N.A., as trustee, with respect to the 10 3/4% Senior
Subordinated Notes due 2011.                                                                     
|              | 
|4.02*         |  | Form of 10 3/4% Senior Subordinated Note due 2011 (included in Exhibit 4.1).                                                                                                                                                                                                          
|              | 
|4.03*         |  | Registration Rights Agreement dated June 28, 2001, among NextMedia Operating, Inc., Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Deutsche Banc Alex. Brown Inc., CIBC
World Markets Corp. and Thomas Weisel Partners LLC.                                            
|              | 
|4.04***       |  | Supplemental Indenture, dated as of March 13, 2002, to be effective as of July 5, 2001, among Crickett Ltd. and Chesapeake Outdoor Enterprises, Inc., each as Guarantor, NextMedia Operating,
Inc., the other Guarantors named therein and U.S. Bank National Association, as trustee.
|              | 
|4.05***       |  | Supplemental Indenture, dated as of August 30, 2002, among NextMedia Northern Colorado, Inc., as Guarantor, NextMedia Operating, Inc., the other Guarantors named therein and U.S. Bank
National Association, as trustee.                                                             
|              | 
|10.01*        |  | Credit Agreement, dated as of July 31, 2000, by and among NextMedia Group, Inc., NextMedia Operating, Inc., a guarantor thereunder, the lenders party thereto and Bankers Trust Company as
Administrative Agent.                                                                      
|              | 
|10.02*        |  | First Amendment to the Credit Agreement, dated as of December 13, 2000, among NextMedia Group, Inc., NextMedia Operating, Inc., NextMedia Group II, Inc., the lenders from time to time party
to the Credit Agreement, and Bankers Trust Company, as administrative agent.            
|              | 
|10.03*        |  | Second Amendment to the Credit Agreement, dated as of May 14, 2001, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement, and
Bankers Trust Company, as administrative agent.                                          
|              | 
|10.04*        |  | Third Amendment and Consent to the Credit Agreement, dated as of June 22, 2001, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit
Agreement, and Bankers Trust Company, as administrative agent.                              
|              | 
|10.05*        |  | Fourth Amendment to the Credit Agreement, dated as of December 20, 2001, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement,
and Bankers Trust Company, as administrative agent.                                     



38



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                   
|              | 
|10.06***      |  | Fifth Amendment to the Credit Agreement, dated as of June 25, 2002, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement, and
Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company), as administrative agent.     
|              | 
|10.07**       |  | Sixth Amendment to the Credit Agreement, dated as of October 15, 2002, among NextMedia Group, Inc., NextMedia Operating, Inc., the lenders from time to time party to the Credit Agreement, and
Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company), as administrative agent.  
|              | 
|10.08*        |  | Asset Purchase Agreement, dated as of August 16, 1999, among NextMedia Group, LLC and Rambaldo Communications, Inc., Rambaldo AM Communications, Inc. and Rambaldo AM Broadcasting
Company.                                                                                                   
|              | 
|10.09*        |  | Asset Purchase Agreement, dated as of October 1, 1999, between NextMedia Group, LLC and Empire Broadcasting System LLP.                                                                                                                                                                       
|              | 
|10.10*        |  | Asset Purchase Agreement, dated as of October 2, 1999, between NextMedia Group, LLC and Styles Broadcasting of Alabama, Inc.                                                                                                                                                                  
|              | 
|10.11*        |  | Asset Purchase Agreement, dated as of October 21, 1999, between NextMedia Group, LLC and The Jet Broadcasting Co., Inc.                                                                                                                                                                       
|              | 
|10.12*        |  | Asset Purchase Agreement, dated as of November 18, 1999 among NextMedia Outdoor, L.L.C., Promote It, Inc. d/b/a Gas Station Advertising Network and Jim and Lori Baxter.                                                                                                                      
|              | 
|10.13*        |  | Asset Purchase Agreement, dated as of November 20, 1999, between NextMedia Group, LLC and Wilmington WJBR-FM, L.L.C.                                                                                                                                                                          
|              | 
|10.14*        |  | Asset Purchase Agreement, dated as of December 6, 1999, between NextMedia Group, LLC and Salt Broadcasting LLC.                                                                                                                                                                               
|              | 
|10.15*        |  | Asset Purchase Agreement, dated as of February 11, 2000, among NextMedia Group, LLC and Pinnacle Broadcasting Company, Inc., WSOY Decatur, Inc., Pinnacle Southeast, Inc., Pinnacle Myrtle
Corp., Atlantic Towers, Inc., El Paso and Lubbock, Inc., WFXC & WDUR, Inc., and Pinnacle S.C., Inc.
|              | 
|10.16*        |  | Asset Purchase Agreement, dated as of February 16, 2000 between NextMedia Group, LLC and Hirsch Broadcasting Group, LP.                                                                                                                                                                       
|              | 
|10.17*        |  | Asset Purchase Agreement, dated as of February 22, 2000, among NextMedia Group, LLC and Lake Broadcasting, Inc. and Red River Radio, Inc.                                                                                                                                                     
|              | 
|10.18*        |  | Asset Purchase Agreement, dated as of May 11, 2000, between NextMedia Group, Inc. and AJ Indoor Advertising, Inc.                                                                                                                                                                             
|              | 
|10.19*        |  | Asset Purchase Agreement, dated as of June 15, 2000, between NextMedia Group, Inc. and Beaverkettle Company.                                                                                                                                                                                  
|              | 
|10.20*        |  | Asset Purchase Agreement, dated as of June 30, 2000, between NextMedia Operating, Inc. and Belvidere Broadcasting, L.P.                                                                                                                                                                       



