**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

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**FORM 10-Q**

 
| **(MARK  ONE)**                                                                                                                                                                                                                                                    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                               |   |
| **ý**                                                                                                                                                                                                                                                         | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                               |   |
| **FOR THE PERIOD ENDED MARCH 31, 2003**                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                               |   |
| **OR**                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                               |   |
| **o**                                                                                                                                                                                                                                                              | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                               |   |
| **FOR THE TRANSITION PERIOD FROM                      TO                    ** |
|                                                                                                                                                                                                                                                               |   |
| **COMMISSION  FILE NUMBER 001-13715**                                                                                                                                                                                                                              |

 

| **BIG CITY  RADIO, INC.**                                        |
|------------------------------------------------------------------|
| (Exact name of  registrant as specified in its charter)          |
|                                                             |   |   |
| **DELAWARE**                                                     |   | **13-3790661** |
| (State or other  jurisdiction  of incorporation or organization) |   | (I.R.S. Employer  Identification Number) |
|                                                             |   |   |
| **1888  Century Park East, Suite 212, Los Angeles, CA 90067**    |
| (Address and zip  code of principal executive offices)           |
|                                                             |   |   |
| **(310) 556-2489**                                               |
| (Registrant’s  telephone number, including area code)       |

 

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Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   YES ý  NO  o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inRule 12b-2 of the Exchange Act).  YES o   NO  ý

 

The number of shares ofthe registrant’s Class A common stock and Class B common stock outstanding asof April 25, 2003 was 6,226,817 and 8,250,458, respectively.

 

 

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**BIG CITY RADIO, INC.**

**PART 1 - FINANCIAL INFORMATION**

 
| Item 1.                     | Financial Statements                                                                          | 2        |
|-----------------------------|-----------------------------------------------------------------------------------------------|----------|
|                        |                                                                                          |     |
|                        | Consolidated Balance Sheets                                                                   | 3        |
|                        |                                                                                          |     |
|                        | Consolidated  Statement of Operations                                                         | 4        |
|                        |                                                                                          |     |
|                        | Consolidated  Statement of Cash Flows                                                         | 5        |
|                        |                                                                                          |     |
|                        | Consolidated  Statement of Stockholders’ Equity (Deficiency)                             | 6        |
|                        |                                                                                          |     |
|                        | Notes to Consolidated Financial Statements                                                    | 7 - 21   |
|                        |                                                                                          |     |
| Item  2.                    | Management’s  Discussion and Analysis of Financial   Condition and Results of Operations | 22  - 27 |
|                        |                                                                                          |     |
| Item  3.                    | Quantitative  and Qualitative Disclosures About Market Risk                                   | 38       |
|                        |                                                                                          |     |
| Item 4.                     | Controls and Procedures                                                                       | 38       |
|                        |                                                                                          |     |
|                        | PART II – OTHER INFORMATION                                                              |     |
|                        |                                                                                          |     |
| Item  1.                    | Legal  Proceedings                                                                            | 39       |
|                        |                                                                                          |     |
| Item  2.                    | Changes  in Securities and Use of Proceeds                                                    | 39       |
|                        |                                                                                          |     |
| Item 3.                     | Defaults Upon  Senior Securities                                                              | 39       |
|                        |                                                                                          |     |
| Item  4.                    | Submission  of Matters to a Vote of Security Holders                                          | 39       |
|                        |                                                                                          |     |
| Item  5.                    | Other  Information                                                                            | 39       |
|                        |                                                                                          |     |
| Item 6.                     | Exhibits and  Reports on Form 8-K                                                             | 39       |
|                        |                                                                                          |     |
| Signatures                  | 40                                                                                            |
|                        |                                                                                          |     |
| Section 302  Certifications | 41                                                                                            |
|                        |                                                                                          |     |
| Exhibits                    |                                                                                          |

 

2

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Part1 - Financial Information

 

Item 1. Financial Statements

 

**BIG CITY RADIO,INC.**

**Consolidated Balance Sheets**

**(Unaudited)**

 
|                                                                                                                           |   | **March 31,  2003** |       | **December 31,  2002** |       |
|--------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|------------------------|------------|
| **Assets**                                                                                                                     |   |                | ** ** |                   | ** ** |
| Current assets:                                                                                                                |   |                |       |                   |       |
| Cash and cash equivalents                                                                                                      |   | $                   | 137,000    |                   | $          | 732,000 |   |
| Cash held in investment, restricted                                                                                            |   | 1,072,000           |       | 1,085,000              |       |
| Marketable securities                                                                                                          |   | 619,000             |       | 1,861,000              |       |
| Accounts receivable, net of allowance of $226,000 and  $362,000 in 2003 and 2002, respectively                                 |   | 443,000             |       | 1,997,000              |       |
| Interest receivable                                                                                                            |   | 3,000               |       | 6,000                  |       |
| Assets held for sale                                                                                                           |   | 79,571,000          |       | 79,571,000             |       |
| Prepaid expenses and other current assets                                                                                      |   | 926,000             |       | 289,000                |       |
| Total current assets                                                                                                           |   | 82,771,000          |       | 85,541,000             |       |
| Property and equipment, net                                                                                                    |   | 340,000             |       | 376,000                |       |
| Deferred financing fees, net                                                                                                   |   | 307,000             |       | 1,441,000              |       |
| Other assets                                                                                                                   |   | 165,000             |       | 170,000                |       |
| Total assets                                                                                                                   |   | $                   | 83,583,000 |                   | $          | 87,528,000 |   |
|                                                                                                                           |   |                |       |                   |       |
| **Liabilities and Stockholders’ Equity**                                                                                  |   |                | ** ** |                   | ** ** |
| Current liabilities:                                                                                                           |   |                |       |                   |       |
| Accounts payable                                                                                                               |   | $                   | 1,923,000  |                   | $          | 883,000 |   |
| Accrued expenses                                                                                                               |   | 970,000             |       | 1,644,000              |       |
| Interest payable                                                                                                               |   | 21,081,000          |       | 15,983,000             |       |
| Senior discount notes                                                                                                          |   | 174,000,000         |       | 174,000,000            |       |
| Other current liabilities                                                                                                      |   | 72,000              |       | 74,000                 |       |
| Total current liabilities                                                                                                      |   | 198,046,000         |       | 192,584,000            |       |
| Long-term liabilities:                                                                                                         |   |                |       |                   |       |
| Other long-term liabilities                                                                                                    |   | 292,000             |       | 301,000                |       |
| Stockholders’ equity (deficiency):                                                                                        |   |                |       |                   |       |
| Preferred stock, $0.01 par value. Authorized  20,000,000 shares; zero shares issued and outstanding in 2003 and 2002           |   | —              |       | —                 |       |
| Common stock, Class A, $0.01 par value. Authorized  80,000,000 shares issued and outstanding 6,226,817 shares in 2003 and 2002 |   | 62,000              |       | 62,000                 |       |
| Common stock, Class B, $0.01 par value. Authorized  20,000,000 shares issued and outstanding 8,250,458 shares in 2003 and 2002 |   | 83,000              |       | 83,000                 |       |
| Additional paid-in capital                                                                                                     |   | 29,492,000          |       | 29,492,000             |       |
| Other comprehensive loss                                                                                                       |   | —              |       | (8,000                 | )          |
| Accumulated deficit                                                                                                            |   | (144,392,000        | )          | (134,986,000           | )          |
|                                                                                                                           |   | (114,755,000        | )          | (105,357,000           | )          |
| Total liabilities and stockholders’ equity  (deficiency)                                                                  |   | $                   | 83,583,000 |                   | $          | 87,528,000 |   |

 

See accompanying notes to consolidated financial statements.

 

3

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**Big City Radio,Inc.**

**ConsolidatedStatements of Operations**

**Three monthsended March 31, 2003 and 2002**

**(Unaudited)**

 
|                                                                                  |   | **2003**   |       | **2002**          |   |
|---------------------------------------------------------------------------------------|--------|------------|------------|-------------------|--------|
|                                                                                  |   |       |       | **(As Restated)** |   |
| Net revenues                                                                          |   | $          | —     |              | $      | — |   |
|                                                                                  |   |       |       |              |   |
| Operating expenses:                                                                   |   |       |       |              |   |
| Corporate, general and administrative expenses                                        |   | 2,178,000  |       | 916,000           |   |
| Depreciation and amortization                                                         |   | 30,000     |       | 30,000            |   |
| Total operating expenses                                                              |   | 2,208,000  |       | 946,000           |   |
| Operating loss from continuing operations                                             |   | (2,208,000 | )          | (946,000          | )      |
|                                                                                  |   |       |       |              |   |
| Other income:                                                                         |   |       |       |              |   |
| Interest income                                                                       |   | 5,000      |       | 74,000            |   |
| Other, net                                                                            |   | 46,000     |       | 16,000            |   |
| Total other income                                                                    |   | 51,000     |       | 90,000            |   |
|                                                                                  |   |       |       |              |   |
| Loss from continuing operations before income taxes                                   |   | (2,157,000 | )          | (856,000          | )      |
| Income tax expense, net                                                               |   | —     |       | (8,631,000        | )      |
| Loss from continuing operations                                                       |   | (2,157,000 | )          | (9,487,000        | )      |
| Discontinued operations:                                                              |   |       |       |              |   |
| Radio operations                                                                      |   | (7,249,000 | )          | (6,806,000        | )      |
| Publishing operations                                                                 |   | —     |       | (213,000          | )      |
| Loss from discontinued operations, including income   tax expense of $500,000 in 2002 |   | (7,249,000 | )          | (7,019,000        | )      |
| Net loss                                                                              |   | $          | (9,406,000 | )                 | $      | (16,506,000 | ) |
|                                                                                  |   |       |       |              |   |
| Basic and diluted loss per share:                                                     |   |       |       |              |   |
| Loss from continuing operations                                                       |   | $          | (0.15      | )                 | $      | (0.66 | ) |
| Loss from discontinued operations                                                     |   | (0.50      | )          | (0.48             | )      |
| Net loss                                                                              |   | $          | (0.65      | )                 | $      | (1.14 | ) |
|                                                                                  |   |       |       |              |   |
| Weighted average shares outstanding                                                   |   | 14,477,000 |       | 14,477,000        |   |

