##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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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, 2004



Commission file number: 333-84416



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NEXTMEDIA OPERATING, INC.

(Exact name of Registrant as Specified in Its Charter)



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



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



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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)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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 22, 2005 was $0. The total number of shares of common stock issued and outstanding as of March 22, 2005 was 3,000.



DOCUMENTS INCORPORATED BY REFERENCE



None



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##### Table of Contents

NEXTMEDIA OPERATING, INC.

FORM 10-K

TABLE OF CONTENTS



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I   |  |                                                                                                              |  | 1   
|         |  |                                                                                                             
|ITEM 1.  |  | BUSINESS                                                                                                     |  | 1   
|         |  |                                                                                                             
|ITEM 2.  |  | PROPERTIES                                                                                                   |  | 15  
|         |  |                                                                                                             
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                            |  | 16  
|         |  |                                                                                                             
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 16  
|         |  |                                                                                                             
|PART II  |  |                                                                                                              |  | 17  
|         |  |                                                                                                             
|ITEM 5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 17  
|         |  |                                                                                                             
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                                      |  | 17  
|         |  |                                                                                                             
|ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 18  
|         |  |                                                                                                             
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 24  
|         |  |                                                                                                             
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 24  
|         |  |                                                                                                             
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 24  
|         |  |                                                                                                             
|ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                                      |  | 24  
|         |  |                                                                                                             
|PART III |  |                                                                                                              |  | 26  
|         |  |                                                                                                             
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                           |  | 26  
|         |  |                                                                                                             
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                                       |  | 27  
|         |  |                                                                                                             
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  | 27  
|         |  |                                                                                                             
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                               |  | 28  
|         |  |                                                                                                             
|ITEM 14. |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                       |  | 28  
|         |  |                                                                                                             
|PART IV  |  |                                                                                                              |  | 30  
|         |  |                                                                                                             
|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES and REPORTS ON FORM 8-K                                              |  | 30  



i



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##### 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 2003, 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 an out-of-home media company that owns and operates radio stations and outdoor
advertising properties throughout the United States. We operate 66 radio stations in 16 small, mid-size and suburban markets. Our outdoor advertising business consists of traditional outdoor properties, including more than 5,100 outdoor advertising
displays and alternative advertising displays located in more than 2,400 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 66 AM and FM radio stations in 16 markets throughout the United States. The
following chart sets forth certain information about the radio stations we own and operate in rated markets.



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##### Table of Contents

|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|------------------------------------------ | ------------------- | ----------- | --------------- | --------- |  | ---------- | --------------------- | ------------------------------- | --------------------------------------- | ------ | ----------------------------------- | ---- | ------------------------ | -- |  | ---- | -
|Market/Stations                            |                     | Market Rank |                 | Frequency |  | Format     |                       | Fall 2004                       |                                        
|                                           | 2003 Radio Revenues |             | 2003 Metro Rank |           |  |            | Target Demographic(1) |                                 | Audience Share in Target Demographic(2) |        | Audience Rank in Target Demographic |      | Market Audience Share(2) |   
|Wilmington, DE                             |                     | 81          |                 | 74        |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WJBR-FM                                    |                     |             |                 |           |  | 99.5       |                       | Adult Contemporary              |                                         | W25-54 |                                     | 19.3 |                          | 1  |  | 10.7 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Reno, NV                                   |                     | 85          |                 | 124       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|KRZQ-FM                                    |                     |             |                 |           |  | 100.9      |                       | Alternative Rock                |                                         | M18-34 |                                     | 10.5 |                          | 3  |  | 3.5  |  
|KTHX-FM                                    |                     |             |                 |           |  | 100.1      |                       | Adult Rock                      |                                         | P25-54 |                                     | 7.7  |                          | 3  |  | 5.7  |  
|KURK-FM(4)                                 |                     |             |                 |           |  | 92.9       |                       | Classic Rock                    |                                         | M25-54 |                                     | 3.6  |                          | 10 |  | 1.7  |  
|KJZS-FM                                    |                     |             |                 |           |  | 92.1       |                       | Smooth Jazz                     |                                         | P35-54 |                                     | 2.9  |                          | 7  |  | 3.1  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 14.0 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Greenville-New Bern-Jacksonville, NC       |                     | 89          |                 | 88        |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WRNS-AM/FM                                 |                     |             |                 |           |  | 960/95.1   |                       | Country                         |                                         | P25-54 |                                     | 14.9 |                          | 1  |  | 14.6 |  
|WERO-FM                                    |                     |             |                 |           |  | 93.3       |                       | Top 40                          |                                         | W18-44 |                                     | 10.1 |                          | 3  |  | 4.6  |  
|WKOO-FM                                    |                     |             |                 |           |  | 98.7       |                       | Oldies                          |                                         | P35-64 |                                     | 3.8  |                          | 6  |  | 2.2  |  
|WANG-AM/FM                                 |                     |             |                 |           |  | 1330/105.1 |                       | Adult Standards                 |                                         | P35-64 |                                     | 0.9  |                          | 14 |  | 0.9  |  
|WXQR-FM                                    |                     |             |                 |           |  | 105.5      |                       | Rock                            |                                         | M18-34 |                                     | 5.9  |                          | 6  |  | 2.5  |  
|WQSL-FM(3)                                 |                     |             |                 |           |  | 92.3       |                       | Rhythmic Contemporary Hit Radio |                                         | P18-34 |                                     | 7.8  |                          | 1  |  | 3.5  |  
|WQZL-FM(3)                                 |                     |             |                 |           |  | 101.1      |                       | Rhythmic Contemporary Hit Radio |                                         | P18-34 |                                     | 5.3  |                          | 1  |  | 3.2  |  
|WDLX-AM                                    |                     |             |                 |           |  | 930        |                       | News/Talk                       |                                         | P25-54 |                                     | 0.0  |                          | 26 |  | 0.4  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 31.9 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Saginaw-Bay City-Midland, MI               |                     | 97          |                 | 130       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WGER-FM                                    |                     |             |                 |           |  | 106.3      |                       | Adult Contemporary              |                                         | W25-54 |                                     | 9.8  |                          | 3  |  | 4.1  |  
|WSGW-AM                                    |                     |             |                 |           |  | 790        |                       | News Talk                       |                                         | P25-54 |                                     | 12.4 |                          | 1  |  | 12.4 |  
|WXQL-FM(5)                                 |                     |             |                 |           |  | 100.5      |                       | Rhythmic Oldies                 |                                         | P25-54 |                                     | 3.0  |                          | 11 |  | 2.4  |  
|WTLZ-FM                                    |                     |             |                 |           |  | 107.1      |                       | Urban                           |                                         | P18-49 |                                     | 5.5  |                          | 8  |  | 5.1  |  
|WCEN-FM                                    |                     |             |                 |           |  | 94.5       |                       | Country                         |                                         | P25-54 |                                     | 7.5  |                          | 3  |  | 7.9  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 31.9 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Wilmington, NC (acquired February 1, 2005) |                     | 154         |                 | 176       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WMFD-AM (LMA)                              |                     |             |                 |           |  | 630        |                       | Sports/Talk                     |                                         | P25-54 |                                     | 3.1  |                          | 8  |  | 1.7  |  
|WAZO-FM (LMA)                              |                     |             |                 |           |  | 107.5      |                       | Contemporary Hit Radio          |                                         | W18-44 |                                     | 10.9 |                          | 3  |  | 4.7  |  
|WRQR-FM (LMA)                              |                     |             |                 |           |  | 104.5      |                       | Classic Rock                    |                                         | M25-54 |                                     | 10.4 |                          | 3  |  | 6.4  |  
|WKXB-FM (LMA)                              |                     |             |                 |           |  | 99.9       |                       | Rhythmic Oldies                 |                                         | P25-54 |                                     | 5.4  |                          | 5  |  | 5.4  |  
|WSFM-FM (LMA)                              |                     |             |                 |           |  | 98.3       |                       | Alternative                     |                                         | M18-34 |                                     | 7.4  |                          | 3  |  | 2.7  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 20.9 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Lubbock, TX                                |                     | 159         |                 | 182       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|KLLL-FM                                    |                     |             |                 |           |  | 96.3       |                       | Country                         |                                         | P25-54 |                                     | 8.9  |                          | 1  |  | 10.2 |  
|KMMX-FM                                    |                     |             |                 |           |  | 100.3      |                       | Hot Adult Contemporary          |                                         | W25-44 |                                     | 9.3  |                          | 2  |  | 5.6  |  
|KONE-FM                                    |                     |             |                 |           |  | 101.1      |                       | Classic Rock                    |                                         | M25-54 |                                     | 9.2  |                          | 2  |  | 4.9  |  
|KBTE-FM (LMA)                              |                     |             |                 |           |  | 104.9      |                       | Rhythmic Contemporary Hit Radio |                                         | P18-34 |                                     | 13.2 |                          | 2  |  | 9.8  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 30.5 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Canton, OH                                 |                     | 159         |                 | 128       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WHBC-FM                                    |                     |             |                 |           |  | 94.1       |                       | Adult Contemporary              |                                         | W25-54 |                                     | 18.6 |                          | 1  |  | 10.1 |  
|WHBC-AM                                    |                     |             |                 |           |  | 1480       |                       | Full Service                    |                                         | P35-64 |                                     | 8.6  |                          | 2  |  | 12.9 |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 23.0 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Myrtle Beach, SC                           |                     | 167         |                 | 164       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WQJM-AM                                    |                     |             |                 |           |  | 1450       |                       | News/Talk Sports                |                                         | P25-54 |                                     |     |                          |   |  |     |  
|WRNN-FM                                    |                     |             |                 |           |  | 99.5       |                       | News/Talk                       |                                         | P25-54 |                                     | 7.0  |                          | 2  |  | 7.3  |  
|WYAV-FM                                    |                     |             |                 |           |  | 104.1      |                       | Classic Rock                    |                                         | M25-54 |                                     | 5.3  |                          | 8  |  | 4.3  |  
|WKZQ-FM                                    |                     |             |                 |           |  | 101.7      |                       | Active Rock                     |                                         | M18-34 |                                     | 15.5 |                          | 1  |  | 5.4  |  
|WMYB-FM                                    |                     |             |                 |           |  | 92.1       |                       | Adult Contemporary              |                                         | W25-54 |                                     | 8.0  |                          | 1  |  | 5.4  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 22.4 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Erie, PA                                   |                     | 172         |                 | 165       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WRTS-FM                                    |                     |             |                 |           |  | 103.7      |                       | Contemporary Hit Radio/Top-40   |                                         | W18-49 |                                     | 29.9 |                          | 1  |  | 17.2 |  
|WRKT-FM                                    |                     |             |                 |           |  | 100.9      |                       | Rock                            |                                         | M25-54 |                                     | 12.5 |                          | 2  |  | 5.6  |  
|WFGO-FM                                    |                     |             |                 |           |  | 94.7       |                       | Oldies                          |                                         | P25-54 |                                     | 9.8  |                          | 3  |  | 10.2 |  
|WFNN-AM                                    |                     |             |                 |           |  | 1330       |                       | Sports                          |                                         | M25-54 |                                     | 3.4  |                          | 8  |  | 1.7  |  
|WJET-AM                                    |                     |             |                 |           |  | 1400       |                       | News/Talk                       |                                         | P25-54 |                                     | 2.9  |                          | 8  |  | 3.3  |  
|WUSE-FM                                    |                     |             |                 |           |  | 93.9       |                       | Country                         |                                         | P25-54 |                                     | 5.2  |                          | 7  |  | 5.0  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 43.0 | %
|                                           |                     |             |                 |           |  |            |                       |                                
|Decatur, IL                                |                     | 262         |                 | 277       |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|WSOY-FM                                    |                     |             |                 |           |  | 102.9      |                       | Top 40                          |                                         | W25-44 |                                     | 19.0 |                          | 1  |  | 7.8  |  
|WCZQ-FM                                    |                     |             |                 |           |  | 105.5      |                       | Rhythmic Contemporary           |                                         | P18-34 |                                     | 13.3 |                          | 2  |  | 6.9  |  
|WDZQ-FM                                    |                     |             |                 |           |  | 95.1       |                       | Country                         |                                         | P25-54 |                                     | 16.4 |                          | 1  |  | 12.1 |  
|WSOY-AM                                    |                     |             |                 |           |  | 1340       |                       | News/Talk/Sports                |                                         | P25-54 |                                     | 6.6  |                          | 4  |  | 7.8  |  
|WDZ-AM                                     |                     |             |                 |           |  | 1050       |                       | Urban Adult Contemporary        |                                         | P25-54 |                                     | 4.9  |                          | 7  |  | 7.8  |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  |      |  
|                                           |                     |             |                 |           |  |            |                       |                                 |                                         |        |                                     |      |                          |    |  | 42.4 | %

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

|(2) | Reflects the radio stations share among all radio station signals received in that market (Monday-Sunday 6AM-Midnight P12+).
|--- | -----------------------------------------------------------------------------------------------------------------------------

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

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

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



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##### Table of Contents

Wilmington, Delaware. Wilmington is the 74th ranked MSA and the 81st ranked radio market in the United States
based on estimated 2003 radio advertising revenue of $26.1 million, of which we had a 23.0% share. According to BIAs Financial Network, Inc.s Radio Market Report 2003, radio advertising revenue in Wilmington grew at a compound rate of
2.4% during the five-year period ended December 31, 2003.



The Wilmington
market has a population of approximately 670,600. 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 124th ranked MSA and the 85th ranked radio market in the
United States based on estimated 2003 radio advertising revenue of $24.6 million, of which we had an 18.6% share. Radio advertising revenue in Reno grew at a compound rate of 7.5% during the five-year period ended December 31, 2003.



The Reno market has a population of approximately 418,400, 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.



Greenville-New Bern-Jacksonville, North Carolina. Greenville-New Bern-Jacksonville is the 88th ranked MSA and the 89th ranked radio market in the United States based on estimated 2003 radio advertising revenue
of $23.3 million, of which we had a 37.8% share. Radio advertising revenue in Greenville grew at a compound rate of 2.8% during the five-year period ended December 31, 2003.



The Greenville-New Bern-Jacksonville market is the largest market that Arbitron covers in terms of geographic area and has a population of
approximately 592,900. We operate ten stations in the market, including WRNS-FM, the leading regional country music station in the market. Combined with our radio operations in Wilmington, North Carolina and our radio and outdoor operations in
Myrtle Beach, South Carolina, our contiguous radio presence and outdoor advertising assets make us the leading out-of-home media provider in the Coastal Carolina region. We expect our position will help us continue to capitalize on the significant
growth opportunities in Greenville-New Bern-Jacksonville.



Saginaw-Bay
City-Midland, Michigan.Saginaw-Bay-Midland is the 130th ranked MSA and the 97th ranked radio market in the United States based on estimated 2003 radio advertising revenue of $22.1 million, of which we had a 32.5% share. Radio advertising in
Saginaw grew at a compound rate of 4.8% during the five-year period ended December 31, 2003.



The Saginaw-Bay City-Midland market has a population of approximately 403,600 and is a located within the primary automotive manufacturing area of the country. 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.



Wilmington, North Carolina. Wilmington is the 176th ranked MSA and the 154th ranked radio market in the United States based on estimated 2003 radio advertising
revenue of $12.9 million, of which we had a 39.7% share. Radio advertising revenue in Wilmington grew at a compound rate of 5.0% during the five-year period ended December 31, 2003.



The Wilmington market has a population of approximately 247,700 which we expect to grow at a pace faster than the national average. We plan
to capitalize on this growth and Wilmingtons popularity as a vacation destination. Combined with our radio operations in Greenville-New Bern-Jacksonville, North Carolina and our radio and outdoor operations in Myrtle Beach, South Carolina, our
contiguous radio presence and outdoor advertising assets 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 Wilmington,
North Carolina.



Lubbock, Texas. Lubbock is the 182nd ranked MSA and the
159th ranked radio market in the United States based on estimated 2003 radio advertising revenue of $12.2 million, of which we had a 25.4% share. Radio advertising revenue in Lubbock grew at a compound rate of 1.3% during the five-year period ended
December 31, 2003.



The Lubbock market has a population of approximately
249,800. 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 is now tied for the number one position with sister station KLLL-FM among persons aged 25-54.



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##### Table of Contents

Canton, Ohio. Canton is the 128th ranked MSA and the 159th ranked radio market in the United States based on
estimated 2003 radio advertising revenue of $12.2 million, of which we had a 62.9% share. Radio advertising revenue in Canton grew at a compound rate of 4.1% during the five-year period ended December 31, 2003.