39



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                         
|              | 
|10.21*        |  | Asset Purchase Agreement, dated as of June 30, 2000, between NextMedia Operating, Inc. and Pride Communications, LLC.                                                                                                               
|              | 
|10.22*        |  | Asset Exchange Agreement, dated as of August 31, 2000, among NextMedia Operating, Inc. and Cumulus Broadcasting Inc., Cumulus Wireless Services, Inc., Cumulus Licensing Corp., and the Myrtle
Beach Stations Trust.                
|              | 
|10.23*        |  | Asset Purchase Agreement, dated as of August 31, 2000, between Myrtle Beach Stations Trust and Fidelity Broadcasting Corporation.                                                                                                   
|              | 
|10.24*        |  | KLAK-FM Option Agreement, dated as of October 10, 2000, among First Broadcasting Company, L.P., NextMedia Licensing, Inc. and NextMedia Operating, Inc.                                                                             
|              | 
|10.25*        |  | Asset Purchase Agreement, dated as of December 28, 2000, among NextMedia Group II, Inc., NextMedia Licensing, Inc., Regent Broadcasting of Erie, Inc. and Regent Licensee of Erie,
Inc.                                             
|              | 
|10.26*        |  | Asset Purchase Agreement, dated as of January 1, 2001, among NextMedia Operating, Inc. and NextMedia Licensing, Inc. and Radioworks, Inc., WFVR, Inc. and WKKD, Inc.                                                                
|              | 
|10.27*        |  | Asset Purchase Agreement, dated as of January 31, 2001, among NextMedia Outdoor, Inc. and CityVision, LLC, CityVision Connecticut, LLC and CityVision Massachusetts, LLC.                                                           
|              | 
|10.28*        |  | Asset Purchase Agreement, dated as of January 31, 2001, between NextMedia Operating, Inc. and Fairview Radio, Inc.                                                                                                                  
|              | 
|10.29*        |  | Amendment No. 1 to the Asset Exchange Agreement, dated April 30, 2001, among NextMedia Operating, Inc. and Cumulus Broadcasting Inc., Cumulus Wireless Services, Inc., Cumulus Licensing Corp.,
and the Myrtle Beach Stations Trust.
|              | 
|10.30*        |  | Asset Purchase Agreement, dated as of June 13, 2001, between NextMedia Outdoor, Inc. and Great Advertising, LLC.                                                                                                                    
|              | 
|10.31*        |  | Asset Purchase Agreement, dated as of June 13, 2001, between NextMedia Outdoor, Inc. and Great Outdoor, Inc.                                                                                                                        
|              | 
|10.32*        |  | Asset Purchase Agreement, dated as of June 13, 2001, between NextMedia Outdoor, Inc. and Media Displays, Inc.                                                                                                                       
|              | 
|10.33*        |  | Contribution and Purchase and Sale Agreement, dated as of June 13, 2001, among NextMedia Investors, LLC, NextMedia Outdoor, Inc. and PNE Media, LLC.                                                                                
|              | 
|10.34*        |  | Amendment No. 2 to Asset Purchase Agreement, dated as of August 7, 2001, among NextMedia Outdoor, Inc. and CityVision, LLC, CityVision Mid-America, LLC, CityVision Connecticut, LLC and
CityVision Massachusetts, LLC.             
|              | 
|10.35*        |  | Asset Purchase Agreement, dated as of October 16, 2001, among Capital Advertising, Inc., Capital Media II, Inc., and Capital Outdoor, Inc. and NextMedia.                                                                           
|              | 
|10.36*        |  | Asset Purchase Agreement, dated as of October 26, 2001 between Sailing Billboards Outdoor Media, LLC and NextMedia Outdoor, Inc.                                                                                                    



40



---

##### Table of Contents

|              |  |                                                                                                                                                               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                   
|              | 
|10.37*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Carl E. Hirsch.                                                            
|              | 
|10.38*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Steven Dinetz.                                                             
|              | 
|10.39*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Sean Stover.                                                               
|              | 
|10.40*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Samuel Weller.                                                             
|              | 
|10.41*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Jeffrey Dinetz.                                                            
|              | 
|10.42*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Steven Smith.                                                              
|              | 
|10.43*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Group, Inc. and Schuyler Hansen.                                                           
|              | 
|10.44*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Outdoor, Inc., NextMedia Group, Inc. and James Matalone.                                   
|              | 
|10.45*        |  | Employment Agreement, dated as of March 6, 2000, between NextMedia Outdoor, Inc., NextMedia Group, Inc. and Scot McArtor.                                     
|              | 
|10.46***      |  | Purchase Agreement, dated as of October 30, 2002, by and among Wilks Broadcasting, LLC, Wilks License Co. LLC, NextMedia Operating, Inc. and NM Licensing LLC.
|              | 
|21.1+         |  | List of subsidiaries of NextMedia Operating, Inc.                                                                                                             
|              | 
|31.1+         |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                           
|              | 
|31.2+         |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                           
|              | 
|32.1+         |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            
|              | 
|32.2+         |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            

---

|+ | Filed herewith.
|- | ---------------



|* | Incorporated herein by reference to our Registration Statement on Form S-4/A, dated April 8, 2002.
|- | --------------------------------------------------------------------------------------------------



|** | Incorporated herein by reference to our quarterly report on Form 10-Q, dated November 14, 2002.
|-- | -----------------------------------------------------------------------------------------------



|*** | Incorporated herein by reference to our annual report on Form 10-K, dated March 27, 2003.
|--- | -----------------------------------------------------------------------------------------



41