 

See accompanying notes to consolidated financial statements

 

4

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**BIG CITY RADIO, INC.**

**Consolidated Statements of Cash Flows**

**Three months ended March 31, 2003 and 2002**

**(Unaudited)**

 
|                                                                                                      |   | **2003**   |       | **2002**          |   |
|-----------------------------------------------------------------------------------------------------------|--------|------------|------------|-------------------|--------|
|                                                                                                      |   |       |       | **(As Restated)** |   |
| Cash flows from operating activities:                                                                     |   |       |       |              |   |
| Net loss from continuing operations                                                                       |   | $          | (2,157,000 | )                 | $      | (9,487,000 | ) |
| Adjustments to reconcile net loss from continuing  operations to   net cash used in operating activities: |   |       |       |              |   |
| Depreciation and amortization                                                                             |   | 30,000     |       | 30,000            |   |
| Non cash change in other comprehensive loss                                                               |   | 8,000      |       | —            |   |
| Deferred income taxes                                                                                     |   | —     |       | 8,631,000         |   |
| Change in operating assets and liabilities                                                                |   |       |       |              |   |
| (Increase) decrease in assets:                                                                            |   |       |       |              |   |
| Accounts receivable                                                                                       |   | —     |       | 384,000           |   |
| Interest receivable                                                                                       |   | 3,000      |       | 3,000             |   |
| Prepaid expenses and other current assets                                                                 |   | (614,000   | )          | (299,000          | )      |
| Other assets                                                                                              |   | 5,000      |       | 2,000             |   |
| Increase (decrease) in liabilities:                                                                       |   |       |       |              |   |
| Accounts payable                                                                                          |   | 967,000    |       | (20,000           | )      |
| Accrued expenses                                                                                          |   | (273,000   | )          | (451,000          | )      |
| Other liabilities                                                                                         |   | (11,000    | )          | (7,000            | )      |
| Net cash used in operating activities                                                                     |   | (2,042,000 | )          | (1,214,000        | )      |
|                                                                                                      |   |       |       |              |   |
| Cash flows from investing activities:                                                                     |   |       |       |              |   |
| Sales of marketable securities                                                                            |   | 1,242,000  |       | 9,723,000         |   |
| Decrease in cash held in restricted investment                                                            |   | 13,000     |       | 12,000            |   |
| Net cash provided by investing activities                                                                 |   | 1,255,000  |       | 9,735,000         |   |
|                                                                                                      |   |       |       |              |   |
| Cash flows from financing activities                                                                      |   | —     |       | —            |   |
| Cash provided by (used in) discontinued operations                                                        |   | 192,000    |       | (10,350,000       | )      |
| Change in cash and cash equivalents                                                                       |   | (595,000   | )          | (1,829,000        | )      |
| Cash and cash equivalents at beginning of period                                                          |   | 732,000    |       | 3,194,000         |   |
| Cash and cash equivalents at end of period                                                                |   | $          | 137,000    |              | $      | 1,365,000 |   |

 

See accompanying notes to consolidated financial statements

 

5

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**BIG CITY RADIO, INC.**

**Consolidated Statements of Stockholders’ Equity(Deficiency)**

**(Unaudited)**

 
|                                        |   |             |   |       |    | **Additional  paid-in  capital** |   | **Other  comprehensive  loss** |   | **Accumulated  deficit** |   | **Total**  |   |
|---------------------------------------------|--------|------------------|--------|------------|---------|----------------------------------|--------|--------------------------------|--------|--------------------------|--------|------------|--------|
|                                        |   | **Common stock** |   |       |    |                             |   |
|                                        |   | **Shares**       |   | **Amount** |    |                             |   |                           |   |
|                                        |   |             |   |       |    |                             |   |                           |   |                     |   |       |   |
| Balance at December 31,2002                 |   | 14,477,275       |   | $          | 145,000 |                             | $      | 29,492,000                     |   | $                        | (8,000 | )          | $      | (134,986,000 | ) | $ | (105,357,000 | ) |
| Unrealized income on  marketable securities |   |             |   |       |    |                             |   | 8,000                          |   | —                   |   | 8,000      |   |
| Net loss                                    |   | —           |   | —     |    | —                           |   | —                         |   | (9,406,000               | )      | (9,406,000 | )      |
| Total comprehensive loss                    |   | —           |   | —     |    | —                           |   | 8,000                          |   | (9,406,000               | )      | (9,398,000 | )      |
|                                        |   |             |   |       |    |                             |   |                           |   |                     |   |       |   |
| Balance at March 31, 2003                   |   | 14,477,275       |   | $          | 145,000 |                             | $      | 29,492,000                     |   | $                        | — |       | $      | (144,392,000 | ) | $ | (114,755,000 | ) |

 

See accompanying notes to consolidated financial statements.

 

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**BIG CITYRADIO, INC.**

 

**NOTES****TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****                   Organization, Business and Basis ofPresentation**

 

Big City Radio, Inc.(“Big City Radio” or the “Company”, formerly Odyssey Communications, Inc.) wasincorporated in Delaware on August 2, 1994 and commenced operations onJanuary 1, 1995. On May 30, 1996, Big City Radio merged with QBroadcasting, Inc., with Big City Radio being the surviving company. Big CityRadio and Q were owned 94% and 100%, respectively by Stuart and AnitaSubotnick. Accordingly, the merger has been accounted for as a combination ofentities under common control. As a result, the combination of Big City Radioand Q was effected utilizing historical costs. At the date of conversion from SCorporation status to C Corporation status, the Company formed five whollyowned subsidiaries, Big City Radio - LA, LLC; Big City Radio - NYC, LLC; BigCity Radio - CHI, LLC; WRKL Rockland Radio, LLC; and Odyssey TravelingBillboards, Inc.

 

The Company owns andoperates radio broadcasting stations. As of March 31, 2003, the Company owned three FM stations in SouthernCalifornia, KLYY-FM, Arcadia, KVYY-FM, Ventura and KSYY-FM, Fallbrook. In theNew York area, the Company owned four radio properties, WYNY-FM, BriarcliffManor, New York, WWZY-FM, Long Branch, New Jersey, WWXY-FM, Hampton Bays, NewYork and WWYY-FM, Belvidire, New Jersey. In the Chicago area, the Company ownedfive radio properties, WXXY-FM Highland Park, Illinois, WYXX-FM Morris,Illinois, WKIE-FM Arlington Heights, Illinois, WKIF-FM Kankakee, Illinois, andWDEK-FM DeKalb, Illinois. Big City Radio is seeking to sell all of its radiostations in an auction process that it announced on November 4, 2002.  Between December 24, 2002 and January 2,2003, Big City Radio signed four, separate definitive asset purchase agreementsto sell eleven of its twelve FCC FM licenses. Big City Radio is selling theseradio stations to raise the funds necessary to pay all principal of, andaccrued and unpaid interest on, its 11 1/4% senior discount notes due2005. Noteholders have accelerated payment of the senior notes as a result ofdefaults by Big City Radio under these notes. Three of these transactions haveclosed subsequent to March 31, 2003 (see note 8). As discussed in note 6, theradio station operations have been treated as discontinued operations.

 

The Company owns HIHAcquisition, Inc. (“HIH”) which owns the TodoAhora.com website, and also inturn owns United Publishers of Florida, Inc., (“UPF”) which published the Hispanicmusic trade magazine, “Disco,” operated a graphic design business, and owns theLatinMusicTrends.com website. In response to the continued downturn in themusic industry advertising marketplace, during December 2001 the Company ceasedits internet operations, and during June 2002 the Company ceased the operationof UPF, and wrote-off the remaining $108,000 of goodwill associated with UPF.As discussed in Note 6, the Company has treated these operations asdiscontinued operations. The Company also owns Independent Radio Reps, LLC(“IRR”), an in-house rep firm to represent it in generating national Hispanicradio business. As a result of the proposed sales of the radio stationsdetailed above, IRR ceased operations during the quarter ended March 31, 2003.

 

The accompanyingconsolidated financial statements include the accounts of Big City Radio andall its subsidiaries. All significant intercompany accounts and transactionshave been eliminated. As a result of the Company’s decisions during 2002 toclose down publishing operations and to sell the radio stations, the publishingand radio station operations of the Company have been presented as discontinuedoperations (see note 6).

 

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosures of contingentassets and liabilities at the date of the financial statements and the

 

7

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reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates and the assumptions could prove to be inaccurate.

 

The accompanying interimconsolidated financial statements have been prepared without audit pursuant tothe rules and regulations of the Securities and Exchange Commission. Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principles have beencondensed or omitted pursuant to such rules and regulations, although theCompany believes that the disclosures made are adequate to make the informationpresented not misleading. These financial statements should be read inconjunction with the consolidated financial statements and related footnotesincluded in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2002 (the “2002 Form 10-K”). In the opinion of management all adjustments, consisting only of normalrecurring adjustments, necessary to present fairly in all material respects thefinancial position of the Company as of March 31, 2003 and the results of itsoperations for the three months ended March 31, 2003 and 2002, and its cashflows for the three months ended March 31, 2003 and 2002 have beenincluded.  The results of operations forthe interim period are not necessarily indicative of the results which may berealized for the full year.