The Canton market has a population of approximately 407,200. 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. Canton is
home to the Pro Football Hall of Fame for which our two stations are the official stations. Our stations are Cantons leading radio group in terms of revenue and ratings.



Myrtle Beach, South Carolina. Myrtle Beach is the 164th ranked MSA and the 167th ranked radio market in the United States based on
estimated 2003 radio advertising revenue of $11.8 million, of which we had a 30.5% share. Radio advertising revenue in Myrtle Beach grew at a compound rate of 5.0% during the five-year period ended December 31, 2003.



The Myrtle Beach market has a population of approximately 269,400. 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. Combined with our radio operations in Wilmington, North Carolina and Greenville-New Bern-Jacksonville, North Carolina and our outdoor operations in Myrtle Beach, South Carolina, our contiguous radio presence
and outdoor advertising assets make us the leading out-of-home media provider in the Coastal Carolina region. We expect our position to help us to continue to capitalize on the significant growth opportunities in Myrtle Beach.



Erie, Pennsylvania. Erie is the 165th ranked MSA and the 172nd ranked radio market in
the United States based on estimated 2003 radio advertising revenue of $10.9 million, of which we had a 59.8% share. Radio advertising revenue in Erie grew at a compound rate of 4.4% during the five-year period ended December 31, 2003.



The Erie market has a population of approximately 278,900. 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 consolidated three sites into one facility to streamline our operations and reduce costs. WRTS-FM The Star is
one of the highest ranked contemporary hit radio stations in the country.



Decatur, Illinois. Decatur is the 277th ranked MSA and the 262nd ranked radio market in the United States based on estimated 2003 radio advertising revenue of $5.1 million, of which we had a 55.8% share. Radio advertising revenue in
Decatur grew at a compound rate of 3.9% during the five-year period ended December 31, 2003.



The Decatur market has a population of approximately 113,700. WSOY-AM, which commenced broadcasting in 1946, is one of the leading news/talk and agricultural information stations in the state of Illinois. 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.



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               
|WWYW-FM(3)               |  | 103.9     |  | Rhythmic Oldies        |  | P25-54               
|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, TX      |  |           |  |                        |  |                      
|KLAK-FM                  |  | 97.5      |  | Adult Contemporary     |  | W25-54               
|KMKT-FM                  |  | 93.1      |  | Country                |  | P25-54               
|KMAD-FM                  |  | 102.3     |  | Classic Rock           |  | M25-54               
|Ardmore, OK              |  |           |  |                        |  |                      
|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
|--- | ----------------

|(3) | Formerly WZCH-FM
|--- | ----------------



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##### Table of Contents

Suburban Chicago. Chicago is the third ranked MSA and the third ranked radio market in the United States based on
estimated 2003 radio advertising revenue of $602.8 million. Radio advertising revenue in Chicago grew at a compound rate of 6.5% during the five-year period ended December 31, 2003. The markets that comprise suburban Chicago are currently non-rated;
however, six of our twelve stations have achieved Arbitron 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 five adjacent areas within this area and extending to Milwaukee:
(i) Waukegan-Kenosha, (ii) Crystal Lake, (iii) Joliet and (iv) Aurora-Naperville and (v) Milwaukee. Moreover, our signals in this cluster reach approximately 4.1 million people in the Chicago metropolitan area (representing 45% of Chicagos 9.2
million total population). For purposes of comparison, a standalone market having a population of 4.1 million would constitute the 12th largest metropolitan area in the United States, ranking immediately below Atlanta, Georgia (4.5 million) and
above Miami-Ft. Lauderdale-Hollywood, Florida (4.1 million). The demographic characteristics of the population within our Greater Chicago cluster are also particularly attractive. For example, the median household income of $58,633 represents 138%
of the national average. Our station WEXT-FM moved its antenna location during 2004 to substantially increase our coverage of the Milwaukee area, enhancing the clusters overall advertising base.



Suburban Dallas (Sherman-Denison-Ardmore). Dallas is the 5th ranked MSA and the 5th
ranked radio market in the United States based on estimated 2003 radio advertising revenue of $401.6 million. Radio advertising revenue in Dallas grew at a compound rate of 7.0% during the five-year period ended December 31, 2003. Dallas is one of
the fastest growing metropolitan centers in the United States and is expanding northward to the suburban markets that we serve. Sherman-Denison-Ardmore, an outlying suburb of northern Dallas and Fort Worth, is currently a non-rated market.



Suburban Dallas is defined as three adjacent counties: (i) Denton, (ii)
Collin, and (iii) Grayson. This region includes 1.2 million people (representing 22% of Dallas 5.5 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 Jacksonville, Florida
(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.



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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 2004, 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. M-F. 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.



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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Posters, which are generally 12 feet high by 25 feet wide, are the most common type of billboard. Advertising copy for these posters consists of lithographed or silk-screened paper
sheets supplied by the advertiser that are pasted and applied like wallpaper to the face of the display, or single sheets of vinyl with computer-generated advertising copy that are wrapped around the structure. Standardized posters are concentrated
on major traffic arteries or on city streets and target pedestrian traffic
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 2,700 bulletins and wall displays and 2,400
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 2,400 alternative display sites.



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



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##### Table of Contents

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



|                                   |  |             |  |                |  |            |  |             
|---------------------------------- |  | ----------- |  | -------------- |  | ---------- |  | ------------
|Traditional Outdoor Display Market |  | Market Rank |  | # of Bulletins |  | # of Walls |  | # of Posters
|San Francisco                      |  | 4           |  |               |  | 28         |  |            
|Hartford                           |  | 50          |  | 338            |  |           |  | 857         
|Myrtle Beach                       |  | 164         |  | 727            |  |           |  | 424         
|Northern Colorado                  |  | NA          |  | 925            |  |           |  | 658         
|Missouri                           |  | NA          |  | 696            |  |           |  | 22          
|All other                          |  | NA          |  | 4              |  |           |  | 448         
|                                   |  |             |  |                |  |            |  |             
|Total                              |  |             |  | 2,690          |  | 28         |  | 2,409       
|                                   |  |             |  |                |  |            |  |             



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



|                           |  |              |  |                       |  |              
|-------------------------- |  | ------------ |  | --------------------- |  | -------------
|Alternative Display Market |  | Market Rank  |  | # of Retail Locations |  | # of Displays
|New York                   |  | 1            |  | 231                   |  | 797          
|Los Angeles                |  | 2            |  | 244                   |  | 762          
|Chicago                    |  | 3            |  | 139                   |  | 433          
|San Francisco              |  | 4            |  | 67                    |  | 176          
|Dallas                     |  | 5            |  | 97                    |  | 336          
|Philadelphia               |  | 6            |  | 118                   |  | 259          
|Houston                    |  | 7            |  | 82                    |  | 391          
|Washington, D.C.           |  | 8            |  | 55                    |  | 66           
|Boston                     |  | 9            |  | 81                    |  | 147          
|Detroit                    |  | 10           |  | 167                   |  | 591          
|Atlanta                    |  | 11           |  | 75                    |  | 245          
|Miami                      |  | 12           |  | 55                    |  | 91           
|Puerto Rico                |  | 13           |  |                      |  |             
|Seattle                    |  | 14           |  | 133                   |  | 522          
|Phoenix                    |  | 15           |  | 38                    |  | 67           
|Minneapolis/St. Paul       |  | 16           |  | 356                   |  | 3,066        
|San Diego                  |  | 17           |  | 30                    |  | 37           
|Nassau-Suffolk             |  | 18           |  |                      |  |             
|St. Louis                  |  | 19           |  | 66                    |  | 177          
|Baltimore                  |  | 20           |  | 44                    |  | 98           
|                           |  |              | 
|All Other                  |  | 21 or higher |  | 367                   |  | 900          
|                           |  |              |  |                       |  |              
|Total                      |  |              |  | 2,445                 |  | 9,161        
|                           |  |              |  |                       |  |              



Advertising Sales



Local advertising currently comprises approximately 80% 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, San Francisco 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.



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##### Table of Contents

As of December 31, 2004, the average occupancy rate of our bulletins across all of our traditional outdoor markets was
approximately 76%. 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 2004, no single advertising customer accounted for more than 10% of our consolidated outdoor advertising or total revenues.



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.



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 the copy for their advertisements. We use two or three printers in each market to produce vinyl and posters for our local customers. We have an in-house art department based in Minneapolis that produces copy for
alternative displays for local advertisers. We obtain frames produced specifically for our displays from third party vendors and then assemble the displays in Minneapolis and ship them to the alternative display sites for installation.



We generally employ third party contractors to paint and/or 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 poster and at our alternative display sites 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, 2005, we had a staff of 626 full-time employees and 355 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 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.



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##### Table of Contents

Competition



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



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, 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;
| | - |  | ------------------------------------------------------------------



| |  |  | new consumer products, such as portable digital audio players;
| | - |  | --------------------------------------------------------------



| |  |  | 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 over the air 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 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 our
strong emphasis on developing local relationships and expertise will enable us to secure attractive real estate sites at competitive rates and to develop long-term advertising relationships in each of our markets.



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##### Table of Contents

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 (including aspects of station programming, e.g., indecency, obscenity,
childrens programming, political advertising) and employment practices of stations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The FCC is authorized to impose penalties for violations of its rules or the Communications Act. Penalties can include 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.



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, the application must be placed on public notice for not less than 30 days. (In the FCCs view, a substantial change in ownership occurs when one or more parties previously unapproved by the FCC with
the respect to the licenses in question propose to acquire, in the aggregate, 50% or more of a licensees ownership.) During that 30-day period, 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 or review 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.



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##### Table of Contents

Multiple Ownership Rules.The Communications Act and FCC rules and policies impose specific limits
on the number of commercial radio stations in a single market in which an entity may hold a cognizable or attributable interest. For purposes of these rules and policies, persons and entities said to hold
attributable or cognizable interests include officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the companys voting ownership interests. In addition, certain passive
investors are attributable if they hold 20.0% or more of the corporate licensee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 in the same way as limited partnerships for purposes
of attribution.



In June, 2003, the FCC adopted new multiple ownership rules
and policies governing the commercial radio and television industries. On review by the U.S. Court of Appeals for the Third Circuit (Court of Appeals), those rules and policies were affirmed in part and remanded in part. While the FCC
has not sought further review of the decision of the Court of Appeals, a number of private parties have asked the United States Supreme Court to review it. Pending a decision by the Supreme Court and/or further action by the FCC in response to the
remand from the Court of Appeals, the Court of Appeals has permitted the FCC to implement some of the rules which the FCC adopted in June, 2003, although the Court of Appeals has also stayed the effectiveness of other aspects of the FCCs June,
2003 decision.



The FCCs multiple ownership 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 limits currently in effect
for Arbitron-designated Metro markets are as follows:



| |  |  | in markets in which BIA reports 45 or more home commercial and noncommercial full-service radio stations, ownership is limited to eight commercial stations, no more than
five of which can be either AM or FM;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in markets in which BIA reports 30 to 44 home commercial and noncommercial full-service radio stations, ownership is limited to seven commercial stations, no more than
four of which can be either AM or FM;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in markets in which BIA reports 15 to 29 home commercial and noncommercial full-service radio stations, ownership is limited to six commercial stations, no more than
four of which can be either AM or FM; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in markets in which BIA reports 14 or fewer home commercial and noncommercial 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In markets not designated as Metro markets by Arbitron, the FCC utilizes a contour-overlap methodology for identifying markets for purpose of applying the
numerical limits set out above. This contour-overlap methodology is interim and will likely be in effect at least until the FCC completes a rulemaking proceeding (in MB Docket No. 03-130) which it initiated in 2003 in connection with its review of
the ownership rules.



Prior to June, 2003, the FCC utilized a 50/70
revenue test to identify those applications which proposed radio transactions raising concerns about excessive marketplace dominance. Under that test, if an application (a) proposed a radio station combination having 50% or more of the revenue in an
Arbitron metropolitan market or (b) would have resulted in two station owners controlling stations having 70% or more of the revenue in an Arbitron metropolitan market, then that application would be placed on public notice with a special notation
inviting public comment on the applications impact on competition and diversity in the market. Action on applications so identified tended to be delayed significantly. As a result of the Third Circuit decision, the stay imposed by the Third
Circuit, and the partial lifting of that stay, the current status of the 50/70 revenue test is unclear.



The television ownership rules presently in effect permit common ownership of up to two television stations in the same Designated Market Area (DMA) as that
term is defined by Nielsen Media Research or any successor entity, provided that:



| |  |  | at least one of the stations is not ranked among the top four stations in the DMA based on the most recent all-day audience share as measured by Nielsen Media Research or by any
comparable, accepted audience ratings service; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | at least eight independently-owned and operating, full-power commercial and noncommercial television stations would remain, post-consummation, in the DMA in which the stations which
would be commonly-owned are located.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The radio/television
cross-ownership rule presently in effect 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 and operating full-power television station (a) which is located in the DMA of the commonly-owned television stations community of license and (b)
whose Grade B signal contour overlaps the Grade B signal contour of the commonly-owned television station(s); and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each independently owned and operating primary radio station (a) in the radio metro market of the community of license of either the commonly-owned television station(s) or the
commonly-owned radio station(s) or (b) located out-of-market but with a minimum share as reported by Arbitron or another nationally-recognized audience rating service; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each daily newspaper that has a circulation exceeding 5.0% of the households in the market; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | cable television service if generally available in the DMA (cable television counts as only one voice regardless of the number of individual cable systems in the DMA).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 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 media 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 asset value (i.e., all debt plus all equity). A major programming supplier includes any programming supplier that provides more than 15.0% of the
commonly-owned stations weekly programming hours. A same-market media 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.



For more than a decade, the FCC has permitted radio station licensees to enter into agreements pursuant to which those licensees make their stations facilities
available to other licensees for the broadcast of programming and advertising. Such arrangements are familiarly known by various names, including local marketing agreements (LMAs) or time brokerage agreements (TBAs). While
these agreements may take varying forms, under a typical LMA or TBA, separate and distinct radio licensees enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with FCCs rules
and policies. One typical form of LMA or TBA is a programming agreement between two separately-owned radio stations serving a common service area, pursuant to which the licensee of one station (a) provides substantial portions of the programming to
be broadcast on the other licensees station (subject to ultimate editorial and other controls which remain with the latter licensee) and (b) sells advertising time during those program segments.



The FCCs rules provide that a radio licensee 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 an LMA or TBA 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 an LMA or TBA where the brokered and brokering stations which it owns or programs serve substantially the same area.



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Joint sales agreements (JSAs) permit broadcasters to sell advertising time on stations owned by others. Under
the multiple ownership rules presently in effect, a JSA constitutes an attributable media interest in a station (Station A) if, pursuant to the JSA, an entity with a cognizable interest in a second station in Station As market sells more than
15.0% of the weekly advertising time on Station A.



As noted above, the
FCCs multiple ownership rules are in a state of flux. While some aspects of the FCCs June, 2003 decision modifying those rules have been upheld on appeal, other aspects have been remanded to the FCC by the Third Circuit for further
explanation. Pending the completion of remand proceedings before the FCC, the Third Circuit has stayed the effectiveness of some aspects of the June, 2003 rules, but has allowed other aspects to take effect. Further, a number of parties have sought
review of the Third Circuit decision by the Supreme Court.



While it is
impossible to predict how the FCC, the Third Circuit, or the Supreme Court might eventually resolve the outstanding questions concerning the multiple ownership rules, the new radio market definitions which have been implemented and are currently in
effect 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 of
broadcast licenses to, or the 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 limitations on alien ownership have been held by the FCC to apply to non-corporate business structures (e.g., partnerships, LLCs) as well. 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 maintain records demonstrating each stations most significant treatment of community issues in the stations programming. In August, 2003, the FCC commenced an inquiry into the
extent to which the broadcasting industry in general addresses local matters.



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, the broadcast of obscene, indecent or profane materials, and technical operations, including limits on human
exposure to radio frequency radiation.



In November 2002, the FCC adopted rules
prohibiting employment discrimination by broadcast stations on the basis of race, religion, color, national origin and gender; and requiring broadcasters to 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 and to maintain detailed records of their recruitment efforts. 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;
| | - |  | ----------------------------------------------------------------



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| |  |  | increased penalties for the broadcast of obscene, indecent and/or profane material;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | modified EEO requirements, including possibly extending existing recruitment and reporting requirements to include part-time employees;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 are believed by some to 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 are not
permitted to own more than one station nationwide during the initial two-year period. After the initial two-year period, entities are allowed to own up to five stations nationwide, and after three years, the limit is 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 are not 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. While the
LPFM service has thus far been required to protect full-service FM stations operating on third adjacent frequencies to LPFM stations, legislation has been introduced which would, if enacted, eliminate such third-adjacent protection requirements. We
cannot predict the likelihood that such legislation will be enacted.



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.



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.



The FCC has also authorized the initiation of satellite-based digital audio radio service
pursuant to which audio programming is transmitted, on a regional or nationwide basis, from earth-orbiting satellites to subscribers receivers. Two companies are presently providing such service. The FCC is considering the extent to which such
operators may utilize terrestrial repeater stations in support of their satellite operations. We cannot predict the impact of the satellite service on our business.



The foregoing is intended to provide only a summary of certain regulatory issues arising under the Communications Act and the rules and
policies of the FCC. This does not purport to be comprehensive. Proposals to add or modify rules, regulations and/or policies are pending and under consideration before Congress and the FCC from time to time. Moreover, the matters addressed above
are or may become the subject of litigation before the courts. We cannot predict the outcome of any such legislative, regulatory or judicial proceedings or their likely impact on our business.



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



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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.



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. Recent filings with the Securities and Exchange Commission may
be found at their website: www.sec.gov.



ITEM 2. PROPERTIES



Our principal executive
offices are located at 6312 S. Fiddlers Green Circle, Suite 360E, Greenwood Village, 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.



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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 represented 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 $3.3 million. The arbitration award has been fully implemented.



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 2004.



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##### Table of Contents

PART II



ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



All outstanding shares of our common stock are held by our parent, NextMedia Group, Inc. As of March 22, 2005, 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 consolidated financial data, in thousands of dollars. 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, |        
|                                                                                         |  | 2000                    |         |   | 2001 |   |         | 2002 |  |   | 2003    |   |  | 2004 |        
|                                                                                         |  | (in thousands)          |        
|Operating Data:                                                                          |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net revenue                                                                              |  | $                       | 39,820  |   |      | $ | 71,721  |      |  | $ | 91,330  |   |  | $    | 106,959 |   |  | $ | 115,174 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 25,913  |   |      |   | 46,819  |      |  |   | 59,330  |   |  |      | 66,532  |   |  |   | 71,302  |  
|Corporate expenses                                                                       |  |                         | 5,475   |   |      |   | 8,834   |      |  |   | 8,116   |   |  |      | 8,518   |   |  |   | 8,452   |  
|Depreciation and amortization                                                            |  |                         | 4,325   |   |      |   | 11,053  |      |  |   | 5,523   |   |  |      | 10,291  |   |  |   | 14,833  |  
|Local marketing agreement fees(1)                                                        |  |                         | 2,913   |   |      |   | 20      |      |  |   |        |   |  |      | 42      |   |  |   | 708     |  
|Impairment loss                                                                          |  |                         |        |   |      |   |        |      |  |   | 42,956  |   |  |      |        |   |  |   | 31,624  |  
|                                                                                         |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating income (loss)                                                                  |  |                         | 1,194   |   |      |   | 4,995   |      |  |   | (24,595 | ) |  |      | 21,576  |   |  |   | (11,745 | )
|Interest expense, net                                                                    |  |                         | 3,805   |   |      |   | 15,815  |      |  |   | 22,444  |   |  |      | 22,369  |   |  |   | 24,460  |  
|Loss on extinguishment of debt                                                           |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | 1,541   |  
|Other (income) expense, net                                                              |  |                         | 38      |   |      |   | (574    | )    |  |   | (1,370  | ) |  |      | (20,764 | ) |  |   | (3,490  | )
|                                                                                         |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income (loss) from continuing operations before income taxes                             |  |                         | (2,649  | ) |      |   | (10,246 | )    |  |   | (45,669 | ) |  |      | 19,971  |   |  |   | (34,256 | )
|Provisions for income taxes                                                              |  |                         |        |   |      |   |        |      |  |   | 4,311   |   |  |      | 10,464  |   |  |   | (1,440  | )
|                                                                                         |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income (loss) from continuing operations                                                 |  |                         | (2,649  | ) |      |   | (10,246 | )    |  |   | (49,980 | ) |  |      | 9,507   |   |  |   | (32,816 | )
|(Income) loss from discontinued operations including loss on disposition                 |  |                         | 189     |   |      |   | 662     |      |  |   | 3,475   |   |  |      | (1      | ) |  |   |        |  
|                                                                                         |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                       | (2,838  | ) |      | $ | (10,908 | )    |  | $ | (53,455 | ) |  | $    | 9,508   |   |  | $ | (32,816 | )
|                                                                                         |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance Sheet Data (at end of period):                                                   |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                                                                |  | $                       | 836     |   |      | $ | 30,501  |      |  | $ | 14,446  |   |  | $    | 707     |   |  | $ | 12,260  |  
|Working capital                                                                          |  |                         | 2,736   |   |      |   | 28,149  |      |  |   | 12,225  |   |  |      | (1,156  | ) |  |   | 11,464  |  
|Intangibles assets, net                                                                  |  |                         | 284,666 |   |      |   | 408,794 |      |  |   | 388,901 |   |  |      | 452,746 |   |  |   | 437,980 |  
|Total assets                                                                             |  |                         | 327,067 |   |      |   | 506,537 |      |  |   | 491,980 |   |  |      | 543,377 |   |  |   | 565,860 |  
|Long-term debt                                                                           |  |                         | 106,948 |   |      |   | 197,102 |      |  |   | 197,276 |   |  |      | 199,634 |   |  |   | 232,449 |  
|Stockholders equity                                                                     |  |                         | 208,382 |   |      |   | 282,631 |      |  |   | 257,386 |   |  |      | 294,055 |   |  |   | 259,185 |  

---

|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



The following information should be read in conjunction with Item 6. Selected Financial Dataand Item 8. Consolidated Financial
Statements in Parts II and IV of this Annual Report on Form 10-K.



Introduction



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 small, 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 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 SFAS 141. 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, including intangible assets acquired is recorded as goodwill. Determining the fair



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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, customer turnover, 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, and non-compete agreements, 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 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.



Income Taxes. We account for
income taxes in accordance with SFAS 109. 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 provide a full valuation allowance against our net deferred tax asset, excluding the
deferred tax liability for amortization of indefinite-lived intangibles including goodwill, because we believe the realization of those tax benefits is not more likely than not. We record additional deferred tax expense throughout each period to
establish a valuation allowance against net operating loss carry-forwards generated by amortization of indefinite-lived intangibles including goodwill that is deductible for tax purposes, but is no longer amortized in the financial statements. The
resulting deferred tax liability on our balance sheet therefore relates primarily to the difference between the book and tax basis of indefinite-lived intangibles including goodwill, which will not reverse over time unless impairment charges are
recognized on indefinite-lived intangibles including goodwill, or the indefinite-lived intangible assets or assets supporting the goodwill are sold.



Factors Affecting Comparability



We commenced operations in late-1999. 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.



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##### Table of Contents

Results of Operations



The following tables present certain summary historical financial data in thousands of 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,
|                                                                                         |  | 2002                    |         |   | % |       | 2003 |   |         | % |  | 2004  |  |   | %      
|Consolidated Operating Data:                                                             |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net revenue                                                                              |  | $                       | 91,330  |   |   | 100.0 |      | $ | 106,959 |   |  | 100.0 |  | $ | 115,174 |   |  | 100.0
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 59,330  |   |   | 65.0  |      |   | 66,532  |   |  | 62.2  |  |   | 71,302  |   |  | 61.9 
|Corporate expenses                                                                       |  |                         | 8,116   |   |   | 8.9   |      |   | 8,518   |   |  | 8.0   |  |   | 8,452   |   |  | 7.3  
|Depreciation and amortization                                                            |  |                         | 5,523   |   |   | 6.0   |      |   | 10,291  |   |  | 9.6   |  |   | 14,833  |   |  | 12.9 
|Local marketing agreement fees                                                           |  |                         |        |   |   |      |      |   | 42      |   |  |      |  |   | 708     |   |  | 0.1  
|Impairment loss                                                                          |  |                         | 42,956  |   |   | NM    |      |   |        |   |  | NM    |  |   | 31,624  |   |  | NM   
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Operating income (loss)                                                                  |  |                         | (24,595 | ) |   | NM    |      |   | 21,576  |   |  | NM    |  |   | (11,745 | ) |  | NM   
|Interest expense, net                                                                    |  |                         | 22,444  |   |   |       |      |   | 22,369  |   |  |       |  |   | 24,460  |   |  |      
|Loss on extinguishment of debt                                                           |  |                         |        |   |   |       |      |   |        |   |  |       |  |   | 1,541   |   |  |      
|Other (income), net                                                                      |  |                         | (1,370  | ) |   |       |      |   | (20,764 | ) |  |       |  |   | (3,490  | ) |  |      
|Provision for income taxes                                                               |  |                         | 4,311   |   |   |       |      |   | 10,464  |   |  |       |  |   | (1,440  | ) |  |      
|Discontinued operations                                                                  |  |                         | 3,475   |   |   |       |      |   | (1      | ) |  |       |  |   |        |   |  |      
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net income (loss)                                                                        |  | $                       | (53,455 | ) |   |       |      | $ | 9,508   |   |  |       |  | $ | (32,816 | ) |  |      
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Radio Broadcasting Operating Data:                                                       |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net revenue                                                                              |  | $                       | 64,064  |   |   | 100.0 |      | $ | 72,876  |   |  | 100.0 |  | $ | 78,894  |   |  | 100.0
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 40,065  |   |   | 62.5  |      |   | 44,432  |   |  | 61.0  |  |   | 47,482  |   |  | 60.2 
|Depreciation and amortization                                                            |  |                         | 3,523   |   |   | 3.9   |      |   | 5,974   |   |  | 8.2   |  |   | 5,009   |   |  | 6.3  
|Impairment loss                                                                          |  |                         |        |   |   |      |      |   |         |   |  |       |  |   |         |   |  |      
|                                                                                         |  |                         |        |   |   |      |      |   | 10,085  |   |  | NM    |  |   |         |   |  |      
|Local marketing agreement fees                                                           |  |                         |        |   |   |      |      |   | 42      |   |  |      |  |   | 708     |   |  | 0.1  
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Segment operating income                                                                 |  | $                       | 20,476  |   |   | 32.0  |      | $ | 22,428  |   |  | 30.8  |  | $ | 15,610  |   |  | NM   
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Outdoor Advertising Operating Data:                                                      |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Net revenue                                                                              |  | $                       | 27,266  |   |   | 100.0 |      | $ | 34,083  |   |  | 100.0 |  | $ | 36,280  |   |  | 100.0
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                         | 19,265  |   |   | 70.7  |      |   | 22,100  |   |  | 64.8  |  |   | 23,820  |   |  | 65.7 
|Depreciation and amortization                                                            |  |                         | 2,000   |   |   | 7.3   |      |   | 4,317   |   |  | 12.7  |  |   | 9,824   |   |  | 27.1 
|Impairment loss                                                                          |  |                         | 42,956  |   |   | NM    |      |   |        |   |  |      |  |   | 21,539  |   |  | NM   
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|Segment operating income (loss)                                                          |  | $                       | (36,955 | ) |   | NM    |      | $ | 7,666   |   |  | 22.5  |  | $ | (18,903 | ) |  | NM   
|                                                                                         |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      
|NM  Not Meaninfgul                                                                      |  |                         |         |   |   |       |      |   |         |   |  |       |  |   |         |   |  |      



Comparison of Fiscal Year 2004 to
Fiscal Year 2003



Net Revenue.Consolidated net revenue increased
$8.2 million to $115.2 million in 2004 from $107.0 million in 2003. Radio net revenue increased $6.0 million to $78.9 million in 2004 from $72.9 million in 2003. Outdoor advertising net revenue increased $2.2 million to $36.3 million in 2004 from
$34.1 million in 2003. Net revenue increased $4.9 million due to acquisitions, net of dispositions, with the remaining $3.3 million increase attributable to organic growth in the assets that we owned and operated at December 31, 2004. Of the $3.3
million of organic growth, $2.8 million was related to the radio division and, $500,000 was related to the outdoor division. We expect 2005 net revenue to exceed 2004 net revenues due to continued acquisition activity and organic growth.



Market Level Expenses, exclusive of depreciation and amortization.Consolidated
operating expenses increased $4.8 million to $71.3 million in 2004 from $66.5 million in 2003. Radio operating expenses increased $3.1 million to $47.5 million in 2004 from $44.4 million in 2003. Outdoor advertising operating expenses increased $1.7
million to $23.8 million in 2004 from $22.1 million in 2003. These increases were attributable primarily to our completion of acquisitions in 2003 and 2004. As a percentage of net revenue, consolidated operating expenses decreased from 62.2% to
61.9% because revenue growth did not require a proportionate increase in expenses.



Corporate Expenses. Corporate expenses remained constant at $8.5 million in both 2004 and 2003. As a percentage of net revenue, corporate expenses declined from 8.0% to 7.3% because we did not add corporate costs in connection with
our acquisitions.



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Depreciation and Amortization. Consolidated depreciation and amortization increased $4.5 million to $14.8 million
in 2004 from $10.3 million in 2003. Radio depreciation and amortization decreased $1.0 million to $5.0 million in 2004 from $6.0 million in 2003. Outdoor advertising depreciation and amortization increased $5.5 million to $9.8 million in 2004 from
$4.3 million in 2003. The decrease in radio depreciation and amortization was attributable to the 2003 dispositions which resulted in fewer depreciable fixed assets and definite lived intangibles which are amortized over their useful lives. The
increase in outdoor depreciation and amortization was attributable to the 2004 acquisitions, including two exchange transactions, which significantly changed the components of long lived assets resulting in a higher level of definite-lived assets
subject to depreciation and amortization.



Impairment loss.During 2004,
we recognized impairment losses totaling $31.6 million. In the third quarter of 2004, we performed an interim impairment analysis of our alternative advertising market because year-to-date operating results indicated that a impairment may have
occurred. As a result of deteriorating business conditions, we recorded a $17.0 million impairment loss to reduce the carrying value of the markets goodwill to its estimated fair value. In the fourth quarter of 2004, we performed our annual
evaluation of goodwill and indefinite-lived intangibles pursuant to SFAS 142. As a result of this evaluation, we recorded a $14.6 million impairment loss to reduce the carrying value of certain markets assets to their estimated fair values.
Approximately, $10.1 million of the fourth quarter impairment loss in 2004 related to the carrying values of FCC licenses in certain of our radio markets which have experienced growth rates below expectations with the balance of the fourth quarter
impairment loss relating to the carrying value of advertising permits ($3.7 million) and goodwill ($775,000) in certain outdoor advertising markets where operating results have not met expectations.



Interest Expense and Other Income Net.Interest expense, net, increased $2.1 million
to $24.5 million in 2004 from $22.4 million in 2003 due to additional indebtedness incurred in connection with our acquisitions. Other income, net decreased to $3.5 million in 2004 from $20.8 million in 2003 due to the absence in 2004 of significant
gains on asset sales during 2003, including $18.9 million on the sale of station WJTW-FM and $1.7 million on the sale of station WAIT-FM.



Income Tax. We expect that our deferred tax liabilities will not reverse within our net operating loss carry-forward period. Accordingly, we record deferred tax
expense throughout the year to establish a valuation allowance against net operating loss carry-forwards generated by amortization of indefinite-lived intangibles and goodwill that is deductible for tax purposes, but is no longer amortized as a
result of SFAS 142.



This deferred tax expense was partially offset by the tax
benefit associated with the $31.6 million impairment loss. As a result of the impairment loss, a portion of the Companys deferred tax liability, resulting from the difference between book and tax amortization of indefinite-lived intangibles
including goodwill was reversed. Consequently, we recorded a deferred tax benefit of $5.4 million related to the impairment loss.



Net Income (loss). Consolidated net loss increased $42.3 million to $32.8 million in 2004 from $9.5 million of net income in 2003 as a result of the factors
described above.



Comparison of Fiscal Year 2003 to Fiscal Year 2002



Net Revenue.Consolidated net revenue increased $15.7 million to
$107.0 million in 2003 from $91.3 million in 2002. Radio net revenue increased $8.8 million to $72.9 million in 2003 from $64.1 million in 2002. Outdoor advertising net revenue increased $6.8 million to $34.1 million in 2003 from $27.3 million in
2002. Net revenue 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.



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 revenue, consolidated operating expenses decreased from 65.0% to 62.2% because revenue growth did not require a proportionate increase in
expenses.