 

On January 1, 2002, theCompany adopted the provisions of SFAS 142 and stopped amortizing its FCCbroadcast licenses as these intangible assets were determined to have anindefinite useful life. Accordingly, deferred tax liabilities related to theseintangible assets could no longer be utilized to support the realization ofdeferred tax benefits. The Company has restated its quarterly results to recordan additional deferred tax valuation allowance of approximately $8.6 millionduring the quarter ended March 31, 2002 and additional tax expense relating to theincrease in the deferred tax liability of approximately $0.5 million during thequarters ended March 31, 2002, June 30, 2002, September 30, 2002. Furthermore,the March 31, 2002 quarterly information has been restated to reflect thereclassification of the Company’s radio station and publishing assets asdiscontinued operations (see note 6).

 

**2.****                   Earnings per Share**

 

Basic earnings per shareexcludes all dilutive securities.  It isbased upon the weighted average number of common shares outstanding during theperiod.  Diluted earnings per sharereflects the potential dilution that would occur if securities to issue commonstock were exercised or converted into common stock.  In calculating diluted earnings per share, no potential shares ofcommon stock are included in the computation when a loss from continuingoperations available to common stockholders exists.  For  the three monthsended March 31, 2003 and 2002, the Company had losses from continuingoperations.  The Company hadantidilutive options amounting to 1,313,000****and 1,835,000 at March 31, 2003 and 2002,respectively, which were not included in the computation of diluted EPS. Inaddition, if an acquisition by any person, group of affiliated persons orentity of all of the stock of the Company or of all or substantially all of theassets of the Company occurs on or prior to November 1, 2004 at a price of atleast $4.00 per share of Class A Common Stock, the former stockholders of HIHwill be entitled to receive 600,000 shares of the Company’s Class A CommonStock.

 

**3.****                   Accounting for Stock Options**

 

On January 1, 1996, theCompany adopted Statement of Financial Accounting Standards (SFAS) No. 123,“Accounting for Stock-Based Compensation,” which permits entities to recognizeas expense over the vesting period the fair value of all stock-based awards onthe date of grant. Alternatively, SFAS No. 123 allows entities to continue toapply the provisions of APB Opinion No. 25 and provide pro forma net income anddisclosure for employee stock grants made in 1995, 1996 and future years as ifthe fair-value-based method defined in SFAS No. 123 had been applied. TheCompany has elected to continue to apply the provisions of APB Opinion No. 25and provide the pro forma disclosure provisions of SFAS No. 123.

 

8

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For the three monthsended March 31, 2002 and 2003, had the Company determined compensation costbased on the fair value at the grant date for its stock options under SFAS No.123, the Company’s net loss would have been increased to the pro forma amountsindicated below:

 

|                                                                                     |   | **Three months Ended  March 31,** |        |
|------------------------------------------------------------------------------------------|--------|-----------------------------------|-------------|
|                                                                                     |   | **2003**                          |        | **2002** |   |
| Net loss:                                                                                |   |                              |        |   |   |
| As reported                                                                              |   | $                                 | (9,406,000  | ) | $ | (16,506,000 | ) |
| Stock based compensation expense determinedunder fair value based method  for all awards |   | (898,000                          | )           | (1,080,000 | ) |
| Pro forma                                                                                |   | $                                 | (10,304,000 | ) | $ | (17,586,000 | ) |
| Loss per share:                                                                          |   |                              |        |   |   |
| As reported                                                                              |   | $                                 | (0.65       | ) | $ | (1.14 | ) |
| Pro forma                                                                                |   | $                                 | (0.71       | ) | $ | (1.21 | ) |

 

**4.****                  ****Recent Accounting Pronouncements**

 

*Business Combinations and Goodwill and Other IntangibleAssets*

 

In accordance with SFASNo.142, the Company discontinued the amortization of goodwill and intangibleassets (comprised solely of broadcast license) effective January 1, 2002.  During the quarter ended March 31, 2002, theCompany completed the transitional impairment test, which did not result inimpairment of recorded intangible assets. In June 2002, the Company ceased theoperation of UPF, and wrote off the remaining $108,000 of goodwill associatedwith UPF. During the fourth quarter of 2002, the Company made the decision tosell its broadcast licenses. In accordance with SFAS No.144, these licenses arereported as assets held for sale. The Company compared the licenses’ carryingvalue to their fair value, less the estimated cost to sell them. This review ofthe carrying value of its intangible assets resulted in a charge of $630,000relating to the impairment in value of some of its FCC broadcast licenses. Asof March 31, 2003 and December 31, 2002, the Company has no remainingun-amortized goodwill, and the carrying amount of unamortized intangible assetsare as follows:

 

|               |   | **March 31, 2003** |       | **December 31, 2002** |   |
|--------------------|--------|--------------------|------------|-----------------------|--------|
| Broadcast licenses |   | $                  | 76,325,000 |                  | $      | 76,325,000 |   |
|                    |        |                    |            |                       |        |  |  |

 

As discussed more fullyin note 6, the Broadcast licenses above relate to the radio stations to besold. Therefore, these assets are reported as assets held for sale at March 31,2003 and December 31, 2002.

 

9

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*Accounting for Costs Associated with Exit and DisposalActivities*

 

In June 2002, theFinancial Accounting Standards Board issued FASB Statement No. 146, *Accountingfor Costs Associated with Exit or Disposal Activities (“SFAS 146”)*which nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, *LiabilityRecognition for Certain Employee Termination Benefits and Other Costs to Exitan Activity* (*including CertainCosts Incurred in a Restructuring*) (“Issue 94-3”).

 

The principal differencebetween this Statement and Issue 94-3 relates to its requirements forrecognition of a liability for a cost associated with an exit or disposalactivity. This Statement requires that a liability for a cost associated withan exit or disposal activity be recognized when the liability is incurred.Under Issue 94-3, a liability for an exit cost as defined in Issue 94-3 wasrecognized at the date of an entity’s commitment to an exit plan. Under SFAS146, a commitment to a plan, by itself, does not create a present obligation toothers that meets the definition of a liability. SFAS 146 also establishes thatfair value is the objective for initial measurement of the liability.

 

The Company is requiredto adopt SFAS 146 on exit and disposal activities that are initiated afterDecember 31, 2002, with early application encouraged. The Company has adoptedSFAS No. 146 in relation to exit and disposal activities initiated afterSeptember 30, 2002.

 

*Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others*

 

In November 2002, theFASB issued Interpretation No. 45, *Guarantor’s Accounting and Disclosure Requirementsfor Guarantees, Including Indirect Guarantees of Indebtedness of Others*(“FIN45”)*,*which addresses the disclosure to be made by a guarantor in its interim andannual financial statements about its obligations under guarantees.  The disclosure requirements are effectivefor interim and annual financial statements ending after December 15, 2002.

 

FIN 45 also requires therecognition of a liability by a guarantor at the inception of certain guarantees.  FIN 45 requires the guarantor to recognize aliability for the non-contingent component of a guarantee, which is theobligation to stand ready to perform in the event that specified triggeringevents or conditions occur.  The initialmeasurement of this liability is the fair value of the guarantee at inception.The recognition of the liability is required even if it is not probable thatpayments will be required under the guarantee or if the guarantee was issuedwith a premium payment or as part of a transaction with multiple elements.  The initial recognition and measurementprovisions are effective for all guarantees within the scope of FIN 45 issuedor modified after December 31, 2002.

 

As noted above we haveadopted the disclosure requirements of FIN 45 and will apply the recognitionand measurement provisions for all guarantees entered into or modified afterDecember 31, 2002.  To date we have notentered into any guarantees.

 

*Consolidation of Variable InterestEntities*

 

In February 2003, theFASB issued Interpretation No. 46, *Consolidation of Variable Interest Entities*(“FIN46”), which addresses the consolidation by business enterprises of variableinterest entities, which have one or both of the following characteristics: (1)the equity investment at risk is not sufficient to permit the entity to financeits activities without additional financial support from other parties, or (2)the equity investors lack one or more of the following essentialcharacteristics of a controlling financial interest: (a) the direct or indirectability to make decisions about the entity’s activities through voting orsimilar rights, (b) the obligation to absorb the expected losses of the entityif they occur, or (c) the right to receive the expected residual returns of theentity if they occur.  FIN 46 will havea significant effect on existing practice because it

 

10

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requires existingvariable interest entities to be consolidated if those entities do noteffectively disburse risks among parties involved.  In addition, FIN 46 contains detailed disclosurerequirements.  FIN 46 appliesimmediately to variable interest entities created after January 31, 2003, andto variable interest entities in which an enterprise obtains an interest afterthat date.  It applies in the firstfiscal year or interim period beginning after June 15, 2003, to variableinterest entities in which an enterprise holds a variable interest that itacquired before February 1, 2003.  ThisInterpretation may be applied prospectively with a cumulative-effect adjustmentas of the date on which it is first applied or by restating previously issuedfinancial statements for one or more years with a cumulative-effect adjustmentas of the beginning of the first year restated. Management expects theapplication of this interpretation will not have a material effect on theCompany’s consolidated financial statements.

 

**5.****                   SeniorDiscount Notes**

 

*Offering of Senior Discount Notes*

 

The Company completed aprivate placement of $174.0 million aggregate principal amount, at maturity, of11.25% Senior Discount Notes due 2005 (the “Notes”) on March 17, 1998 (the“Notes Offering”), generating approximately $125.4 million of gross proceedsfor the Company of which the Company used approximately $32.6 million to repayoutstanding indebtedness under its previous credit facility.  The Company has used the proceeds of theNotes Offering to finance the acquisition costs of radio station properties andthe remaining proceeds were used for general working capital purposes.  On March 15, 2001, the Notes commencedaccruing cash interest at 11.25% per annum. Semi-annual cash interest paymentsof $9.8 million commenced on September 15, 2001. (For a discussion of theCompany’s current liquidity issues, including events of default under theIndenture governing the Notes and the acceleration of the principal of andinterest on the Notes, see note 8 below.)