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 revenue, corporate expenses declined from 8.9% to 8.0%
because we did not add significant corporate costs in connection with our acquisitions.



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Depreciation and Amortization. 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.



Impairment loss.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 Expense and Other Income 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 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. We expect that our deferred tax liabilities will 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 indefinite-lived intangibles and goodwill and that is deductible for tax
purposes, but is no longer amortized as a result of SFAS 142.



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.



Liquidity and Capital Resources



Sources of
Funds



Our cash and cash equivalents balance at December 31, 2004 was
approximately $12.3 million compared to $707,000 at December 31, 2003. The increase was due primarily to borrowings under our Revolving Credit Facility to fund our January 1, 2005 interest payment on our senior subordinated notes.



Net cash provided by (used in) operating activities was $7.8 million and $6.9 million in 2004
and 2003, 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 2003 and 2004.



Net cash provided by financing activities was $32.0 million and $28.7 million in 2004 and
2003, respectively. Net cash used in investing activities was $28.3 million and $49.4 million in 2004 and 2003, respectively. These cash flows primarily reflect net borrowings, capital contributions and expenditures for acquisitions and proceeds
from dispositions.



As of December 31, 2004 we had net operating loss carry
forwards of approximately $100.5 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, 2004, 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 $234.5 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.



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On February 1, 2005 we closed our previously announced acquisition of five radio stations in Wilmington, North Carolina
for $24.5 million in cash funded under our Revolving Credit Facility.



Credit Facility and Senior Subordinated Notes



On April 9,
2004, we terminated our existing senior credit facility and entered into a new $75.0 million senior credit facility (the Revolving Credit Facility) which matures five years from the date thereof. Included within the Revolving Credit
Facility is $30.0 million available to us for the issuance of letters of credit. At December 31, 2004, $1.3 million of letters of credit were outstanding. Amounts available for borrowing under the Revolving Credit Facility are determined based on
certain leverage requirements.



The Revolving Credit Facility contains
customary restrictive covenants that, among other things and with certain exceptions, limit our ability to incur additional indebtedness and liens in connection therewith, pay dividends and make capital expenditures above specified limits. Under the
Revolving 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, 2004, we were in compliance with all of these covenants. After taking into account our most restrictive covenant, as of March 1, 2005, we had approximately $19.0 million of borrowing capacity under our Revolving Credit Facility.



Borrowings under the Revolving Credit Facility bear interest (a) in the case of loans with an
interest rate based on the index rate (the Index Rate), the Index Rate plus an applicable margin or (b) in the case of loans with an interest rate based on the libor rate (the LIBOR Rate), the LIBOR Rate plus an applicable
margin. The applicable margins are based on our total leverage ratio. On February 25, 2005 we amended the Revolving Credit Facility to reduce the applicable margins, and as a result, reduced our interest payments under the Revolving 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, 2004, we were in compliance with all of these covenants.



Capital Expenditures



Capital expenditures in the year ended December 31, 2004 increased to $6.5 million from approximately $5.0 million for the year ended December 31, 2003 due to
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, 2003 and 2004. Recurring capital
expenditures are related to the maintenance of our existing broadcast facilities and outdoor structures that extend the lives of the assets. 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, 2003 |       | Twelve Months Ended December 31, 2004
|                           |  | (in thousands)                       
|Recurring                  |  | $                                     | 2,019 |                                       | $ | 3,267
|Non-recurring              |  |                                       | 517   |                                       |   | 2,029
|Revenue producing          |  |                                       | 2,506 |                                       |   | 1,201
|                           |  |                                       |       |                                       |   |      
|Total capital expenditures |  | $                                     | 5,042 |                                       | $ | 6,497
|                           |  |                                       |       |                                       |   |      



Commitments and
Contractual Obligations



The following table sets forth future payments due
under our debt and lease obligations as of December 31, 2004 (in thousands):



|                    |  |                           |        |                                     |   |                                |  |       |        |  |   |        
|------------------- |  | ------------------------- | ------ | ----------------------------------- | - | ------------------------------ |  | ----- | ------ |  | - | -------
|                    |  | Revolving Credit Facility |        | 103/4%
SeniorSubordinated Notes (1) |   | Non-CancelableOperating Leases |  | Total
|2005                |  | $                         |       |                                     | $ |                               |  | $     | 4,823  |  | $ | 4,823  
|2006                |  |                           |       |                                     |   |                               |  |       | 4,221  |  |   | 4,221  
|2007                |  |                           |       |                                     |   |                               |  |       | 3,366  |  |   | 3,366  
|2008                |  |                           |       |                                     |   |                               |  |       | 2,980  |  |   | 2,980  
|2009 and thereafter |  |                           | 34,500 |                                     |   | 200,000                        |  |       | 17,036 |  |   | 251,536
|                    |  |                           |        |                                     |   |                                |  |       |        |  |   |        
|                    |  | $                         | 34,500 |                                     | $ | 200,000                        |  | $     | 32,426 |  | $ | 266,926
|                    |  |                           |        |                                     |   |                                |  |       |        |  |   |        

---

|(1) | In each year from 2005 through 2010, we will make semi-annual cash interest payments of $10,750.
|--- | ------------------------------------------------------------------------------------------------



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



Inflation



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



Recent Accounting Pronouncements



The SEC staff made Staff Announcement No. D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill (D-108), at the September 2004
meeting of the Emerging Issues Task Force (EITF). D-108 states that the residual method should no longer be used to value intangible assets other than goodwill. Rather, a direct method should be used to determine the fair value of all
intangible assets required to be recognized under Statement of Financial Accounting Standards No. 141, Business Combinations. Registrants who have applied the residual method to the valuation of intangible assets for purposes of impairment
testing under Statement of Financial Accounting Standards No 142, Goodwill and Other Intangible Assets, shall perform an impairment test using a direct value method on all intangible assets that were previously valued using the residual
method by no later than the beginning of their first fiscal year beginning after December 15, 2004. The adoption of Staff Announcement No. D-108 did not have an impact on the Companys financial position or results of operation.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



At December 31, 2004, approximately 15% of our long-term debt bears interest at variable rates. Accordingly, our earnings are affected by changes in interest rates. Assuming the current level of borrowings at variable
rates and assuming a two percentage point change in the years average interest rate under these borrowings, it is estimated that our 2004 interest expense net income would have changed by $690,000. In the event of an adverse change in interest
rates, management may take actions to further mitigate its exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, this interest rate analysis assumes no such actions. Further, the analysis does not
consider the effects of the change in the level of overall economic activity that could exist in such an environment.



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 became a party to an interest rate swap (the Swap) with an
aggregate notional amount of $100,000 in March 2005. The Swap becomes effective June 30, 2006 and expires on December 31, 2009. Pursuant to the swap, we will pay a fixed rate of interest on the notional amount and receive a floating rate of interest
on the notional amount.



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.



24



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There has been no change in our internal control over financial reporting that has materially affected or could
materially affect our internal control over financial reporting subsequent to the date of their evaluation in connection with the preparation of this annual report on Form 10-K.



ITEM 9B. OTHER INFORMATION



|None | 
|---- | 



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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       |  | 58  |  | Director, Executive Chairman of the Board                                    
|Steven Dinetz        |  | 58  |  | Director, President and Chief Executive Officer                              
|Sean Stover          |  | 42  |  | Senior Vice President and Chief Financial Officer                            
|Samuel Skip Weller |  | 49  |  | President and Co-Chief Operating Officer of the Radio Division               
|Jeffrey Dinetz       |  | 46  |  | Executive Vice President and Co-Chief Operating Officer of the Radio Division
|Jim Matalone         |  | 43  |  | President and Chief Operating Officer of the Outdoor Division                
|Schuyler Hansen(1)   |  | 37  |  | Chief Accounting Officer, Treasurer and Assistant Secretary                  
|Matthew Leibowitz    |  | 54  |  | 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 was our Treasurer, Chief Accounting Officer and Assistant Secretary from
September 2001 to February 15, 2005. 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.

---

|(1) | Effective February 15, 2005, Mr. Hansen resigned his position as Treasurer, Chief Accounting
Officer and Assistant Secretary.
|--- | -----------------------------------------------------------------------------------------------------------------------------



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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 our
audit committee. Mr. McElwee is a General 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 have adopted a code of business conduct and ethics that applies to all employees, including our executive officers, and a supplemental
code of business conduct and ethics that applies only to our senior executive officers. A copy of each of these codes of ethics is posted on our website at www.nextmediagroup.net. In the event we make any amendments to, or grant any waivers of, a
provision of either code of ethics that applies to the principal executive officer, principal financial officer, or principal accounting officer that requires disclosure under applicable SEC rules, we intend to disclose such amendments or waiver and
the reasons therefore on our website.



ITEM 11. EXECUTIVE COMPENSATION



The following
table sets forth, for the year ended December 31, 2004, 2003 and 2002 the compensation paid to the chief executive officer and the other four most highly-paid executives in 2004. We have not granted any stock options.



|                                                                                             |      |                     |        |                       |                       |  |     |                       |  |        
|-------------------------------------------------------------------------------------------- | ---- | ------------------- | ------ | --------------------- | --------------------- |  | --- | --------------------- |  | -------
|Name and Principal Position                                                                  |      | Annual Compensation |        | All OtherCompensation
|                                                                                             | Year |                     | Salary |                       | Bonus                 | 
|Carl E. Hirsch Executive Chairman of the Board                                               |      | 200420032002        |        | $$$                   | 300,000300,000300,000 |  | $$$ |                    |  |     
|Steven Dinetz President and Chief Executive Officer                                          |      | 200420032002        |        | $$$                   | 300,000300,000300,000 |  | $$$ | 200,000             |  |     
|Sean Stover Senior Vice President and Chief Financial Officer                                |      | 200420032002        |        | $$$                   | 300,000287,500270,000 |  | $$$ | 175,000172,500175,000 |  |     
|Samuel Weller President and Co-Chief Operating Officer of the Radio Division                 |      | 200420032002        |        | $$$                   | 287,500287,500275,000 |  | $$$ | 100,00070,000175,000  |  |     
|Jeffrey Dinetz Executive Vice President and Co-Chief Operating Officer of the Radio Division |      | 200420032002        |        | $$$                   | 272,500272,500260,000 |  | $$$ | 80,00045,000160,000   |  |     



Each of our executive officers
historically has been subject to an employment agreement with us. We are currently negotiating renewals of those employment agreements. Although we expect to enter into these agreements in the near future, we may be unable to successfully complete
these negotiations.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



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. We have no equity compensation plans.



27



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The following table sets forth the amount of NextMedia Investors LLC membership interests beneficially owned by our
directors as of March 22, 2005. The address of our directors is c/o NextMedia Operating, Inc. 6312 S. Fiddlers Green Circle, Suite 360E, Greenwood Village, Colorado 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 eight 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 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:



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2003 |         | 2004
|Audit Fees(1)      |  | $    | 332,402 |      | $ | 368,282
|Audit-Related Fees |  |      |        |      |   |       
|Tax Fees(2)        |  |      | 138,218 |      |   | 186,967
|All Other Fees     |  |      |        |      |   |       
|                   |  |      |         |      |   |        
|Total              |  | $    | 470,620 |      | $ | 555,249
|                   |  |      |         |      |   |        

---

|(1) | Annual audit fees are for professional services rendered for the audit of our annual financial statements and reviews of quarterly financial statements. This category also includes
fees for assistance with and review of documents filed with the SEC, attest services, work done by tax professionals in connection with the audit or quarterly reviews, and accounting consultations and research work necessary to comply with generally
accepted auditing standards.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Tax fees are for professional services rendered for tax compliance, tax advice and tax planning, except those provided in connection with the audit or quarterly reviews.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NextMedias Audit Committee has considered whether
PricewaterhouseCoopers LLPs provision of non-audit services to NextMedia is compatible with maintaining PricewaterhouseCoopers LLPs independence.



The Audit Committee pre-approves all audit and permitted non-audit services (including the fees and terms thereof) to be performed for NextMedia by its independent
auditor. The chairperson of the Audit Committee may represent the entire committee for the purposes of pre-approving permissible non-audit services, provided that the decision to pre-approve any service is disclosed to the Audit Committee no later
than its next scheduled meeting.



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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:
| | -- | ---------



|               |  |                                                                                                                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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 103/4% Senior Subordinated Notes due 2011.                                                                            
|               | 
|4.02*          |  | Form of 103/4% 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.                                           
|               | 
|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.                                                                                                 



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|               |  |                                                                                                                                                                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                   
|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.                                                                                                                                                                       
|               | 
|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.                                                                                                                                                                                 



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|               |  |                                                                                                                                                                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                          
|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.                                                                                                                                                                                   
|               | 
|10.43*         |  | 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.                                                                                                                       
|               | 
|10.47+         |  | Amended and Restated Credit Agreement, dated as of April 9, 2004, among NextMedia Operating, Inc., the other credit parties signatory thereto, the lenders signatory thereto, General Electric
Capital Corporation, as agent, and GECC Capital Markets Group, Inc., as lead arranger.
|               | 
|10.48+         |  | First Amendment to the Amended and Restated Credit Agreement, dated February 25, 2005, among NextMedia Operating, Inc., the other credit parties signatory thereto, the lenders signatory
thereto and General Electric Capital Corporation, as agent.                                
|               | 
|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 10, 2005, we filed a Current Report on Form 8-K announcing earnings results for the year ended December 31, 2004.



32



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##### Table of Contents

INDEX TO FINANCIAL STATEMENTS



NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



|                                                                                                     |  |     
|---------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                     |  | Page
|Report of Independent Registered Public Accounting Firm                                              |  | F-2 
|                                                                                                     | 
|Consolidated Balance Sheets as of December 31, 2003 and 2004                                         |  | F-3 
|                                                                                                     | 
|Consolidated Statements of Operations for the Years Ended December 31, 2002, 2003 and 2004           |  | F-4 
|                                                                                                     | 
|Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2002, 2003 and 2004 |  | F-5 
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004           |  | F-6 
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | F-7 



F-1



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and 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, 2004 and 2003, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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.



/S/ PRICEWATERHOUSECOOPERS LLP



Denver, Colorado

March 30, 2005



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



|                                                                                               |  |                  |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                               |  | December 31,2003 |         |   | December 31,2004 |  
|Assets                                                                                         |  |                  |         |   |                  |   |         |  
|Current assets:                                                                                |  |                  |         |   |                  |   |         |  
|Cash and cash equivalents                                                                      |  | $                | 707     |   |                  | $ | 12,260  |  
|Accounts receivable, net of allowance for doubtful accounts of $1,111 and $1,335, respectively |  |                  | 16,452  |   |                  |   | 16,287  |  
|Prepaid expenses and other current assets                                                      |  |                  | 3,209   |   |                  |   | 3,193   |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Total current assets                                                                           |  |                  | 20,368  |   |                  |   | 31,740  |  
|Property and equipment, net                                                                    |  |                  | 58,016  |   |                  |   | 87,574  |  
|Definite-lived intangibles, net                                                                |  |                  | 6,009   |   |                  |   | 23,879  |  
|Indefinite-lived intangibles, net                                                              |  |                  | 383,147 |   |                  |   | 369,044 |  
|Goodwill, net                                                                                  |  |                  | 63,590  |   |                  |   | 45,057  |  
|Other assets                                                                                   |  |                  | 12,247  |   |                  |   | 8,566   |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Total assets                                                                                   |  | $                | 543,377 |   |                  | $ | 565,860 |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Liabilities and Stockholders Equity                                                           |  |                  |         |   |                  |   |         |  
|Current liabilities:                                                                           |  |                  |         |   |                  |   |         |  
|Accounts payable                                                                               |  | $                | 1,699   |   |                  | $ | 1,725   |  
|Accrued expenses                                                                               |  |                  | 17,484  |   |                  |   | 16,472  |  
|Deferred revenue                                                                               |  |                  | 516     |   |                  |   | 917     |  
|Other                                                                                          |  |                  | 1,825   |   |                  |   | 1,162   |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Total current liabilities                                                                      |  |                  | 21,524  |   |                  |   | 20,276  |  
|Long-term debt                                                                                 |  |                  | 199,634 |   |                  |   | 232,449 |  
|Deferred income taxes                                                                          |  |                  | 26,858  |   |                  |   | 28,590  |  
|Other long-term liabilities                                                                    |  |                  | 1,306   |   |                  |   | 860     |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Total liabilities                                                                              |  |                  | 249,322 |   |                  |   | 282,175 |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Minority interest-variable interest entities (Note 2)                                          |  |                  |        |   |                  |   | 24,500  |  
|Commitments and contingencies (Note 9)                                                         |  |                  |         |   |                  |   |         |  
|                                                                                               |  |                 
|Stockholders equity:                                                                          |  |                  |         |   |                  |   |         |  
|Common stock, no par value, 3,000 shares authorized, issued and outstanding, respectively      |  |                  | 1       |   |                  |   | 1       |  
|Additional paid-in capital                                                                     |  |                  | 352,615 |   |                  |   | 350,561 |  
|Accumulated deficit                                                                            |  |                  | (58,561 | ) |                  |   | (91,377 | )
|                                                                                               |  |                  |         |   |                  |   |         |  
|Total stockholders equity                                                                     |  |                  | 294,055 |   |                  |   | 259,185 |  
|                                                                                               |  |                  |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                     |  | $                | 543,377 |   |                  | $ | 565,860 |  
|                                                                                               |  |                  |         |   |                  |   |         |  



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



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)



|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                       |  | Year ended December 31, |        
|                                                                                                                       |  | 2002                    |         |   | 2003 |   |         | 2004 | 
|Net revenue                                                                                                            |  | $                       | 91,330  |   |      | $ | 106,959 |      |  | $ | 115,174 |  
|                                                                                                                       |  |                         |        
|Market level expenses, exclusive of depreciation and amortization, shown separately below                              |  |                         | 59,330  |   |      |   | 66,532  |      |  |   | 71,302  |  
|Corporate expenses                                                                                                     |  |                         | 8,116   |   |      |   | 8,518   |      |  |   | 8,452   |  
|Depreciation and amortization                                                                                          |  |                         | 5,523   |   |      |   | 10,291  |      |  |   | 14,833  |  
|Local marketing agreement fees                                                                                         |  |                         |        |   |      |   | 42      |      |  |   | 708     |  
|Impairment loss                                                                                                        |  |                         | 42,956  |   |      |   |        |      |  |   | 31,624  |  
|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Total operating expenses                                                                                               |  |                         | 115,925 |   |      |   | 85,383  |      |  |   | 126,919 |  
|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating income (loss)                                                                                                |  |                         | (24,595 | ) |      |   | 21,576  |      |  |   | (11,745 | )
|Interest expense, net                                                                                                  |  |                         | 22,444  |   |      |   | 22,369  |      |  |   | 24,460  |  
|Loss on extinguishment of debt                                                                                         |  |                         |        |   |      |   |        |      |  |   | 1,541   |  
|Other (income), net                                                                                                    |  |                         | (1,370  | ) |      |   | (20,764 | )    |  |   | (3,490  | )
|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations before income taxes                                                           |  |                         | (45,669 | ) |      |   | 19,971  |      |  |   | (34,256 | )
|Provision (benefit) for income taxes                                                                                   |  |                         | 4,311   |   |      |   | 10,464  |      |  |   | (1,440  | )
|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations                                                                               |  |                         | (49,980 | ) |      |   | 9,507   |      |  |   | (32,816 | )
|Discontinued operations (Note 3):                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|(Income) loss from discontinued operations (including loss on disposal of $3,272 for the year ended December 31, 2002) |  |                         | 3,475   |   |      |   | (1      | )    |  |   |        |  
|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                                                      |  | $                       | (53,455 | ) |      | $ | 9,508   |      |  | $ | (32,816 | )
|                                                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  



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



F-4



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##### 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, 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                                         |  |             |  |                          |  |  |                    |        |   |       |   | 9,508   |   |  |   | 9,508   |  
|                                                   |  |              |  |                          |   |  |                    |         |   |       |   |         |   |  |   |         |  
|Balance, December 31, 2003                         |  | 3,000        |  |                          | 1 |  |                    | 352,615 |   |       |   | (58,561 | ) |  |   | 294,055 |  
|                                                   |  |              |  |                          |   |  |                    |         |   |       |   |         |   |  |   |         |  
|Distribution to Parent                             |  |             |  |                          |  |  |                    | (2,133  | ) |       |   |        |   |  |   | (2,133  | )
|Vesting of Parent Company Class B membership units |  |             |  |                          |  |  |                    | 79      |   |       |   |        |   |  |   | 79      |  
|Net loss                                           |  |             |  |                          |  |  |                    |        |   |       |   | (32,816 | ) |  |   | (32,816 | )
|                                                   |  |              |  |                          |   |  |                    |         |   |       |   |         |   |  |   |         |  
|Balance, December 31, 2004                         |  | 3,000        |  | $                        | 1 |  | $                  | 350,561 |   |       | $ | (91,377 | ) |  | $ | 259,185 |  
|                                                   |  |              |  |                          |   |  |                    |         |   |       |   |         |   |  |   |         |  



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



F-5



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)



|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                   |  | Year ended December 31, |        
|                                                                                                   |  | 2002                    |         |   | 2003 |   |         | 2004 | 
|Cash Flows From Operating Activities                                                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                                  |  | $                       | (53,455 | ) |      | $ | 9,508   |      |  | $ | (32,816 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                         |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                                      |  |                         | 5,572   |   |      |   | 10,291  |      |  |   | 14,833  |  
|Non-cash interest expense                                                                          |  |                         | 1,256   |   |      |   | 1,238   |      |  |   | 1,150   |  
|Provision for bad debt expense                                                                     |  |                         | 1,034   |   |      |   | 888     |      |  |   | 949     |  
|Non-cash compensation expense                                                                      |  |                         | 79      |   |      |   | 79      |      |  |   | 79      |  
|Other (gains) and losses, net                                                                      |  |                         | 3,321   |   |      |   | (21,848 | )    |  |   | (3,915  | )
|Unrealized (gain) loss on interest rate swap                                                       |  |                         | (1,853  | ) |      |   | 118     |      |  |   | 135     |  
|Loss on extinguishment of debt                                                                     |  |                         |        |   |      |   |        |      |  |   | 1,541   |  
|Provision for deferred income taxes                                                                |  |                         | 4,311   |   |      |   | 10,464  |      |  |   | (1,440  | )
|Impairment loss                                                                                    |  |                         | 42,956  |   |      |   |        |      |  |   | 31,624  |  
|Changes in assets and liabilities, net of effect of acquisitions:                                  |  |                         |         |   |      |   |         |      |  |   |         |  
|Accounts receivable                                                                                |  |                         | (2,143  | ) |      |   | (2,958  | )    |  |   | (784    | )
|Prepaid expenses and other assets                                                                  |  |                         | (214    | ) |      |   | (947    | )    |  |   | 866     |  
|Accounts payable                                                                                   |  |                         | (372    | ) |      |   | (878    | )    |  |   | (255    | )
|Accrued expenses                                                                                   |  |                         | (741    | ) |      |   | 1,090   |      |  |   | (3,720  | )
|Deferred revenue                                                                                   |  |                         | (54     | ) |      |   | (111    | )    |  |   | 401     |  
|Other current liabilities                                                                          |  |                         | 1       |   |      |   | 13      |      |  |   | (820    | )
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) operating activities                                                |  |                         | (302    | ) |      |   | 6,947   |      |  |   | 7,828   |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash Flows From Investing Activities                                                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Purchase of equipment                                                                              |  |                         | (6,441  | ) |      |   | (5,042  | )    |  |   | (6,497  | )
|Payments for acquisitions, net of cash acquired                                                    |  |                         | (38,449 | ) |      |   | (81,250 | )    |  |   | (23,826 | )
|Proceeds from sale of properties, net                                                              |  |                         | 1,581   |   |      |   | 36,908  |      |  |   | 421     |  
|Proceeds from termination of interest rate swaps                                                   |  |                         |        |   |      |   |        |      |  |   | 1,600   |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                                              |  |                         | (43,309 | ) |      |   | (49,384 | )    |  |   | (28,302 | )
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash Flows From Financing Activities                                                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Proceeds from revolving credit facilities                                                          |  |                         |        |   |      |   | 44,000  |      |  |   | 50,500  |  
|Repayment of revolving credit facilities                                                           |  |                         |        |   |      |   | (42,000 | )    |  |   | (18,000 | )
|Capital contributions from Parent, net                                                             |  |                         | 28,113  |   |      |   | 27,100  |      |  |   |        |  
|Payments of financing related costs                                                                |  |                         | (711    | ) |      |   | (90     | )    |  |   | (427    | )
|Other                                                                                              |  |                         | 154     |   |      |   | (312    | )    |  |   | (46     | )
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Net cash provided by financing activities                                                          |  |                         | 27,556  |   |      |   | 28,698  |      |  |   | 32,027  |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                         | (16,055 | ) |      |   | (13,739 | )    |  |   | 11,553  |  
|Cash and cash equivalents at beginning of period                                                   |  |                         | 30,501  |   |      |   | 14,446  |      |  |   | 707     |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                       | 14,446  |   |      | $ | 707     |      |  | $ | 12,260  |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Supplemental Cash Flow Information                                                                 |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash payments during the period for:                                                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Interest                                                                                           |  | $                       | 22,318  |   |      | $ | 22,969  |      |  | $ | 23,210  |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Taxes                                                                                              |  | $                       |        |   |      | $ |        |      |  | $ |        |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Non-Cash Investing and Financing Activities:                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Non-cash distribution to Parent                                                                    |  | $                       |        |   |      | $ |        |      |  | $ | 2,133   |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Fair value of outdoor advertising asset exchanges                                                  |  | $                       |        |   |      | $ |        |      |  | $ | 83,600  |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Book value of assets given up in outdoor advertising exchanges                                     |  | $                       |        |   |      | $ |        |      |  | $ | 81,538  |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Net assets consolidated per FIN 46-R (Note 2)                                                      |  | $                       |        |   |      | $ |        |      |  | $ | 24,500  |  
|                                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  



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



F-6



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NEXT 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 sixteen small, mid-sized and suburban markets and an outdoor advertising business within seven primary markets. The markets in which the Company operates are geographically spread across several states within the continental United
States, including California, Colorado, Connecticut, Delaware, Florida, Illinois, Michigan, Minnesota, Nevada, North Carolina, Ohio, Pennsylvania, South Carolina and Texas.



The Company is a 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.



Principles of Consolidation



The consolidated financial statements include all controlled subsidiaries.
In addition, the company reviews its relationships with other entities to assess if the Company is the primary beneficiary of a variable interest entity. If the determination is made that the Company is the primary beneficiary, then that entity is
consolidated. See Note 2 for additional discussion on the consolidation of variable interest entities. All material inter-company balances and transactions are eliminated in consolidation.



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.



Revenue Recognition



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 revenue recognition are recorded as deferred revenue.



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:



|                                              |  |                         |       |      |   |       |  |   |      
|--------------------------------------------- |  | ----------------------- | ----- | ---- | - | ----- |  | - | -----
|                                              |  | Year ended December 31,
|                                              |  | 2002                    |       | 2003 |   | 2004 
|Trade revenue, included in net revenue        |  | $                       | 5,238 |      | $ | 5,043 |  | $ | 5,678
|Trade expense, included in operating expenses |  |                         | 5,301 |      |   | 5,072 |  |   | 5,433



Cash Equivalents



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



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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:



|                                                |  |                         |       |   |      |   |        |      |  |   |       |  
|----------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                |  | Year ended December 31, |      
|                                                |  | 2002                    |       |   | 2003 |   |        | 2004 | 
|Allowance for doubtful accountsopening balance |  | $                       | 1,209 |   |      | $ | 1,248  |      |  | $ | 1,111 |  
|Provision for bad debt expense                  |  |                         | 959   |   |      |   | 888    |      |  |   | 949   |  
|Write-offs                                      |  |                         | (920  | ) |      |   | (1,025 | )    |  |   | (725  | )
|                                                |  |                         |       |   |      |   |        |      |  |   |       |  
|Allowance for doubtful accountsclosing balance |  | $                       | 1,248 |   |      | $ | 1,111  |      |  | $ | 1,335 |  
|                                                |  |                         |       |   |      |   |        |      |  |   |       |  



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. 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.



The Company tests for possible impairment of property and
equipment whenever events or changes in circumstances, such as a reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used, indicate that the carrying amount of the asset may not be recoverable. If
indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment charge is recorded in the statement of
operations for amounts necessary to reduce the carrying value of the asset to fair value. The impairment loss is calculated as the excess of the carrying value of the assets over the discounted future cash flows and requires management to apply
judgment in estimating future cash flows and the discount rates that reflects the risk inherent in future cash flows.



Intangible Assets



The Company classifies intangible assets as definite-lived or indefinite-lived intangible assets, as well as goodwill. Definite-lived intangibles include
primarily customer relationships and non-compete agreements. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived assets. These assets are stated at cost. Indefinite-lived intangibles include
broadcast FCC licenses, billboard advertising permits and easements. The excess cost over fair value of net assets acquired is classified as goodwill. The indefinite-lived intangibles and goodwill are not subject to amortization, but are tested for
impairment at least annually.



The Company tests for possible
impairment of definite-lived intangible assets whenever events or changes in circumstances, such as a reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used indicate that the carrying amount of the
asset may not be recoverable. If indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment
charge is recorded in the statement of operations for amounts necessary to reduce the carrying value of the asset to fair value.



At least annually, the Company performs its impairment test for each reporting units indefinite-lived intangibles and goodwill using a discounted
cash flow model to determine if the carrying value of the reporting unit, including indefinite-lived intangibles and goodwill, is less than the fair value of the reporting unit. Certain assumptions are used in determining the fair value, including
assumptions about cash flow rates, discount rates, and terminal values. If the fair value of the Companys reporting unit is less than the carrying value of the reporting unit, an impairment charge is recorded in the statement of operations for
amounts necessary to reduce the carrying value of the asset to fair value.



Acquisitions



The Company accounts for
business acquisitions under the purchase method of accounting as required by (SFAS) 141. 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



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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.



Debt Issuance Costs



Debt issue costs 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, 2002, 2003 and 2004, the
Company recognized interest expense related to amortization of debt issuance costs of approximately $1,256, $1,238 and $1,150 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 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
a LMA to operate a station in the Lubbock, Texas market. During the year ended December 31, 2004, the Company entered into two LMAs to operate five stations in the Wilmington, North Carolina market.



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 net deferred tax assets, excluding the deferred tax liability for amortization of
indefinite-lived intangibles including goodwill, to the amount more likely than not to be realized.



Additional deferred tax expense is recorded to establish a valuation allowance against net operating loss carry-forwards generated by amortization of
indefinite-lived intangibles including goodwill that is deductible for tax purposes, but is no longer amortized in the financial statements.



The Company computes the increase in the valuation allowance based on the amount of deductible temporary differences in excess of taxable temporary
differences related to indefinite-lived intangible assets and goodwill at the financial statement account level.



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 interest rate swaps were not
designed to hedge the Companys exposure to fluctuations in interest rates and do not qualify for hedge accounting under SFAS 133. 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 follows SFAS 130, which establishes standards for reporting and displaying comprehensive income and its components in a full set of general
purpose financial statements. There was no difference between the Companys net income (loss) and its total comprehensive loss in any periods presented.



Recent Accounting Pronouncements



The SEC staff made Staff Announcement No. D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill (D-108), at
the September 2004 meeting of the Emerging Issues Task Force (EITF). D-108 states that the residual method should no longer be used to value intangible assets other than goodwill. Rather, a direct method should be used to determine the
fair value of all



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##### Table of Contents

intangible assets required to be recognized under Statement of Financial Accounting Standards No. 141, Business Combinations. Registrants who have
applied the residual method to the valuation of intangible assets for purposes of impairment testing under Statement of Financial Accounting Standards No 142, Goodwill and Other Intangible Assets, shall perform an impairment test using a
direct value method on all intangible assets that were previously valued using the residual method by no later than the beginning of their first fiscal year beginning after December 15, 2004. The adoption of Staff Announcement No. D-108 did not have
an impact on the Companys financial position or results of operation.



2. Consolidation of Variable Interest Entities



The Company typically acquires radio station assets at market prices from various entities under fixed price purchase agreements. In certain situations, the Company enters into a local marketing agreement (LMA) coincidental to
the purchase agreement that provides that the Company may operate the radio station in advance of the purchase. The Companys financial statements include the broadcast revenues and operating expenses of the station, under the LMA and the
related LMA fee.