 

*Subsidiary Guarantors*

 

Pursuant to the terms ofthe indenture relating to the Notes (the “Indenture”), the direct subsidiariesof Big City Radio, Inc.– consisting of Odyssey Traveling Billboards, Inc., BigCity Radio-NYC, L.L.C., Big City Radio-LA, L.L.C., Big City Radio-CHI, L.L.C.(collectively, the “Subsidiary Guarantors”) have, jointly and severally, fullyand unconditionally guaranteed the obligations of Big City Radio, Inc. withrespect to the Notes.

 

All of the then existingSubsidiary Guarantors except Odyssey Traveling Billboards, Inc. (the “StationSubsidiaries”), were created in December 1997 as special purpose Delawarelimited liability companies formed for the sole purpose of holding theCompany’s Federal Communications Commission (“FCC”) radio licenses.  The operating agreements for the StationSubsidiaries limit the activities of these companies to owning the FCC radiolicenses.  Odyssey Traveling Billboards,Inc. owns and operates certain vehicles used to advertise for the Company’sradio stations.  Because the StationSubsidiaries have entered into assignment and use agreements with the Companywhereby the Company manages and directs the day-to-day operations of the radiostations, pays all expenses and capital costs incurred in operating the radiostations, and retains all advertising and other receipts collected in operatingthe radio stations, the Station Subsidiaries have no income or expenses otherthan the amortization of the FCC licenses. Odyssey Traveling Billboards, Inc.is similarly a special purpose corporation with no income and only expenses.

 

The covenants in theNotes and the Indenture do not restrict the ability of the Station Subsidiariesto make cash distributions to the Company.

 

Accordingly, set forthbelow is certain condensed consolidating and consolidated financial informationfor the parent company, Big City Radio, Inc. and for the Subsidiary Guarantors,with consolidation adjustments, as of March 31, 2003 and for the three monthsended March 31, 2002 and 2003.

 

11

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**Consolidating Balance Sheet**

**As of March 31, 2003**

 
|                                                        |   | **Parent**   |       | **Subsidiary  Guarantors** |   | **Sub-total** |   | **Consolidation  Adjustments** |        | **Consolidated** |   |
|-------------------------------------------------------------|--------|--------------|------------|----------------------------|--------|---------------|--------|--------------------------------|-------------|------------------|--------|
| Assets                                                      |   |         |       |                       |   |          |   |                           |        |             |   |
| Current Assets                                              |   |         |       |                       |   |          |   |                           |        |             |   |
| Cash and cash equivalents                                   |   | $            | 756,000    |                       | $      | —        |   | $                              | 756,000     |             | $      | — |   | $ | 756,000 |   |
| Cash held in investment, restricted                         |   | 1,072,000    |       | —                     |   | 1,072,000     |   | —                         |        | 1,072,000        |   |
| Accounts receivable, net of allowance                       |   | 443,000      |       | —                     |   | 443,000       |   | —                         |        | 443,000          |   |
| Interest receivable                                         |   | 3,000        |       | —                     |   | 3,000         |   | —                         |        | 3,000            |   |
| Assets held for sale                                        |   | 3,246,000    |       | 76,325,000                 |   | 79,571,000    |   | —                         |        | 79,571,000       |   |
| Prepaid expenses and other current assets                   |   | 926,000      |       | —                     |   | 926,000       |   | —                         |        | 926,000          |   |
| Total current assets                                        |   | 6,446,000    |       | 76,325,000                 |   | 82,771,000    |   | —                         |        | 82,771,000       |   |
| Property and equipment, net                                 |   | 340,000      |       | —                     |   | 340,000       |   | —                         |        | 340,000          |   |
| Investment in, and advances to subsidiaries                 |   | 76,325,000   |       | —                     |   | 76,325,000    |   | (76,325,000                    | )           | —           |   |
| Deferred financing fees, net                                |   | 307,000      |       | —                     |   | 307,000       |   | —                         |        | 307,000          |   |
| Other assets                                                |   | 165,000      |       | —                     |   | 165,000       |   | —                         |        | 165,000          |   |
| Total assets                                                |   | $            | 83,583,000 |                       | $      | 76,325,000    |   | $                              | 159,908,000 |             | $      | (76,325,000 | ) | $ | 83,583,000 |   |
|                                                        |   |         |       |                       |   |          |   |                           |        |             |   |
| Liabilities and stockholders’ equity (deficiency)      |   |         |       |                       |   |          |   |                           |        |             |   |
| Accounts payable                                            |   | $            | 1,923,000  |                       | $      | —        |   | $                              | 1,923,000   |             | $      | — |   | $ | 1,923,000 |   |
| Accrued expenses                                            |   | 970,000      |       | —                     |   | 970,000       |   | —                         |        | 970,000          |   |
| Senior discount notes                                       |   | 174,000,000  |       | —                     |   | 174,000,000   |   | —                         |        | 174,000,000      |   |
| Interest payable                                            |   | 21,081,000   |       | —                     |   | 21,081,000    |   | —                         |        | 21,081,000       |   |
| Other current liabilities                                   |   | 72,000       |       | —                     |   | 72,000        |   | —                         |        | 72,000           |   |
| Total current liabilities                                   |   | 198,046,000  |       | —                     |   | 198,046,000   |   | —                         |        | 198,046,000      |   |
|                                                        |   |         |       |                       |   |          |   |                           |        |             |   |
| Long-term liabilities                                       |   |         |       |                       |   |          |   |                           |        |             |   |
| Other long-term liabilities                                 |   | 292,000      |       | —                     |   | 292,000       |   | —                         |        | 292,000          |   |
| Intercompany balances                                       |   | —       |       | 88,558,000                 |   | 88,558,000    |   | (88,558,000                    | )           | —           |   |
| Total long-term liabilities                                 |   | 292,000      |       | 88,558,000                 |   | 88,850,000    |   | (88,558,000                    | )           | 292,000          |   |
| Stockholders’ equity (deficiency)                      |   |         |       |                       |   |          |   |                           |        |             |   |
| Preferred and common stock, and additional paid-in  capital |   | 29,637,000   |       | —                     |   | 29,637,000    |   | —                         |        | 29,637,000       |   |
| Accumulated deficit                                         |   | (144,392,000 | )          | (12,233,000                | )      | (156,625,000  | )      | 12,233,000                     |        | (144,392,000     | )      |
| Total liabilities and stockholders’ equity (deficiency |   | $            | 83,583,000 |                       | $      | 76,325,000    |   | $                              | 159,908,000 |             | $      | (76,325,000 | ) | $ | 83,583,000 |   |

 

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**Consolidating Statement of Operations for the threemonths ended March 31, 2002**

 
|                                                                                 |   | **Parent** |        | **Subsidiary  Guarantors** |   | **Sub-total** |   | **Consolidation  Adjustments** |        | **Consolidated** |   |
|--------------------------------------------------------------------------------------|--------|------------|-------------|----------------------------|--------|---------------|--------|--------------------------------|-------------|------------------|--------|
| Net revenues                                                                         |   | $          | —      |                       | $      | —        |   | $                              | —      |             | $      | — |   | $ | — |   |
|                                                                                 |   |       |        |                       |   |          |   |                           |        |             |   |
| Operating expenses:                                                                  |   |       |        |                       |   |          |   |                           |        |             |   |
| Corporate, general and administrative expense                                        |   | 916,000    |        | —                     |   | 916,000       |   | —                         |        | 916,000          |   |
| Depreciation and amortization                                                        |   | 30,000     |        | —                     |   | 30,000        |   | —                         |        | 30,000           |   |
| Total operating expenses..                                                           |   | 946,000    |        | —                     |   | 946,000       |   | —                         |        | 946,000          |   |
| Operating loss                                                                       |   | (946,000   | )           | —                     |   | (946,000      | )      | —                         |        | (946,000         | )      |
|                                                                                 |   |       |        |                       |   |          |   |                           |        |             |   |
| Other income (expenses):                                                             |   |       |        |                       |   |          |   |                           |        |             |   |
| Interest income                                                                      |   | 74,000     |        | —                     |   | 74,000        |   | —                         |        | 74,000           |   |
| Other, net                                                                           |   | 16,000     |        | —                     |   | 16,000        |   | —                         |        | 16,000           |   |
| Total other expenses                                                                 |   | 90,000     |        | —                     |   | 90,000        |   | —                         |        | 90,000           |   |
|                                                                                 |   |       |        |                       |   |          |   |                           |        |             |   |
| Loss before income tax expense, and equity in losses  of  Subsidiary Guarantors |   | (856,000   | )           | —                     |   | (856,000      | )      | —                         |        | (856,000         | )      |
| Income tax expense, net                                                              |   | (8,631,000 | )           | —                     |   | (8,631,000    | )      | —                         |        | (8,631,000       | )      |
| Loss before equity in losses of Subsidiary Guarantors                                |   | (9,487,000 | )           | —                     |   | (9,487,000    | )      | —                         |        | (9,487,000       | )      |
| Equity in net losses of Subsidiary Guarantors                                        |   | —     |        | —                     |   | —        |   | —                         |        | —           |   |
| Loss on discontinued operations                                                      |   | (7,019,000 | )           | —                     |   | (7,019,000    | )      | —                         |        | (7,019,000       | )      |
| Net loss                                                                             |   | $          | (16,506,000 | )                          | $      | —        |   | $                              | (16,506,000 | )                | $      | — |   | $ | (16,506,000 | ) |

 

**ConsolidatingStatement of Operations for the three months ended March 31, 2003**

 
|                                                                                 |   | **Parent** |   | **Subsidiary  Guarantors** |   | **Sub-total** |   | **Consolidation  Adjustments** |   | **Consolidated** |   |
|--------------------------------------------------------------------------------------|--------|------------|--------|----------------------------|--------|---------------|--------|--------------------------------|--------|------------------|--------|
| Net revenues                                                                         |   | $          | — |                       | $      | —        |   | $                              | — |             | $      | — |   | $ | — |   |
|                                                                                 |   |       |   |                       |   |          |   |                           |   |             |   |
| Operating expenses:                                                                  |   |       |   |                       |   |          |   |                           |   |             |   |
| Corporate, general and administrative expenses                                       |   | 2,178,000  |   | —                     |   | 2,178,000     |   | —                         |   | 2,178,000        |   |
| Depreciation and amortization                                                        |   | 30,000     |   | —                     |   | 30,000        |   | —                         |   | 30,000           |   |
| Total operating expenses.                                                            |   | 2,208,000  |   | —                     |   | 2,208,000     |   | —                         |   | 2,208,000        |   |
| Operating loss                                                                       |   | (2,208,000 | )      | —                     |   | (2,208,000    | )      | —                         |   | (2,208,000       | )      |
|                                                                                 |   |       |   |                       |   |          |   |                           |   |             |   |
| Other income (expenses):                                                             |   |       |   |                       |   |          |   |                           |   |             |   |
| Interest income                                                                      |   | 5,000      |   | —                     |   | 5,000         |   | —                         |   | 5,000            |   |
| Other, net                                                                           |   | 46,000     |   | —                     |   | 46,000        |   | —                         |   | 46,000           |   |
| Total other income                                                                   |   | 51,000     |   | —                     |   | 51,000        |   | —                         |   | 51,000           |   |
|                                                                                 |   |       |   |                       |   |          |   |                           |   |             |   |
| Loss before income tax expense, and equity in losses  of  Subsidiary Guarantors |   | (2,157,000 | )      | —                     |   | (2,157,000    | )      | —                         |   | (2,157,000       | )      |
| Income tax expense, net                                                              |   | —     |   | —                     |   | —        |   | —                         |   | —           |   |
| Loss before equity in losses of Subsidiary Guarantors                                |   | (2,157,000 | )      | —                     |   | (2,157,000    | )      | —                         |   | (2,157,000       | )      |
| Equity in net losses of Subsidiary Guarantors                                        |   | —     |   | —                     |   | —        |   | —                         |   | —           |   |
| Loss on discontinued operations                                                      |   | (7,249,000 | )      | —                     |   | (7,249,000    | )      | —                         |   | (7,249,000       | )      |
| Net loss                                                                             |   | (9,406,000 | )      | —                     |   | (9,406,000    | )      | —                         |   | (9,406,000       | )      |
|                                                                                      |        |            |        |                            |        |               |        |                                |        |                  |        |  |  |  |  |  |

 

13

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**Consolidating Statement of Cash Flows for the threemonths ended March 31, 2002**

 
|                                           |   | **Parent**  |       | **Subsidiary  Guarantors** |   | **Sub-total** |   | **Consolidation  Adjustments** |       | **Consolidated** |   |
|------------------------------------------------|--------|-------------|------------|----------------------------|--------|---------------|--------|--------------------------------|------------|------------------|--------|
| Net cash used in operating activities          |   | $           | (1,214,000 | )                          | $      | —        |   | $                              | (1,214,000 | )                | $      | — |   | $ | (1,214,000 | ) |
| Cash flows from investing activities:          |   |        |       |                       |   |          |   |                           |       |             |   |
| Sales of marketable securities                 |   | 9,723,000   |       | —                     |   | 9,723,000     |   | —                         |       | 9,723,000        |   |
| Decrease in cash held in restricted investment |   | 12,000      |       | —                     |   | 12,000        |   | —                         |       | 12,000           |   |
| Net cash provided by investing activities      |   | 9,735,000   |       | —                     |   | 9,735,000     |   | —                         |       | 9,735,000        |   |
| Net cash provided by financing activities      |   | —      |       | —                     |   | —        |   | —                         |       | —           |   |
| Cash flows used in discontinuing operations.   |   | (10,350,000 | )          | —                     |   | (10,350,000   | )      | —                         |       | (10,350,000      | )      |
| Change in cash and cash equivalents            |   | (1,829,000  | )          | —                     |   | (1,829,000    | )      | —                         |       | (1,829,000       | )      |
| Cash and cash equivalents at beginning of year |   | 3,194,000   |       | —                     |   | 3,194,000     |   | —                         |       | 3,194,000        |   |
| Cash and cash equivalents at end of period     |   | $           | 1,365,000  |                       | $      | —        |   | $                              | 1,365,000  |             | $      | — |   | $ | 1,365,000 |   |

 

**Consolidating Statement of Cash Flows for the threemonths ended March 31, 2003**

 
|                                            |   | **Parent** |       | **Subsidiary  Guarantors** |   | **Sub-total** |   | **Consolidation  Adjustments** |       | **Consolidated** |   |
|-------------------------------------------------|--------|------------|------------|----------------------------|--------|---------------|--------|--------------------------------|------------|------------------|--------|
| Net cash used in operating activities           |   | $          | (2,042,000 | )                          | $      | —        |   | $                              | (2,042,000 | )                | $      | — |   | $ | (2,042,000 | ) |
| Cash flows from investing activities:           |   |       |       |                       |   |          |   |                           |       |             |   |
| Sales of marketable securities                  |   | 1,242,000  |       | —                     |   | 1,242,000     |   | —                         |       | 1,242,000        |   |
| Decrease in cash held in restricted investment  |   | 13,000     |       | —                     |   | 13,000        |   | —                         |       | 13,000           |   |
| Net cash provided by investing activities       |   | 1,255,000  |       | —                     |   | 1,255,000     |   | —                         |       | 1,255,000        |   |
| Net cash provided by financing activities       |   | —     |       | —                     |   | —        |   | —                         |       | —           |   |
| Cash flows provided by discontinuing operations |   | 192,000    |       | —                     |   | 192,000       |   | —                         |       | 192,000          |   |
| Change in cash and cash equivalents             |   | (595,000   | )          | —                     |   | (595,000      | )      | —                         |       | (595,000         | )      |
| Cash and cash equivalents at beginning of year  |   | 732,000    |       | —                     |   | 732,000       |   | —                         |       | 732,000          |   |
| Cash and cash equivalents at end of period      |   | $          | 137,000    |                       | $      | —        |   | $                              | 137,000    |             | $      | — |   | $ | 137,000 |   |

 

This summarized financialinformation for the Subsidiary Guarantors has been prepared from the books andrecords maintained by the Subsidiary Guarantors and the Company.  The summarized financial information may notnecessarily be indicative of the results of operations or financial positionhad the Subsidiary Guarantors operated as independent entities.

 

**6.****                   DiscontinuedOperations**

 

As described more fullyin Note 7, on November 4, 2002, Big City Radio announced its intention toundertake an auction sale of all of its radio stations. This auction processhas, to date, resulted in the asset disposition transactions detailed below,which will result in the sale of eleven of the twelve FCC licenses owned by theCompany. Its radio station operations have been presented as discontinuedoperations. The Company’s consolidated financial statements for all periodspresented have been adjusted to reflect the radio station operations asdiscontinued operations in accordance with SFAS No.144.

 

Summarized financialinformation for the discontinued radio operations is as follows:

 

14

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**Radio operations**

 
|                                        |   | **March 31,  2003** |       | **December  31, 2002** |   |
|---------------------------------------------|--------|---------------------|------------|------------------------|--------|
| Property  and equipment, net                |   | $                   | 3,246,000  |                   | $      | 3,246,000 |   |
| Intangibles,  net                           |   | 76,325,000          |       | 76,325,000             |   |
| Net  assets - discontinued radio operations |   | $                   | 79,571,000 |                   | $      | 79,571,000 |   |

 
|                                                                  |   | **For the three months  ended March 31,** |       |
|-----------------------------------------------------------------------|--------|-------------------------------------------|------------|
|                                                                  |   | **2003**                                  |       | **2002** | ** ** |
|                                                                  |   |                                      |       |   |   |
| Gross revenues                                                        |   | $                                         | 1,171,000  |   | $ | 3,620,000 |   |
| Less commissions and fees                                             |   | 28,000                                    |       | 291,000 |   |
| Net revenues                                                          |   | 1,143,000                                 |       | 3,329,000 |   |
| Operating expenses:                                                   |   |                                      |       |   |   |
| Stations operating expenses, excluding depreciation  and amortization |   | 2,275,000                                 |       | 4,205,000 |   |
| Depreciation and amortization                                         |   | 6,000                                     |       | 367,000 |   |
| Total operating expenses                                              |   | 2,281,000                                 |       | 4,572,000 |   |
| Operating loss from discontinued operations                           |   | (1,138,000                                | )          | (1,243,000 | ) |
| Other income (expenses):                                              |   |                                      |       |   |   |
| Interest expense                                                      |   | (6,236,000                                | )          | (4,992,000 | ) |
| Other, net                                                            |   | 125,000                                   |       | (71,000 | ) |
| Total other expense                                                   |   | (6,111,000                                | )          | (5,063,000 | ) |
| Loss before income tax                                                |   | (7,249,000                                | )          | (6,306,000 | ) |
| Income tax expense                                                    |   | —                                    |       | 500,000 |   |
| Loss from discontinued operations                                     |   | $                                         | (7,249,000 | ) | $ | (6,806,000 | ) |

 

At March 31, 2003 andDecember 31, 2002,  the Company’sproperty and equipment and intangible assets from the discontinued operationswere reported as assets held for sale.