The Company has concluded that whenever it
simultaneously enters into a local marketing agreement and a purchase agreement with respect to that group of assets, a variable interest entity (VIE) is created as a result of the contractual interest in the entity. This is because the
equity holders of the variable interest entity are not obligated to fully absorb expected losses of the entity and do not have the right to fully receive the expected residual returns of the entity if they occur. The Company therefore examines the
entities with which the Company enters into fixed price purchase agreements and local marketing agreements simultaneously, for possible consolidation by the Company under FIN 46-R. This requires the Company to consider the extent of its financial
interest in the variable interest entity to determine if the Company is deemed to be the primary beneficiary of the variable interest entity. When the Company determines itself to be the primary beneficiary of a variable interest entity, it
consolidates that entity in its financial statements.



The
Companys sole legal obligation and economic loss for failure to perform under these purchase agreements is typically limited to the amount specified in the liquidated damages provisions contained within the purchase agreements. As a result,
none of the creditors of any of the entities with which the Company enters into fixed price purchase agreements have recourse to the general credit of the Company.



In 2004, simultaneous with entering into purchase agreements to acquire five radio stations in Wilmington, North Carolina
for a total of $24,500, the Company entered into local marketing agreements with respect to those stations and has determined that it is the primary beneficiary with respect to certain assets of two entities which are small, closely held
organizations involved in radio broadcasting activities. As a result, the Company has consolidated the fair value of the assets to be acquired in the accompanying financial statements. The effect of this consolidation at December 31, 2004, was the
inclusion of $995 of property and equipment, $19,620 of indefinite-lived intangible assets and $3,885 of goodwill with a corresponding inclusion of $24,500 in minority interest, representing the deferred purchase price of $24,500 under the fixed
price purchase agreements. As a result of the local marketing agreements, the Companys financial statements include the broadcast revenues and operating expenses of the stations to be acquired since the date the Company entered into the LMAs.



In February 2005, the acquisitions of these five radio
stations were closed for $24,500 in cash funded through the Companys Revolving Credit Facility eliminating the $24,500 of minority interest.



3. 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 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 determines 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 numerous acquisitions during 2002, as depicted below,
with an aggregate purchase price of $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 Revolving Credit Facility, (iii) proceeds of $37,836 from asset sales, and (iv) cash generated from operations.
The aggregate purchase price of the 2004 acquisitions consisted of $23,048 (exclusive of $778 of 2004 expenditures related to 2003 and future acquisitions) in cash funded with (i) borrowings under the Companys Revolving Credit Facility and
(ii) cash generated from operations, and $83,600 in the form of exchange consideration, for an aggregate of $106,648.



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##### Table of Contents

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
|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 
|                                                             |  |                    |  |               |        
|2004:                                                        |  |                    |  |               |        
|Clear Channel Outdoor                                        |  | 1 January          |  | $             | 43,707 
|Three Eagles Communications                                  |  | 9 February         |  |               | 14,225 
|Entravision Communications                                   |  | 19 May             |  |               | 5,201  
|Viacom                                                       |  | 30 June            |  |               | 40,121 
|AllVision                                                    |  | Various            |  |               | 2,509  
|Miscellaneous other acquisitions                             |  | Various            |  |               | 885    
|                                                             |  |                    |  |               |        
|                                                             |  |                    |  | $             | 106,648
|                                                             |  |                    |  |               |        



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



|                                                |  |                         |        |   |      |   |        |      |  |   |         |  
|----------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                |  | Year ended December 31, |       
|                                                |  | 2002                    |        |   | 2003 |   |        | 2004 | 
|Current assets                                  |  | $                       | 337    |   |      | $ | 76     |      |  | $ | 100     |  
|Property and equipment                          |  |                         | 11,816 |   |      |   | 6,380  |      |  |   | 41,752  |  
|FCC licenses                                    |  |                         | 177    |   |      |   | 29,994 |      |  |   | 17,283  |  
|Goodwill  radio division                       |  |                         |       |   |      |   | 26,628 |      |  |   | 1,804   |  
|Goodwill  outdoor division(1)                  |  |                         | 19,849 |   |      |   | 3,639  |      |  |   | 4,867   |  
|Advertising permits                             |  |                         | 13,296 |   |      |   | 9,413  |      |  |   | 22,824  |  
|Easements                                       |  |                         | 187    |   |      |   | 160    |      |  |   | 230     |  
|Customer base, non-compete agreements and other |  |                         | 475    |   |      |   | 5,316  |      |  |   | 21,208  |  
|Current liabilities                             |  |                         | (1,521 | ) |      |   | (672   | )    |  |   | (250    | )
|Long-term liabilities                           |  |                         | (6,652 | ) |      |   |       |      |  |   | (3,170  | )
|                                                |  |                         |        |   |      |   |        |      |  |   |         |  
|                                                |  | $                       | 37,964 |   |      | $ | 80,934 |      |  | $ | 106,648 |  
|                                                |  |                         |        |   |      |   |        |      |  |   |         |  

---

|(1) | Approximately $2,748 of the goodwill acquired at December 31, 2004 is not deductible for tax purposes.
|--- | ------------------------------------------------------------------------------------------------------



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During 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.



During 2002, the Company 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 consisted primarily of FCC licenses, broadcast equipment and accounts receivable. The Company 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. The Company 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 it believed there were 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.



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 valued at $43,600 resulting in a gain of approximately $1,834 which is included in other income, net. The Company
accounted for the transaction as a business combination in accordance with SFAS 141 at fair value. As a result of the exchange, certain of the Companys taxable temporary differences reversed resulting in a $3,500 income tax benefit during the
first quarter of 2004.



In June 2004, in exchange for its
outdoor advertising assets in New Jersey, the Company acquired outdoor advertising assets in New Haven, Connecticut and Northern Colorado/Wyoming valued at approximately $40,000. As a result of the exchange, certain of the Companys taxable
temporary differences reversed resulting in a $4,175 income tax benefit during the second quarter of 2004. The Company accounted for the New Jersey exchange as a business combination in accordance with SFAS 141 at fair value resulting in a gain of
approximately $1,000 on the disposition of its assets. Under the terms of the exchange agreement, both parties remain liable for the loss or unfavorable change in the lease costs of all site leases disposed of by them or a breach of representation
with respect to such site leases for a period of four months from June 30, 2004. The Company is currently assessing whether any such claims exist. Additionally, for a period of one year from June 30, 2004, the parties remain liable for the loss
based on non-renewal or unfavorable change in terms of all site leases disposed of by them which expire during the one year period or the loss of advertising structures not properly located on such site leases. To the extent a claim for
indemnification is made for site leases meeting any of the foregoing criteria, each party will be required to do one of the following: 1) make cash payments equivalent to a multiple of the loss of cash flow for the lost sites, 2) substitute
additional outdoor advertising assets with cash flow equivalent to that of the lost sites, or 3) reduce the payments under site leases between the parties by an amount equal to the loss of cash flow of the lost sites. As a result of the
contingencies related to the transferred site leases, the Company has deferred the recognition of the $1,000 gain until such time as the contingency is resolved. This deferred gain is included in other current liabilities in the consolidated balance
sheet at December 31, 2004.



The Company accrued exit costs of
$850 in connection with the disposal of the New Jersey market pursuant to the asset exchange. Employee severance comprised of $709 of this amount with the remainder related primarily to lease buyouts. As of December 31, the substantial majority of
these amounts have been paid.



During 2004, the Company entered
into agreements to acquire five radio stations in Wilmington, North Carolina for $24,500 in cash. In addition, the Company simultaneously entered into LMAs with respect to the stations to be acquired (Note 2). The acquisitions were completed in
February 2005, funded through the Companys Revolving Credit Facility.



The results of operations of the assets acquired are included in the Companys statements of operations, from the completion date of the applicable acquisition with the exception of assets under LMA, where the
Companys statements of operations include the results from the beginning of the LMA period. The results of operations of assets sold have been excluded from the Companys statements of operations from the completion date of the applicable
sale.



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, 2003 and 2004 had occurred on January 1, 2003. The unaudited 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, 2003.



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##### Table of Contents

|                  |  |                         |         |      |   |         |  
|----------------- |  | ----------------------- | ------- | ---- | - | ------- | -
|                  |  | Year ended December 31, |        
|                  |  | 2003                    |         | 2004 |  
|Net revenue       |  | $                       | 109,078 |      | $ | 115,217 |  
|Total expenses    |  |                         | 102,698 |      |   | 147,006 |  
|                  |  |                         |         |      |   |         |  
|Net income (loss) |  | $                       | 6,380   |      | $ | (31,789 | )
|                  |  |                         |         |      |   |         |  



4. Prepaid expenses and other
current assets



Prepaid expenses and other current assets
consist of the following:



|                                   |  |                    |       |      |   |      
|---------------------------------- |  | ------------------ | ----- | ---- | - | -----
|                                   |  | As of December 31,
|                                   |  | 2003               |       | 2004
|Prepaid rent                       |  | $                  | 1,282 |      | $ | 1,696
|Other receivables                  |  |                    | 1,248 |      |   | 712  
|Prepaid insurance, taxes and other |  |                    | 679   |      |   | 785  
|                                   |  |                    |       |      |   |      
|                                   |  | $                  | 3,209 |      | $ | 3,193
|                                   |  |                    |       |      |   |      



5. Property and Equipment



Property and equipment consist of the following:



|                              |  |                 |      |                    |         |      |  |   |         |  
|----------------------------- |  | --------------- | ---- | ------------------ | ------- | ---- |  | - | ------- | -
|                              |  | DepreciableLife |      | As of December 31, |        
|                              |  |                 | 2003 |                    |         | 2004 | 
|Land and improvements         |  |                |      | $                  | 5,729   |      |  | $ | 7,102   |  
|Buildings and improvements    |  | 20              |      |                    | 9,893   |      |  |   | 10,811  |  
|Leasehold improvements        |  | 10              |      |                    | 1,833   |      |  |   | 1,732   |  
|Broadcast equipment           |  | 520            |      |                    | 8,445   |      |  |   | 9,874   |  
|Office equipment              |  | 7               |      |                    | 1,814   |      |  |   | 2,019   |  
|Computer software and systems |  | 35             |      |                    | 1,930   |      |  |   | 2,413   |  
|Tower and antennae            |  | 520            |      |                    | 4,931   |      |  |   | 6,586   |  
|Vehicles                      |  | 3               |      |                    | 1,734   |      |  |   | 2,403   |  
|Furniture and fixtures        |  | 7               |      |                    | 1,319   |      |  |   | 1,484   |  
|Advertising displays          |  | 315            |      |                    | 34,654  |      |  |   | 62,899  |  
|Construction in progress      |  |                |      |                    | 870     |      |  |   | 1,148   |  
|                              |  |                 |      |                    |         |      |  |   |         |  
|                              |  |                 |      |                    | 73,152  |      |  |   | 108,471 |  
|Less accumulated depreciation |  |                 |      |                    | (15,136 | )    |  |   | (20,897 | )
|                              |  |                 |      |                    |         |      |  |   |         |  
|                              |  |                 |      | $                  | 58,016  |      |  | $ | 87,574  |  
|                              |  |                 |      |                    |         |      |  |   |         |  



Depreciation expense
for the years ended December 31, 2002, 2003 and 2004 was $4,975, $6,254 and $8,025, respectively.



6. Intangible Assets



Intangible assets consist of the following:



|                                                                               |  |                     |      |                    |         |      |  |   |         |  
|------------------------------------------------------------------------------ |  | ------------------- | ---- | ------------------ | ------- | ---- |  | - | ------- | -
|                                                                               |  | EstimatedUsefulLife |      | As of December 31, |        
|                                                                               |  |                     | 2003 |                    |         | 2004 | 
|Gross:                                                                         |  |                     |      |                    |         |      |  |   |         |  
|FCC licenses                                                                   |  |                    |      | $                  | 285,755 |      |  | $ | 309,134 |  
|Goodwill                                                                       |  |                    |      |                    | 64,434  |      |  |   | 45,057  |  
|Advertising permits                                                            |  |                    |      |                    | 103,555 |      |  |   | 67,310  |  
|Easements                                                                      |  |                    |      |                    | 2,595   |      |  |   | 1,358   |  
|Definite-lived intangibles, primarily customer base and non-compete agreements |  | 1-15                |      |                    | 11,441  |      |  |   | 36,117  |  
|                                                                               |  |                     |      |                    |         |      |  |   |         |  
|                                                                               |  |                     |      | $                  | 467,780 |      |  | $ | 458,976 |  
|                                                                               |  |                     |      |                    |         |      |  |   |         |  
|Less, accumulated amortization:                                                |  |                     |      |                    |         |      |  |   |         |  
|FCC licenses                                                                   |  |                     |      | $                  | (8,758  | )    |  | $ | (8,758  | )
|Goodwill                                                                       |  |                     |      |                    | (844    | )    |  |   |        |  
|Advertising permits                                                            |  |                     |      |                    |        |      |  |   |        |  
|Easements                                                                      |  |                     |      |                    |        |      |  |   |        |  
|Definite-lived intangibles, primarily customer base and non-compete agreements |  |                     |      |                    | (5,432  | )    |  |   | (12,238 | )
|                                                                               |  |                     |      |                    |         |      |  |   |         |  
|                                                                               |  |                     |      | $                  | (15,034 | )    |  | $ | (20,996 | )
|                                                                               |  |                     |      |                    |         |      |  |   |         |  
|Net:                                                                           |  |                     |      |                    |         |      |  |   |         |  
|FCC licenses                                                                   |  |                     |      | $                  | 276,997 |      |  | $ | 300,376 |  
|Goodwill                                                                       |  |                     |      |                    | 63,590  |      |  |   | 45,057  |  
|Advertising permits                                                            |  |                     |      |                    | 103,555 |      |  |   | 67,310  |  
|Easements                                                                      |  |                     |      |                    | 2,595   |      |  |   | 1,358   |  
|Definite-lived intangibles, primarily customer base and non-compete agreements |  |                     |      |                    | 6,009   |      |  |   | 23,879  |  
|                                                                               |  |                     |      |                    |         |      |  |   |         |  
|                                                                               |  |                     |      | $                  | 452,746 |      |  | $ | 437,980 |  
|                                                                               |  |                     |      |                    |         |      |  |   |         |  



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##### Table of Contents

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 142. FCC licenses, easements and advertising permits are indefinite-lived intangibles under the new standard. The Companys transitional assessment did not identify any impairment in goodwill or its other
indefinite-lived intangibles. Amortization of goodwill and indefinite-lived intangibles ceased upon adoption of SFAS 142.



Activity affecting the Companys indefinite-lived intangibles during 2003 and 2004 is summarized below:



|                                   |  |              |         |   |          |   |         |                     |  |   |           |   |  |   |        |  
|---------------------------------- |  | ------------ | ------- | - | -------- | - | ------- | ------------------- |  | - | --------- | - |  | - | ------ | -
|                                   |  | FCC Licenses |         |   | Goodwill |   |         | Advertising Permits |  |   | Easements |  
|Gross balance at December 31, 2002 |  | $            | 265,471 |   |          | $ | 35,766  |                     |  | $ | 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 |   |          |   | 64,434  |                     |  |   | 103,555   |   |  |   | 2,595  |  
|Accumulated amortization           |  |              | (8,758  | ) |          |   | (844    | )                   |  |   |          |   |  |   |       |  
|                                   |  |              |         |   |          |   |         |                     |  |   |           |   |  |   |        |  
|Net balance at December 31, 2003   |  | $            | 276,997 |   |          | $ | 63,590  |                     |  | $ | 103,555   |   |  | $ | 2,595  |  
|                                   |  |              |         |   |          |   |         |                     |  |   |           |   |  |   |        |  
|Gross balance at December 31, 2003 |  | $            | 285,775 |   |          | $ | 64,434  |                     |  | $ | 103,555   |   |  | $ | 2,595  |  
|Additions due to acquisition       |  |              | 17,283  |   |          |   | 6,671   |                     |  |   | 22,824    |   |  |   | 230    |  
|Reductions due to disposition      |  |              |        |   |          |   | (12,139 | )                   |  |   | (55,326   | ) |  |   | (1,467 | )
|Reduction due to impairment loss   |  |              | (10,085 | ) |          |   | (17,796 | )                   |  |   | (3,743    | ) |  |   |       |  
|Other(1)                           |  |              | 16,181  |   |          |   | 3,887   |                     |  |   |          |   |  |   |       |  
|                                   |  |              |         |   |          |   |         |                     |  |   |           |   |  |   |        |  
|Gross balance at December 31, 2004 |  |              | 309,134 |   |          |   | 45,057  |                     |  |   | 67,310    |   |  |   | 1,358  |  
|Accumulated amortization           |  |              | (8,758  | ) |          |   |        |                     |  |   |          |   |  |   |       |  
|                                   |  |              |         |   |          |   |         |                     |  |   |           |   |  |   |        |  
|Net balance at December 31, 2004   |  | $            | 300,376 |   |          | $ | 45,057  |                     |  | $ | 67,310    |   |  | $ | 1,358  |  
|                                   |  |              |         |   |          |   |         |                     |  |   |           |   |  |   |        |  

---

|(1) | Other consists of adjustments to finalize preliminary purchase accounting for acquisitions completed in earlier periods and amounts consolidated per FIN 46-R (Note
2). 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 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.