 

On December 23, 2002, theCompany entered into an asset purchase agreement to sell its radio stationsKLYY-FM Arcadia, California, KSYY-FM Fallbrook, California and KVYY-FM Ventura,California to Entravision Communications Corporation for a combined purchaseconsideration of $100 million in cash and 3,766,478 shares of Entravision’sClass A Common Stock. This sale was completed on April 16, 2003. On January 15,2003, Entravision and Big City Radio entered into a time brokerage agreementfollowing clearance of the asset sale under federal antitrust law. Under theagreement, Entravision provided programming and related services to thestations it purchased from Big City Radio through the date of completion of theasset sale.  In addition Entravision isentitled to revenue and responsible for certain operating expenses.  The Company has recorded the fee receivedrelated to the time brokerage agreement as revenue.

 

On December 30, 2002, theCompany entered into an asset purchase agreement to sell its radio stationsWYNY-FM Briarcliff Manor, New York, WWXY-FM Hampton Bays, New York, WWYY-FMBelvidere, New Jersey and WWZY-FM Long Branch, New Jersey to NassauBroadcasting Holdings, Inc. for a total consideration of $43 million in cash.This sale was completed on April 2, 2003.

 

On December 31, 2002, theCompany entered into an asset purchase agreement to sell its radio stationsWDEK-FM DeKalb, Illinois, WKIE-FM Arlington Heights, Illinois and WKIF-FMKankakee, Illinois to Spanish Broadcasting Systems, Inc. (SBS) for a totalconsideration of $22 million in cash. This sale was completed on April 4, 2003.On December 31, 2002, SBS and Big City Radio entered into a time brokerageagreement. Under the agreement, SBS provided programming and related servicesto the stations it purchased from Big City Radio through the date of completionof the asset sale.  In addition SBS isentitled to revenue and responsible for certain operating expenses.  The Company has recorded the fee receivedrelated to the time brokerage agreement as revenue.

 

15

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On January 2, 2003, theCompany entered into an asset purchase agreement to sell its radio stationWXXY-FM Highland Park, Illinois to Hispanic Broadcasting Corporation (HBC) fora total consideration of $32.875 million in cash. The sale is subject toinitial FCC approval for the assignment of the FCC licenses. On January 10,2003, HBC and Big City Radio entered into a time brokerage agreement. Under theagreement, HBC is providing programming and related services to the stations itis purchasing from Big City Radio until the asset sale is completed or theasset purchase agreement is terminated. In addition HBC is entitled to revenue and responsible for certainoperating expenses.  The Company hasrecorded the fee received related to the time brokerage agreement asrevenue.  On May 2, 2003, the Companyand HBC amended these agreements resulting in the sale, on that date, ofcertain non-license assets used in the operation of the radio station. On thisdate, HBC paid $29.875 million to Big City Radio. The transfer of the licenseassets remain subject to initial FCC approval for the assignment of the FCClicenses. Under the terms of the Second Amendment, the remaining $3 millionwill be paid on the earlier of (i) the date of receipt of initial FCC approvalof the transfer of the FCC station license to HBC, or (ii) if HBC has notassigned the Agreement to an unaffiliated third party prior to the eighteenthmonth anniversary date of the Second Amendment, then the eighteenth month date.

 

During June 2002, theCompany discontinued the operation of United Publishing of Florida (UPF) (whichwas comprised solely of publishing operations), and wrote-off the remaining$108,000 of goodwill associated with its acquisition. The decision to terminatepublishing operations was made in response to the continued downturn in themusic industry advertising marketplace. As UPF’s publishing operationrepresented the only publishing operations of Big City Radio, Inc., theCompany’s consolidated financial statements for all periods presented have beenadjusted to reflect the publishing operations as discontinued operations inaccordance with SFAS No.144.

 

Summarized financialinformation for the discontinued publishing operations is as follows:

 
|                               |   | **Three  Months Ended  March 31,** |   |
|------------------------------------|--------|------------------------------------|--------|
| **Publishing operations**          |   | **2003**                           |   | **2002** |   |
|                               |   |                               |   |   |   |
| Net  revenues                      |   | $                                  | — |   | $ | 86,000 |   |
| Operating  expenses                |   | —                             |   | 299,000 |   |
| Loss  from discontinued operations |   | $                                  | — |   | $ | (213,000 | ) |

 

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Thefollowing table summarizes the cash flow information from the discontinuedradio and publishing operations:

 
|                                                                                              |   | **For the three months  ended March 31,** |       |
|---------------------------------------------------------------------------------------------------|--------|-------------------------------------------|------------|
|                                                                                              |   | **2003**                                  |       | **2002** |   |
| Cash flows from operating activities:                                                             |   |                                      |       |   |   |
| Net loss from discontinued operations                                                             |   | $                                         | (7,249,000 | ) | $ | (7,019,000 | ) |
| Adjustments to reconcile net loss to net cash used in  operating activities:                      |   |                                      |       |   |   |
| Depreciation and amortization                                                                     |   | 6,000                                     |       | 373,000 |   |
| Deferred income tax expense                                                                       |   | —                                    |       | 500,000 |   |
| Non cash interest                                                                                 |   | 1,131,000                                 |       | 163,000 |   |
| Loss on disposal of fixed assets                                                                  |   | —                                    |       | 28,000 |   |
| Changes in operating assets and liabilities, net of  acquisitions: (Increase) decrease in assets: |   |                                      |       |   |   |
| Accounts receivable                                                                               |   | 1,551,000                                 |       | 606,000 |   |
| Prepaid expenses and other current assets                                                         |   | (20,000                                   | )          | (46,000 | ) |
| Increase (decrease) in liabilities:                                                               |   |                                      |       |   |   |
| Accounts payable                                                                                  |   | 73,000                                    |       | (26,000 | ) |
| Interest payable                                                                                  |   | 5,098,000                                 |       | (4,961,000 | ) |
| Other liabilities                                                                                 |   | (401,000                                  | )          | (154,000 | ) |
| Net cash provided by (used in) operating activities                                               |   | 192,000                                   |       | (10,536,000 | ) |
| Cash flows from investing activities:                                                             |   |                                      |       |   |   |
| Purchase of property and equipment                                                                |   | —                                    |       | (109,000 | ) |
| Cash received for disposal of fixed assets                                                        |   | —                                    |       | 295,000 |   |
| Net cash provided by investing activities                                                         |   | —                                    |       | 186,000 |   |
| Cash flow from financing activities                                                               |   | —                                    |       | — |   |
| Cash provided by (used in) discontinued operations                                                |   | $                                         | 192,000    |   | $ | (10,350,000 | ) |

 

**7. Liquidity and Going Concern**

 

Asis described more fully below, events of default exist under the Indenturegoverning Big City Radio’s Notes and Big City Radio has entered into aForbearance Agreement with the holders of approximately $128 million principalamount at maturity of the Notes, although the Forbearance Agreement willnot prevent the trustee under the Indenture or note-holders that are notparties to the Forbearance Agreement from pursuing remedies under theIndenture, as provided therein.

 

Since its inception, BigCity Radio has incurred substantial net operating losses primarily due tobroadcast cash flow deficits associated with the start up of its radio stationoperations. As of March 31, 2003, Big City Radio had incurred a cumulative cashflow deficit of approximately $165 million and a cumulative net loss ofapproximately $144 million. Subsequent to March 31, 2003, the Company completedthree of four planned asset sale transactions, and also amended the fourthtransaction to sell certain non-license assets (see note 8). As a result ofthese transactions, the Company has sold the majority of its operating assets.The Company continues to own one radio station subject to an asset purchaseagreement, and one radio station not subject to an asset purchase agreement inMorris, Illinois. The Company remains a party to certain contracts formerlyused in the operations of the sold radio stations which were not assumed by thepurchasers of its radio properties. Furthermore, also as a result of thecompleted and pending asset sales, the Company has Federal and State income

 

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tax liabilities ofapproximately $9 million, and members of management may be entitled to  payments up to approximately $2.2 million.As a result, Big City expects to generatenet losses for the foreseeable future.

 

As a result of these factors, Big City Radio has met its working capitalneeds primarily through borrowings, including loans from Big City Radio’sprincipal stockholders, Stuart and Anita Subotnick, loans under creditfacilities, and proceeds from the issuance of the senior notes in March 1998. SinceOctober 31, 2001, Big City Radio has met its working capital needs primarilyfrom the proceeds of the sale of Big City Radio’s Phoenix radio stations whichit completed on that date.

 

Big City Radio completed a sale of $174,000,000 aggregate principal amountat maturity of senior notes on March 17, 1998, generating approximately$125,400,000 of gross proceeds. Big City Radio used approximately $32,600,000of these proceeds to repay outstanding indebtedness under a credit facilitywith The Chase Manhattan Bank entered into in 1996. Big City Radio used theproceeds of the senior notes offering to finance the acquisition costs of radiostation properties and for general working capital purpose.

 

Cash interest commenced accruing on the senior notes on March 15, 2001and semi-annual cash interest payments of $9,800,000 commenced on September 15,2001. Big City Radio failed to make the initial semi-annual interest paymentwhen due on September 15, 2001. In order to obtain the funds to make thispayment within the 30-day grace period provided under the indenture, Big CityRadio obtained a bridge loan in the amount of $15,000,000 by the assignment ofBig City Radio’s revolving credit facility from the lender thereunder to a newlender. The bridge loan was secured to the same extent as the revolving creditfacility and bore interest at the rate of LIBOR plus 3.0%, or a base rate plus2.0%, at the option of Big City Radio. Big City Radio used the net proceeds ofthe bridge loan to pay the semi-annual interest on the senior notes due onSeptember 15, 2001, together with applicable additional interest thereon, andto repay $2,235,000 of principal indebtedness and $51,000 of interest incurredunder the promissory note issued to Mr. Subotnick in May 2001. Big City Radio repaidthe bridge loan on October 31, 2001 with a portion of the proceeds from thesale of the Phoenix radio station properties, as discussed below. Big CityRadio currently does not have a credit facility.

 

On October 31,2001, the Company completed the sale of its four Phoenix radio stations toHispanic Broadcasting Corporation for a cash purchase price of $34,000,000. Theindenture governing the senior notes permits Big City Radio to reinvest theapproximately $18,000,000 of proceeds which remained from the sale of thePhoenix stations after the repayment of the bridge loan in broadcast assets fora period up to one year from the date of these asset sales. Thereafter, any netproceeds that are not timely reinvested in broadcast assets must be used to makean offer to repurchase senior notes. As described above, Big City Radio used aportion of the proceeds to repay indebtedness under the bridge loan and to fundthe semi-annual interest payment due on the senior notes on March 15, 2002. BigCity Radio has been using the remaining proceeds to fund its ongoingoperations, and has not reinvested such proceeds in broadcast assets. Big CityRadio did not made the required offer to repurchase senior notes, because itdid not have sufficient cash resources to consummate such an offer. Its failureto make an offer to repurchase constitutes an event of default under theindenture.

 

The Company failed tomake the semi-annual interest payment of $9,800,000 due on the senior notes onSeptember 15, 2002. Big City Radio’s cash resources were insufficient to enableBig City Radio to make the semi-annual interest payment within the 30-day graceperiod provided under the indenture. The grace period expired on October 15,2002, thereby resulting in an additional event of default under the indenture.On October 17, 2002, pursuant to the indenture, holders of the senior notesdelivered an acceleration notice to Big City Radio declaring notice to Big CityRadio declaring the principal and interest on all of the senior notes to be immediatelydue and payable.

 

In light of thesedevelopments, the Company evaluated its strategic alternatives and the mostefficient use of its capital. On November 4, 2002, Big City Radio announced ithad retained Jorgenson Broadcast Brokerage to market and conduct an auctionsale of all of Big City Radio’s radio stations.

 

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On November 13, 2002, BigCity Radio, and the holders of approximately $128,000,000 in principal amountof the senior notes acting through an ad hoc committee of noteholders, enteredinto a forbearance agreement. Under the forbearance agreement, the signatorynoteholders agreed to forebear, through January 31, 2003 (later extended toMarch 31, 2003 and subsequently to April 30, 2003), from taking, initiating orcontinuing any action to enforce the Company’s payment obligations under thesenior notes, including, without limitation, any involuntary bankruptcy filingagainst the Company, or against any property, officers, directors, employees oragents of the Company to collect on or enforce payment of any indebtedness orobligations, or to otherwise assert  anyclaims or causes of action seeking payment under the senior notes, in each casearising under or relating to the payment default or the default arising fromthe failure to make the required offer to repurchase senior notes or otherexisting defaults known to the signatory noteholders as of November 13, 2002.Under the forbearance agreement, the Company agreed to conduct the auction ofits radio stations in a good faith manner designed to sell the assets as soonas practicable for net cash consideration in an amount at least sufficient topay all principal of, and accrued and unpaid interest on, the senior notes. Ifsignatory noteholders reasonably believe that the Company is not conducting theauction process in good faith or is not operating or managing the business andfinancial affairs of the Company in good faith in the ordinary course andconsistent with past practices, they may notify the Company in writing and mayelect to terminate the forbearance agreement. The Company further has agreednot to pay, discharge or satisfy any liability or obligation except forobligations reflected on the Company’s balance sheet as of December 31, 2001 orincurred in the ordinary course since that date which are paid, discharged orsatisfied for fair and equivalent valued in the ordinary course of business andconsistent with past practices. The forbearance agreement will not prevent thetrustee under the indenture or noteholders that are not parties to theforbearance agreement from pursuing remedies under the indenture.

 

Big City Radio and thenoteholders executed an amendment to the forbearance agreement as of January14, 2003, in which the expiration date of the forbearance period was extendedfrom January 31, 2003 through and including March 31, 2003. The forbearanceagreement was further amended to provide that:

 

•                  Big City Radio will pay the noteholders the netcash proceeds of any asset sale within five business days after the completionof such asset sale, until such time as the noteholders have received cash in anamount equal to all principal of, and accrued and unpaid interest on, thesenior notes;

 

•                  the forbearance agreement may be terminated byeither Big City Radio or the ad hoc committee upon written notice if

 

•                  any party to the forbearance agreement fails toperform any of its obligations, or breaches any of its representations,covenants or warranties, under the forbearance agreement,

 

•                  Big City Radio or any party to any asset purchaseagreement for any asset sale which Big City Radio had publicly announced on orbefore January 6, 2003, including the asset sale to Entravision, breaches anyrepresentation, warranty or covenant in such asset purchase agreement, and doesnot cure such breach within ten days, or

 

•                  one or more of the asset purchase agreements isterminated or modified in any material respect; and

 

•                  Big City Radio must immediately notify the ad hoccommittee by written notice of

 

•                  any breach by Big City Radio of the forbearanceagreement,

 

•                  any breach by Big City Radio or any other party ofany of the foregoing asset purchase agreements, whether or not such breach iscurable, and

 

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•                  any termination by Big City Radio or any otherparty thereto of any such asset purchase agreements.

 

In addition, the forbearance agreement provides that it will automaticallyterminate upon the filing of a voluntary or involuntary petition under theinsolvency or bankruptcy laws of the United States or any state with respect toBig City Radio, except that, upon the filing of an involuntary bankruptcypetition by unaffiliated, arm’s length creditors, Big City Radio will have aperiod of ten days to obtain the dismissal or withdrawal of such a petitionbefore the forbearance agreement terminates as a result of the filing.In March 2003, a second amendment to the forbearance agreement was signedextending the forbearance period through and including April 30, 2003. AlthoughBig City Radio and the signatory noteholders have discussed a further extensionof the forbearance period, no such extension has been executed and the Companycannot provide any assurances that a further extension will be forthcoming.Accordingly, the signatory noteholders are presently able to exercise any andall remedies under the Indenture governing the Notes.

 

Between December 23, 2002 and January 2, 2003, Big City Radio signedasset purchase agreements to sell eleven of the twelve FCC radio stations thatit owns. Following the completion of each of three of these asset purchaseagreements in April 2003 and the amendment of the fourth asset purchaseagreement in May 2003 to permit the transfer of non-license assets in exchangefor an initial payment of $29.875 million, the Company has received gross cashproceeds of approximately $194,900,000 and 3,766,478 shares of EntravisionCommunications Corporation’s Class A Common Stock. Under the senior notesforbearance agreement described above, Big City Radio is obligated to apply thenet proceeds of the asset sales first to pay the principal amount of the seniornotes and all accrued and unpaid interest thereon through the date of suchpayment. To date, payments totaling $189.9 million have been made to thetrustee for the bondholders by Big City. Approximately $5.5 million wasoutstanding on the senior notes as of May 2, 2003.

 

Big City will apply any remaining net proceeds from the asset sales,together with its other liquidity sources, to pay the remaining outstandingbalance on the Notes and to expenses relating to the asset sales, includingemployee severance and change in control amounts, tax liabilities and expensesassociated with termination of contracts not assumed by the buyers, as well astrade payables and other operating expenses.

 

If Big City Radio completes its pending station sale and sells the solestation that is not subject to a binding purchase agreement as of this date, itwill have disposed of substantially all of its operating properties. Itsprincipal sources of liquidity will then consist of cash on hand, including anyremaining proceeds of the station sales, and amounts earned on the investmentof such cash, and collections of trade receivables, which amounted to $443,000as of March 31, 2003. Big City Radio also may seek to obtain additionalliquidity by selling shares of the Entravision Class A common stock it receivedupon completion of the Los Angeles radio stations asset sale although nodetermination has been made at the present with respect to the Entravisionshares. Assuming the closing of its pending station sales, Big City Radiobelieves that these liquidity sources will be sufficient to meet its short-termcash needs. The amount and nature of Big City Radio’s long-term liquidity needswill depend on, among other things, a decision by the board of directorsregarding future operations, if any, of Big City Radio.

 

**8. Subsequent Events**

 

On April 2, 2003,the Company completed the sale of its four New York area radio stations toNassau Broadcasting Holdings, Inc. for $43.0 million in cash.   The Company applied $42.5 million of theproceeds to pay down the principal amount of the senior notes and its unpaidinterest.

 

On April 4, 2003,the Company completed the sale of radio stations WDEK-FM (licensed to De Kalb,Illinois), WKIE-FM (licensed to Arlington Heights, Illinois) and WKIF-FM(licensed to Kankakee, Illinois) to Spanish Broadcasting System of Illinois,Inc., for  $22.1 million in cash.  The Company applied  $ 21.5 million of the proceeds to pay downthe principal amount of the senior notes and its unpaid interest.

 

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On April 16, 2003 theCompany completed the sale of its three FM radio stations (KSSC-FM, KSSD-FM andKSSE-FM) serving the greater Los Angeles market to Entravision CommunicationsCorporation for $100 million in cash and 3.77 million shares of Entravision’sClass A Common Stock. The Company applied $96.5 million of the proceeds to pay down the principal amount of thesenior notes and its unpaid interest.