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##### Table of Contents

In the third quarter of 2004, as a result of deteriorating business conditions and performance below
management expectations, the Company conducted an impairment evaluation of its alternative advertising market and related goodwill and identifiable intangible assets pursuant to SFAS 142. As a result of this evaluation, the Company recorded a
$16,999 non-cash impairment loss on goodwill related to this market. The non-cash impairment was caused primarily by deteriorating business conditions, which affected market revenue and expenses. These weak market conditions adversely affected the
cash flow projections used to determine the fair value of the market and resulted in the non-cash impairment.



In the fourth quarter of 2004, the Company performed its annual evaluation of goodwill and indefinite-lived intangibles pursuant to SFAS 142. As a result
of this evaluation, the Company recorded a $14,625 non-cash impairment loss to reduce the carrying value of certain markets assets to their estimated fair values. Approximately $10,100 of the fourth quarter impairment loss in 2004 related to
the carrying value of FCC licenses in certain of the Companys radio markets which have experienced growth rates below expectations, with the balance of the fourth quarter impairment loss relating to the carrying value of advertising permits
(approximately $3,700) and goodwill (approximately $800) in certain outdoor advertising markets where operating results have not met expectations.



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 respective lives. The most significant definite-lived intangibles are customer relationships which have relatively short useful lives due to customer turnover. Consequently, the
Company applies an accelerated amortization methodology to these assets.



Total amortization expense from definite-lived intangibles for the years ended December 31, 2002, 2003 and 2004 was approximately $597, $4,036 and $6,808, 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, 2004:



|     |  |   |      
|---- |  | - | -----
|2005 |  | $ | 6,794
|2006 |  |   | 4,335
|2007 |  |   | 2,939
|2008 |  |   | 2,095
|2009 |  |   | 1,561



7. Accrued Expenses



Accrued expenses consist of the following:



|                                    |  |                    |        |      |   |       
|----------------------------------- |  | ------------------ | ------ | ---- | - | ------
|                                    |  | As of December 31,
|                                    |  | 2003               |        | 2004
|Accrued compensation and bonuses    |  | $                  | 1,198  |      | $ | 1,346 
|Accrued commissions                 |  |                    | 839    |      |   | 828   
|Accrued interest                    |  |                    | 10,753 |      |   | 10,866
|Accrued property taxes              |  |                    | 352    |      |   | 609   
|Accrued rents                       |  |                    | 643    |      |   | 605   
|Unfavorable leases                  |  |                    | 347    |      |   | 214   
|Accrued franchise taxes             |  |                    | 331    |      |   | 170   
|Accrued legal and professional fees |  |                    | 1,044  |      |   | 383   
|Accrued insurance costs             |  |                    | 550    |      |   | 214   
|Accrued music license fees          |  |                    | 572    |      |   | 120   
|Other                               |  |                    | 855    |      |   | 1,117 
|                                    |  |                    |        |      |   |       
|                                    |  | $                  | 17,484 |      | $ | 16,472
|                                    |  |                    |        |      |   |       



8. Long-Term Debt



Long-term debt consists of the following:



|                          |  |                    |         |   |      |   |         |  
|------------------------- |  | ------------------ | ------- | - | ---- | - | ------- | -
|                          |  | As of December 31, |        
|                          |  | 2003               |         |   | 2004 |  
|Revolving Credit Facility |  | $                  | 2,000   |   |      | $ | 34,500  |  
|Senior Subordinated Notes |  |                    | 200,000 |   |      |   | 200,000 |  
|Unamortized discount      |  |                    | (2,366  | ) |      |   | (2,051  | )
|                          |  |                    |         |   |      |   |         |  
|Total long-term debt      |  | $                  | 199,634 |   |      | $ | 232,449 |  
|                          |  |                    |         |   |      |   |         |  



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##### Table of Contents

Revolving Credit Facility



On April 9, 2004, the Company terminated its existing senior credit facility and entered into a new $75,000 senior credit
facility (the Revolving Credit Facility) which matures five years from the date thereof. Included within the Revolving Credit Facility is $30,000 available to the Company for the issuance of letters of credit. At December 31, 2004,
$1,252 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 (as amended) 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 or Federal Funds Rate plus fifty (50) basis points per annum, plus a margin ranging from 1.0% to 2.5% depending on the extent of leverage or (ii) a base rate of LIBOR plus a margin
ranging from 2.0% to 3.5% depending on the extent of leverage. The weighted average interest rate on borrowings under the Revolving Credit Facility was 5.5% at December 31, 2004. The Company pays fees on the aggregate unused portion of the loan
commitment at a rate of .25%. Commitment fees were $745, $371 and $340 in 2002, 2003 and 2004, 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 in connection therewith, 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 ratio of 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, 2005, the Company had approximately $19,000 of borrowing capacity under 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. As a result of the termination of its former credit facility,
the Company recorded a charge of $1,541 to write off the associated deferred financing costs.



Senior Subordinated Notes



On July 5, 2001, the Company issued $200,000 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 Company was in compliance with all applicable covenants during all periods presented. The Notes indenture contains
limitations on incurrence of additional indebtedness, and restricted payments, including a restriction on the payment of dividends to NextMedia Group, Inc. unless certain financial conditions are met, as well as other restrictive covenants. Interest
is payable on the Notes on January 1 and July 1 of each year.



Future maturities of long-term debt at December 31, 2004 are as follows:



|           |  |   |        
|---------- |  | - | -------
|2005       |  | $ |       
|2006       |  |   |       
|2007       |  |   |       
|2008       |  |   |       
|2009       |  |   | 34,500 
|Thereafter |  |   | 200,000
|           |  |   |        
|           |  | $ | 234,500
|           |  |   |        



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



F-16



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##### Table of Contents

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 became a party to an interest rate swap (the Swap) with an aggregate notional amount of $100,000 in March 2005. The Swap becomes effective June 30, 2006 and expires on December 31, 2009.
Pursuant to the swap, the Company will pay a fixed rate of interest on the notional amount and receive a floating rate of interest on the notional amount.



9. 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, 2002, 2003
and 2004 was approximately $9,104, $10,296 and $9,780, 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: |  |   |       
|2005                    |  | $ | 4,823 
|2006                    |  |   | 4,221 
|2007                    |  |   | 3,366 
|2008                    |  |   | 2,980 
|Thereafter              |  |   | 17,036
|                        |  |   |       
|                        |  | $ | 32,426
|                        |  |   |       



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 of four years as the fair value at the date of grant exceeded the grant price.



Legal



In January 2003, the Company withheld approximately $1,500 from PNE Media (which represented 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 $3,300 and a gain of approximately $2,100, net of
legal expenses, which is included in other income, net. The arbitration award has been fully implemented.



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.



Acquisitions



The Company has certain contingencies related to the asset exchange completed in June 2004 as more fully explained in Note 3.



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##### Table of Contents

Guarantees



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



10. 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 142 on January 1, 2002. SFAS 142 does not change the requirements of SFAS 109, for recognition of
deferred taxes related to indefinite-lived intangibles and tax-deductible goodwill. As a result of adopting SFAS 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
indefinite-lived assets and goodwill, the deferred tax liability will not reverse over time unless impairment charges are recognized on indefinite-lived assets or goodwill, or the indefinite-lived assets or assets supporting the goodwill are sold.



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



As a result of the $42,956 impairment loss on goodwill and advertising
permits in 2002, as discussed in Note 6, a significant portion of the Companys deferred tax liability, resulting from the difference between book and tax amortization of goodwill and advertising permits, was reversed. Consequently, we recorded
a deferred tax benefit of $15,341 during the fourth quarter offsetting previously recognized expense of $19,652.



As a result of the $31,624 impairment loss on goodwill, FCC licenses and advertising permits in 2004, as discussed in Note 6, a portion of the
Companys deferred tax liability, resulting from the difference between book and tax amortization of FCC licenses and advertising permits was reversed. Consequently, we recorded a deferred tax benefit of $5,360 related to the impairment loss,
which is offset by deferred tax expense related to current period amortization which is deductible for tax purposes. The recorded deferred tax benefit related to the impairment was limited to the extent the tax basis in any category of
indefinite-lived intangible assets including goodwill exceeded the respective book basis.



As of December 31, 2004 the Company has net operating loss carryforwards of approximately $100,500 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:



|                           |  |                         |       |      |   |        |  |   |        |  
|-------------------------- |  | ----------------------- | ----- | ---- | - | ------ |  | - | ------ | -
|                           |  | Year ended December 31, |      
|                           |  | 2002                    |       | 2003 |   | 2004   | 
|Current:                   |  |                         |       |      |   |        |  |   |        |  
|Federal                    |  | $                       |      |      | $ |       |  | $ |       |  
|State                      |  |                         |      |      |   |       |  |   |       |  
|                           |  |                         |       |      |   |        |  |   |        |  
|Total current              |  |                         |      |      |   |       |  |   |       |  
|                           |  |                         |       |      |   |        |  |   |        |  
|Deferred                   |  |                         |       |      |   |        |  |   |        |  
|Federal                    |  |                         | 3,846 |      |   | 9,337  |  |   | (1,286 | )
|State                      |  |                         | 465   |      |   | 1,127  |  |   | (154   | )
|                           |  |                         |       |      |   |        |  |   |        |  
|Total deferred             |  |                         | 4,311 |      |   | 10,464 |  |   | (1,440 | )
|                           |  |                         |       |      |   |        |  |   |        |  
|Provision for income taxes |  | $                       | 4,311 |      | $ | 10,464 |  | $ | (1,440 | )
|                           |  |                         |       |      |   |        |  |   |        |  



F-18



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##### 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, |        
|                                      |  | 2002               |         |   | 2003 |   |         | 2004 | 
|Deferred tax assets:                  |  |                    |         |   |      |   |         |      |  |   |         |  
|Net operating loss carryforward       |  | $                  | 28,075  |   |      | $ | 27,997  |      |  | $ | 39,379  |  
|Goodwill and non-compete agreements   |  |                    |        |   |      |   |        |      |  |   | 7,552   |  
|Accrued liabilities                   |  |                    | 925     |   |      |   | 794     |      |  |   | 340     |  
|Other                                 |  |                    | 1,664   |   |      |   | 563     |      |  |   | 1,015   |  
|                                      |  |                    |         |   |      |   |         |      |  |   |         |  
|Total deferred tax assets             |  |                    | 30,664  |   |      |   | 29,354  |      |  |   | 48,286  |  
|                                      |  |                    |         |   |      |   |         |      |  |   |         |  
|Deferred tax liabilities:             |  |                    |         |   |      |   |         |      |  |   |         |  
|Property, equipment and intangibles   |  |                    | (20,955 | ) |      |   | (30,409 | )    |  |   | (30,876 | )
|Other                                 |  |                    | (1,093  | ) |      |   | (680    | )    |  |   | (836    | )
|                                      |  |                    |         |   |      |   |         |      |  |   |         |  
|Total deferred tax liabilities        |  |                    | (22,047 | ) |      |   | (31,089 | )    |  |   | (31,712 | )
|                                      |  |                    |         |   |      |   |         |      |  |   |         |  
|Net deferred tax assets (liabilities) |  |                    | 8,617   |   |      |   | (1,735  | )    |  |   | 16,574  |  
|Valuation allowance                   |  |                    | (25,013 | ) |      |   | (25,123 | )    |  |   | (45,164 | )
|                                      |  |                    |         |   |      |   |         |      |  |   |         |  
|Net deferred tax liabilities          |  | $                  | (16,396 | ) |      | $ | (26,858 | )    |  | $ | (28,590 | )
|                                      |  |                    |         |   |      |   |         |      |  |   |         |  



The Company has
provided a valuation allowance against the net deferred tax asset, excluding the deferred tax liability for amortization of indefinite-lived 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 indefinite-lived 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 net change in the valuation allowance in 2002 was $20,434 which differs from the amount shown in the effective rate
reconciliation by $1,362 due to the valuation allowance allocable to discontinued operations. The change in the valuation allowance affecting the rate reconciliation does not equal the total change in the valuation allowance of $110 in 2003 due to
changes in the valuation allowance resulting from purchase accounting.



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:



|                                                           |  |                         |         |   |      |   |        |  |   |         |  
|---------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------ |  | - | ------- | -
|                                                           |  | Year ended December 31, |        
|                                                           |  | 2002                    |         |   | 2003 |   | 2004   | 
|US federal income tax expense (benefit) at statutory rate  |  | $                       | (15,984 | ) |      | $ | 6,990  |  | $ | (11,990 | )
|State income taxes                                         |  |                         | (1,619  | ) |      |   | 849    |  |   | (1,439  | )
|Change in valuation allowance                              |  |                         | 19,072  |   |      |   | 2,582  |  |   | 20,041  |  
|Net benefit of impairments / swaps                         |  |                         |        |   |      |   |       |  |   | (8,052  | )
|Other permanent items, principally non-deductible goodwill |  |                         | 2,842   |   |      |   | 43     |  |   |        |  
|                                                           |  |                         |         |   |      |   |        |  |   |         |  
|Provision (benefit) for income taxes                       |  | $                       | 4,311   |   |      | $ | 10,464 |  | $ | (1,440  | )
|                                                           |  |                         |         |   |      |   |        |  |   |         |  



11. Segment Data



Based on information provided to the Chief Operating Decision Maker,
principally the Executive Chairman of the Board of Directors and Chief Executive Officer and President, 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, 2004, the radio broadcasting segment included 66
radio stations owned or 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,
2004, the outdoor advertising segment owned or operated over 5,100 outdoor billboard displays and, indoor advertising display faces in more than 2,400 retail locations across the United States. All of these displays are located in domestic markets.



F-19



---

##### Table of Contents

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.



|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                          |  | Year ended December 31, |        
|                                                                                          |  | 2002                    |         |   | 2003 |   |         | 2004 | 
|Net revenue:                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  | $                       | 64,064  |   |      | $ | 72,876  |      |  | $ | 78,894  |  
|Outdoor Advertising                                                                       |  |                         | 27,266  |   |      |   | 34,083  |      |  |   | 36,280  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Consolidated                                                                              |  |                         | 91,330  |   |      |   | 106,959 |      |  |   | 115,174 |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Market level expenses, exclusive of depreciation and amortization shown separately below: |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  |                         | 40,065  |   |      |   | 44,432  |      |  |   | 47,482  |  
|Outdoor Advertising                                                                       |  |                         | 19,265  |   |      |   | 22,100  |      |  |   | 23,820  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Consolidated                                                                              |  |                         | 59,330  |   |      |   | 66,532  |      |  |   | 71,302  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization:                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  |                         | 3,523   |   |      |   | 5,974   |      |  |   | 5,009   |  
|Outdoor Advertising                                                                       |  |                         | 2,000   |   |      |   | 4,317   |      |  |   | 9,824   |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Consolidated                                                                              |  |                         | 5,523   |   |      |   | 10,291  |      |  |   | 14,833  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Other segment costs:                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Local marketing agreement fees - Radio Broadcasting                                       |  |                         |        |   |      |   | 42      |      |  |   | 708     |  
|Impairment loss-Radio Broadcasting                                                        |  |                         |        |   |      |   |        |      |  |   | 10,085  |  
|Impairment loss-Outdoor Advertising                                                       |  |                         | 42,956  |   |      |   |        |      |  |   | 21,539  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Segment operating income (loss):                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  |                         | 20,476  |   |      |   | 22,428  |      |  |   | 15,610  |  
|Outdoor Advertising                                                                       |  |                         | (36,955 | ) |      |   | 7,666   |      |  |   | (18,903 | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|                                                                                          |  |                         | (16,479 | ) |      |   | 30,094  |      |  |   | (3,293  | )
|                                                                                          |  |                         |        
|Corporate expenses                                                                        |  |                         | 8,116   |   |      |   | 8,518   |      |  |   | 8,452   |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating income (loss)                                                                   |  |                         | (24,595 | ) |      |   | 21,576  |      |  |   | (11,745 | )
|Interest expense, net                                                                     |  |                         | 22,444  |   |      |   | 22,369  |      |  |   | 24,460  |  
|Loss on extinguishment of debt                                                            |  |                         |        |   |      |   |        |      |  |   | 1,541   |  
|Other (income), net                                                                       |  |                         | (1,370  | ) |      |   | (20,764 | )    |  |   | (3,490  | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Income (loss) from continuing operations before taxes                                     |  | $                       | (45,669 | ) |      | $ | 19,971  |      |  | $ | (34,256 | )
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Total identifiable assets:                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  | $                       | 323,543 |   |      | $ | 357,810 |      |  | $ | 400,566 |  
|Outdoor Advertising                                                                       |  |                         | 168,437 |   |      |   | 185,567 |      |  |   | 165,294 |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Consolidated                                                                              |  | $                       | 491,980 |   |      | $ | 543,377 |      |  | $ | 565,860 |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Goodwill, net:                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  | $                       |        |   |      | $ | 26,628  |      |  | $ | 32,317  |  
|Outdoor Advertising                                                                       |  |                         | 34,922  |   |      |   | 36,962  |      |  |   | 12,740  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Consolidated                                                                              |  |                         | 34,922  |   |      | $ | 63,590  |      |  | $ | 45,057  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Additions to long lived assets:                                                           |  |                         |         |   |      |   |         |      |  |   |         |  
|Radio Broadcasting                                                                        |  | $                       | 2,088   |   |      | $ | 68,967  |      |  | $ | 50,109  |  
|Outdoor Advertising                                                                       |  |                         | 54,887  |   |      |   | 17,930  |      |  |   | 93,799  |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Consolidated                                                                              |  | $                       | 56,975  |   |      | $ | 86,897  |      |  | $ | 143,908 |  
|                                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  



12. 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 $221,000 at December 31, 2004 based on current market rates.



F-20



---

##### Table of Contents

13. Quarterly Results of Operations (Unaudited)



The following summarizes certain quarterly results of operations:



|                                         |  |                    |        |   |         |   |        |              |  |   |             |   |  |            |         |   |  |   |         |  
|---------------------------------------- |  | ------------------ | ------ | - | ------- | - | ------ | ------------ |  | - | ----------- | - |  | ---------- | ------- | - |  | - | ------- | -
|                                         |  | Three Months Ended |       
|                                         |  | March 31           |        |   | June 30 |   |        | September 30 |  |   | December 31 |   |  | Total year |        
|2004                                     |  |                    |        |   |         |   |        |              |  |   |             |   |  |            |         |   |  |   |         |  
|Net revenue                              |  | $                  | 24,391 |   |         | $ | 29,215 |              |  | $ | 31,036      |   |  | $          | 30,532  |   |  | $ | 115,174 |  
|Income (loss) from operations            |  |                    | 2,572  |   |         |   | 5,481  |              |  |   | (10,620     | ) |  |            | (9,178  | ) |  |   | (11,745 | )
|Net income (loss) as originally reported |  |                    | 1,026  |   |         |   | (5,372 | )            |  |   | (13,314     | ) |  |            | (15,156 | ) |  |   | (32,816 | )
|Adjustment for income taxes (1)          |  |                    | 712    |   |         |   | (4,170 | )            |  |   | 6,185       |   |  |            | (2,727  | ) |  |   |        |  
|Net income (loss) as restated            |  |                    | 314    |   |         |   | (1,202 | )            |  |   | (19,499     | ) |  |            | (12,429 | ) |  |   | (32,816 | )
|                                         |  |                    |        |   |        
|2003                                     |  |                    |        |   |         |   |        |              |  |   |             |   |  |            |         |   |  |   |         |  
|Net revenue                              |  | $                  | 23,556 |   |         | $ | 27,695 |              |  | $ | 27,783      |   |  | $          | 27,925  |   |  |   | 106,959 |  
|Income (loss) from operations            |  |                    | 3,933  |   |         |   | 5,956  |              |  |   | 5,904       |   |  |            | 5,783   |   |  |   | 21,576  |  
|Net income (loss)                        |  |                    | (5,160 | ) |         |   | (2,985 | )            |  |   | 16,510      |   |  |            | 1,143   |   |  |   | 9,508   |  

---

|(1) | Net income (loss) for each of the quarters in fiscal 2004 has been adjusted and restated to reflect the tax benefits from the swap of assets described in Note 3 and the tax benefits
associated with the impairments recorded in 2004. The company does recognize tax benefits when an impairment of intangible assets is recorded, however, only to the extent that deferred tax liabilities exist for that financial statement intangible
asset category.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14. 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-21



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##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Balance Sheet

December 31, 2003



|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|---------------------------------------------------------------- |  | ------------------------- | ------- | ---------------------- | - | ------- | ------------------- |  | - | -------- | - |  | - | -------
|                                                                 |  | NextMedia Operating, Inc. |         | Guarantor Subsidiaries |   |         | Eliminating Entries |  |   | 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-22



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Balance Sheet

December 31, 2004



|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|---------------------------------------------------------------- |  | ------------------------- | ------- | ---------------------- | - | ------- | ------------------- |  | - | -------- | - |  | - | -------
|                                                                 |  | NextMedia Operating, Inc. |         | Guarantor Subsidiaries |   |         | Eliminating Entries |  |   | Total   
|Assets                                                           |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Current assets:                                                  |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Cash and cash equivalents                                        |  | $                         | 13,006  |                        | $ | (746    | )                   |  | $ |         |   |  | $ | 12,260 
|Accounts receivable, net                                         |  |                           | 11,984  |                        |   | 4,303   |                     |  |   |         |   |  |   | 16,287 
|Prepaid and other current assets                                 |  |                           | 497     |                        |   | 2,696   |                     |  |   |         |   |  |   | 3,193  
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Total current assets                                             |  |                           | 25,487  |                        |   | 6,253   |                     |  |   |         |   |  |   | 31,740 
|Property and equipment, net                                      |  |                           | 27,860  |                        |   | 59,714  |                     |  |   |         |   |  |   | 87,574 
|Intangibles, net                                                 |  |                           | 38,360  |                        |   | 399,620 |                     |  |   |         |   |  |   | 437,980
|Other assets                                                     |  |                           | 8,482   |                        |   | 12,168  |                     |  |   | (12,084  | ) |  |   | 8,566  
|Investment in subsidiaries                                       |  |                           | 455,423 |                        |   |        |                     |  |   | (455,423 | ) |  |   |       
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Total assets                                                     |  | $                         | 555,612 |                        | $ | 477,755 |                     |  | $ | (467,507 | ) |  | $ | 565,860
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Liabilities and Stockholders Equity                             |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Current liabilities:                                             |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Accounts payable, accrued expenses and other current liabilities |  | $                         | 25,842  |                        | $ | 6,518   |                     |  | $ | (12,084  | ) |  | $ | 20,276 
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Total current liabilities                                        |  |                           | 25,842  |                        |   | 6,518   |                     |  |   | (12,084  | ) |  |   | 20,276 
|Long-term debt                                                   |  |                           | 232,449 |                        |   |        |                     |  |   |         |   |  |   | 232,449
|Other long-term liabilities                                      |  |                           | 13,636  |                        |   | 15,814  |                     |  |   |         |   |  |   | 29,450 
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Total liabilities                                                |  |                           | 271,927 |                        |   | 22,332  |                     |  |   | (12,084  | ) |  |   | 282,175
|Minority interest                                                |  |                           | 24,500  |                        |   |        |                     |  |   |         |   |  |   | 24,500 
|Stockholders equity                                             |  |                           | 259,185 |                        |   | 455,423 |                     |  |   | (455,423 | ) |  |   | 259,185
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        
|Total liabilities and stockholders equity                       |  | $                         | 555,612 |                        | $ | 477,755 |                     |  | $ | (467,507 | ) |  | $ | 565,860
|                                                                 |  |                           |         |                        |   |         |                     |  |   |          |   |  |   |        



F-23



---

##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Year Ended December
31, 2002



|                                                                                         |  |                           |         |   |                        |   |         |                     |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---------------------- | - | ------- | ------------------- |  | - | ------- | - |  | - | ------- | -
|                                                                                         |  | NextMedia Operating, Inc. |         |   | Guarantor Subsidiaries |   |         | Eliminating Entries |  |   | 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), net                                                                      |  |                           | (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-24



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##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Year Ended December
31, 2003



|                                                                                         |  |                           |         |   |                        |   |        |                     |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---------------------- | - | ------ | ------------------- |  | - | ------ | - |  | - | ------- | -
|                                                                                         |  | NextMedia Operating, Inc. |         |   | Guarantor Subsidiaries |   |        | Eliminating Entries |  |   | 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), net                                                                      |  |                           | (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   |  
|Income on discontinued operations                                                        |  |                           | (1      | ) |                        |   |       |                     |  |   |       |   |  |   | (1      | )
|                                                                                         |  |                           |         |   |                        |   |        |                     |  |   |        |   |  |   |         |  
|Net income (loss)                                                                        |  | $                         | 9,508   |   |                        | $ | 5,347  |                     |  | $ | (5,347 | ) |  | $ | 9,508   |  
|                                                                                         |  |                           |         |   |                        |   |        |                     |  |   |        |   |  |   |         |  



F-25



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##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Year Ended December
31, 2004



|                                                                                         |  |                           |         |   |                        |   |         |                     |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---------------------- | - | ------- | ------------------- |  | - | ------- | - |  | - | ------- | -
|                                                                                         |  | NextMedia Operating, Inc. |         |   | Guarantor Subsidiaries |   |         | Eliminating Entries |  |   | Total   |  
|Net revenue                                                                              |  | $                         | 78,894  |   |                        | $ | 36,282  |                     |  | $ | (2      | ) |  | $ | 115,174 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                           | 47,482  |   |                        |   | 23,822  |                     |  |   | (2      | ) |  |   | 71,302  |  
|Corporate expenses                                                                       |  |                           | 5,556   |   |                        |   | 2,896   |                     |  |   |        |   |  |   | 8,452   |  
|Depreciation and amortization                                                            |  |                           | 5,009   |   |                        |   | 9,824   |                     |  |   |        |   |  |   | 14,833  |  
|Impairment loss                                                                          |  |                           |        |   |                        |   | 31,624  |                     |  |   |        |   |  |   | 31,624  |  
|Local marketing agreement fees                                                           |  |                           | 708     |   |                        |   |        |                     |  |   |        |   |  |   | 708     |  
|                                                                                         |  |                           |         |   |                        |   |         |                     |  |   |         |   |  |   |         |  
|Operating income (loss)                                                                  |  |                           | 20,139  |   |                        |   | (31,884 | )                   |  |   |        |   |  |   | (11,745 | )
|Interest expense, net                                                                    |  |                           | 24,460  |   |                        |   |        |                     |  |   |        |   |  |   | 24,460  |  
|Loss on extinguishment of debt                                                           |  |                           | 1,541   |   |                        |   |        |                     |  |   |        |   |  |   | 1,541   |  
|Other (income), net                                                                      |  |                           | 701     |   |                        |   | (4,191  | )                   |  |   |        |   |  |   | (3,490  | )
|Equity in loss of subsidiaries                                                           |  |                           | 27,693  |   |                        |   |        |                     |  |   | (27,693 | ) |  |   |        |  
|                                                                                         |  |                           |         |   |                        |   |         |                     |  |   |         |   |  |   |         |  
|Income (loss) before provision for income taxes                                          |  |                           | (34,256 | ) |                        |   | (27,693 | )                   |  |   | 27,693  |   |  |   | (34,256 | )
|Provision for deferred income taxes                                                      |  |                           | (1,440  | ) |                        |   |        |                     |  |   |        |   |  |   | (1,440  | )
|                                                                                         |  |                           |         |   |                        |   |         |                     |  |   |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                         | (32,816 | ) |                        | $ | (27,693 | )                   |  | $ | 27,693  |   |  | $ | (32,816 | )
|                                                                                         |  |                           |         |   |                        |   |         |                     |  |   |         |   |  |   |         |  



F-26



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##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Year Ended December
31, 2002



|                                                |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|----------------------------------------------- |  | ------------------------- | ------- | - | ---------------------- | - | ------ | ------------------- |  | ----- | - |  | - | ------- | -
|                                                |  | NextMedia Operating, Inc. |         |   | Guarantor Subsidiaries |   |        | Eliminating Entries |  | 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 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-27



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##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Year Ended December
31, 2003



|                                                |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|----------------------------------------------- |  | ------------------------- | ------- | - | ---------------------- | - | ------ | ------------------- |  | ----- | - |  | - | ------- | -
|                                                |  | NextMedia Operating, Inc. |         |   | Guarantor Subsidiaries |   |        | Eliminating Entries |  | 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 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 decrease 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-28



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##### Table of Contents

NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Year Ended December
31, 2004



|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|------------------------------------------------ |  | ------------------------- | ------- | - | ---------------------- | - | ------ | ------------------- |  | ----- | - |  | - | ------- | -
|                                                 |  | NextMedia Operating, Inc. |         |   | Guarantor Subsidiaries |   |        | Eliminating Entries |  | Total |  
|Net cash provided by (used in) operations        |  | $                         | 1,423   |   |                        | $ | 6,405  |                     |  | $     |  |  | $ | 7,828   |  
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Cash Flows From Investing Activities             |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Purchase of equipment                            |  |                           | (4,283  | ) |                        |   | (2,214 | )                   |  |       |  |  |   | (6,497  | )
|Payments for acquisitions, net of cash acquired  |  |                           | (19,320 | ) |                        |   | (4,506 | )                   |  |       |  |  |   | (23,826 | )
|Proceeds from sale of properties                 |  |                           | 421     |   |                        |   |       |                     |  |       |  |  |   | 421     |  
|Proceeds from termination of interest rate swaps |  |                           | 1,600   |   |                        |   |       |                     |  |       |  |  |   | 1,600   |  
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Net cash used in investing activities            |  |                           | (21,582 | ) |                        |   | (6,720 | )                   |  |       |  |  |   | (28,302 | )
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Cash Flows From Financing Activities             |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Proceeds from revolving credit facilities        |  |                           | 50,500  |   |                        |   |       |                     |  |       |  |  |   | 50,500  |  
|Repayment of revolving credit facilities         |  |                           | (18,000 | ) |                        |   |       |                     |  |       |  |  |   | (18,000 | )
|Payments of financing related costs              |  |                           | (427    | ) |                        |   |       |                     |  |       |  |  |   | (427    | )
|Other                                            |  |                           | (46     | ) |                        |   |       |                     |  |       |  |  |   | (46     | )
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Net cash provided by financing activities        |  |                           | 32,027  |   |                        |   |       |                     |  |       |  |  |   | 32,027  |  
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Net increase in cash                             |  |                           | 11,868  |   |                        |   | (315   | )                   |  |       |  |  |   | 11,553  |  
|Cash at beginning of period                      |  |                           | 1,138   |   |                        |   | (431   | )                   |  |       |  |  |   | 707     |  
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  
|Cash at end of period                            |  | $                         | 13,006  |   |                        | $ | (746   | )                   |  | $     |  |  | $ | 12,260  |  
|                                                 |  |                           |         |   |                        |   |        |                     |  |       |   |  |   |         |  





F-29



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##### 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 31, 2005




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 31, 2005
|                                 |  |                                                                                                          
|/S/ STEVEN DINETZSteven Dinetz   |  | Director, President and Chief Executive Officer (Principal Executive Officer)                             |  | March 31, 2005
|                                 |  |                                                                                                          
|/S/ SEAN R. STOVERSean R. Stover |  | Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |  | March 31, 2005



- 32 -



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##### Table of Contents

INDEX TO EXHIBITS



|               |  |                                                                                                                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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 103/4% Senior Subordinated Notes due 2011.                                                                            
|               | 
|4.02*          |  | Form of 103/4% 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.                                           
|               | 
|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.                                                                                                                    



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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.                                                                                                                                                                            
|               | 
|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.                                                                                                                                                                                             



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                          
|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.                                                                                                                                                                                   
|               | 
|10.43*         |  | 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.                                                                                                                       
|               | 
|10.47+         |  | Amended and Restated Credit Agreement, dated as of April 9, 2004, among NextMedia Operating, Inc., the other credit parties signatory thereto, the lenders signatory thereto, General Electric
Capital Corporation, as agent, and GECC Capital Markets Group, Inc., as lead arranger.
|               | 
|10.48+         |  | First Amendment to the Amended and Restated Credit Agreement, dated February 25, 2005, among NextMedia Operating, Inc., the other credit parties signatory thereto, the lenders signatory
thereto and General Electric Capital Corporation, as agent.                                
|               | 
|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.
|--- | -----------------------------------------------------------------------------------------



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