 

On May 2, 2003, theCompany and HBC signed (i) a Second Amendment to the Asset Purchase Agreementdated January 2, 2003 (as amended by the First Amendment to Asset PurchaseAgreement dated as of January 10, 2003), and (ii) an Amended and Restated TimeBrokerage Agreement. On this date, Big City transferred non-license assets usedin the operation of the radio station to HBC in return for an initial paymentof $29.875 million. Under the terms of the Second Amendment, the remaining $3million will be paid on the earlier of (i) the date of receipt of initial FCCapproval of the transfer of the FCC station license to HBC, or (ii) if HBC hasnot assigned the Agreement to an unaffiliated third party prior to the eighteenmonth anniversary date of the Second Amendment, then the eighteenth month date.On May 2, 2003, the Company applied $29.4 million of the proceeds to pay down the principal amount of thesenior notes and its unpaid interest.

 

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**Item 2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

Certain statements setforth below under this caption constitute “Forward-Looking Statements” withinthe meaning of Section 27A of the Securities Act of 1933, as amended (the“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, asamended (the “Exchange Act”).  See“Special Note Regarding Forward-Looking Statements” for a discussion of considerationsrelating to such statements.

 

**Recent Developments**

 

Sinceits inception, Big City Radio has incurred substantial net operating lossesprimarily due to broadcast cash flow deficits associated with the start up ofits radio station operations. As of March 31, 2003, Big City Radio had incurreda cumulative cash flow deficit of approximately $165 million and a cumulativenet loss of approximately $144 million.

 

Big City Radio isseeking to sell all of its radio stations in an auction process that it announcedon November 4, 2002.  Between December24, 2002 and January 2, 2003, Big City Radio signed four separate definitiveasset purchase agreements to sell eleven of its twelve FCC FM licenses. BigCity Radio entered into these agreement to raise the funds necessary to pay allprincipal of, and accrued and unpaid interest on, its 11 1/4% SeniorDiscount Notes (“the senior notes”) due 2005. Noteholders have acceleratedpayment of the senior notes as a result of defaults by Big City Radio underthese notes. None of these transactions was conditioned on the completion ofany other transaction. In April 2003, the Company completed the sale of all ofthe stations that were governed by these agreements, other than radio stationWXXY-FM Highland Park, Illinois, which is to be sold to Hispanic BroadcastingCorporation (HBC) for a total consideration of $32.875 million in cash. TheCompany has amended its agreement with HBC, which has paid $29.875 million tothe Company. The remaining $3 million will be paid on the earlier of (i) thedate of receipt of initial FCC approval of the transfer of the FCC stationlicense to HBC, or (ii) if HBC has not assigned the Agreement to anunaffiliated third party prior to the eighteen month anniversary date of theSecond Amendment, then the eighteenth month date.

 

Big City Radio’sboard of directors has unanimously approved the asset sales and determined thatthe sales are in the best interests of Big City Radio and its stockholders andcreditors.  Big City Radio also  obtained stockholder approval of the assetsales by the written consent of the holders of a majority of the voting powerof Big City Radio common stock in accordance with the requirements of Delawarelaw and Big City Radio’s certificate of incorporation. As is described more fully below, events of default exist under theIndenture governing the Company’s Notes and the Company has entered into aForbearance Agreement with the holders of approximately $128 million principalamount at maturity of the Notes, although the Forbearance Agreement willnot prevent the trustee under the Indenture or note-holders that are notparties to the Forbearance Agreement from pursuing remedies under theIndenture, as provided therein, including aninvoluntary bankruptcy filing. Big City Radio and the noteholders executed anamendment to the forbearance agreement as of January 14, 2003, in which theexpiration date of the forbearance period was extended from January 31, 2003through and including March 31, 2003. A second amendment to the forbearanceagreement was signed extending the forbearance period through and includingApril 30, 2003. Although Big City Radio and the signatory noteholders havediscussed a further extension of the forbearance period, no such extension hasbeen executed and the Company cannot provide any assurances that a furtherextension will be forthcoming. Accordingly, the signatory noteholders arepresently able to exercise any and all remedies under the Indenture governingthe Notes, including an involuntary bankruptcy filing.

 

No assurances can beprovided that the Company will be successful in selling the remaining stationsat all or selling the stations at prices sufficient to pay the remainingprincipal and interest on the Notes. In the absence of successful sales, theCompany will consider other strategic alternatives including filing forprotection under the United States bankruptcy code. In addition, because anevent of default exists under the Company’s Indenture, the Company could alsobe subject to an involuntary filing under the bankruptcy code.

 

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Commencingin 2002, Big City Radio’s Class A Common Stock, which is listed on the AmericanStock Exchange, was subject to a listing review and related proceedings by theExchange.

 

Underthe Exchange’s requirements as communicated to Big City Radio in connectionwith these proceedings, Big City Radio’s Class A common stock remains subjectto delisting due to the fact that after the completion of the auction sale ofits radio station properties, Big City Radio would not retain any of itsexisting assets and, for a period of time, may not continue to be an operatingcompany. Moreover, if Big City Radio  does not satisfy the Exchange’srequirements, its Class A common stock may be subject to delisting. If theExchange delists Big City Radio’s Class A Common Stock, the liquidity and themarket price of its Class A Common Stock would be adversely affected. In lightof the number and complexity of the issues facing the Company noted above, theCompany cannot give any assurance that the Class A Common Stock will not bedelisted.

 

**General**

 

Throughoutthe periods presented in this quarterly report on Form 10-Q, Big City Radioowned and operated radio stations in three of the largest radio markets in theUnited States. Big City Radio’s radio broadcast properties are located in oradjacent to major metropolitan markets and utilize innovative engineeringtechniques and low-cost, ratings-driven operating strategies to develop these propertiesinto successful metropolitan radio stations.

 

BigCity Radio’s financial results are dependent on a number of factors, includingthe general strength of the local and national economies, local marketcompetition, the relative efficiency and effectiveness of radio broadcastingcompared to other advertising media, governmental regulation and policies, andBig City Radio’s ability to provide popular programming.

 

BigCity Radio’s primary source of revenue is the sale of advertising. Eachstation’s total revenue is determined by the number of advertisements aired bythe station and the advertising rates that the station is able to charge. Untilit discontinued its publishing operations in June 2002, Big City Radio derivedpublishing revenues principally from the sale of advertising announcements andfrom contract graphic design projects.

 

BecauseBig City Radio’s strategy has involved developing brand new metropolitan arearadio stations, the initial revenue base was zero and subject to factors otherthan ratings and radio broadcasting seasonality. After a station start-upperiod, as is typical in the radio broadcasting industry, Big City Radio’sfirst calendar quarter generally would produce the lowest revenues for theyear, and the fourth quarter generally would produce the highest revenues forthe year. Big City Radio’s operating results in any period are affected by theincurrence of advertising and promotional expenses that do not producecommensurate revenues in the period in which the expenses are incurred.

 

Ineach of its markets, Big City Radio seeks to maximize the operating results ofits broadcast properties by selecting the most competitively viable formats,engaging experienced and talented management, and optimizing the signalcoverages of its transmitting facilities.

 

The independent auditor’s reports on Big City Radio’sfinancial statements for each of the last three fiscal years have stated thatBig City Radio’s recurring losses from operations, negative cash flows fromoperations, stockholders’ deficiency and default under the terms of its seniornotes raise substantial doubt about Big City Radio’s ability to continue as agoing concern. Because of the severe constraints on its liquidity, Big CityRadio is in default on $174,000,000 principal amount of senior notes. As aresult, holders of the requisite amount of the notes have declared theprincipal and interest on the senior notes to be due and payable, and Big CityRadio has agreed

 

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with the holders ofapproximately 75% of the notes to conduct an auction sale of substantially allof its operation properties as soon as practicable for net cash considerationin an amount at least sufficient to pay all principal of, and accrued andunpaid interest on, the senior notes. As of March 31, 2003, Big City Radio owedholders of the senior notes payment of a total of approximately $195,000,000.As a result of payments made to the trustee for the noteholders using the netproceeds of asset sales consummated in April and early May 2003, approximately$5.5 million was outstanding on the senior notes as of May 2, 2003.

 

The majority of Big City Radio’s broadcast properties arein various stages of development, either as a result of recently granted or pendingrequests to the FCC for enhancements or upgrades or as a result of havingrecently changed formats. As a result, since its inception, Big City Radio hasincurred substantial net operating losses primarily due to broadcast cash flowdeficits associated with the start up of its radio station operations. Big CityRadio’s original business plan envisaged that Big City Radio would generatesufficient cash flows from operations to fund its operating requirements andcapital needs and to service interest payments on the senior notes when thoseinterest payments first became due. Although Big City Radio sold the seniornotes in March 1998, the senior notes were issued at an original issuediscount, and no note interest was payable in cash until September 15, 2001.Big City Radio’s inability to generate sufficient cash flows from operations tomeet all of its cash needs was attributable to a number of factors, includingan adverse competitive environment, a downturn in the demand for music industryadvertising, which resulted in discontinuation of the internet and publishingbusinesses, and the reduction in listening levels and resulting ratings forsome of Big City Radio’s original station formats. Although a change in stationformats produced an improvement in net revenues, the enhanced revenues were notsufficient in most markets to offset station operating expenses and othercosts.

 

Big City Radio’s liquidity crisis was precipitated by itslack of ability to generate operating income and its obligation to make semi-annualinterest payments of $9.8 million on its senior notes beginning on March 31,2001. Although it was able to make the first two such interest payments, BigCity Radio had to fund those payments from the proceeds of additionalborrowings and the sale of its four Phoenix stations in October 2001. Toaddress its liquidity problems, Big City Radio has sought to reduce expenses bydecreasing capital expenditures and expenditures for promotional andprogramming activities and by reducing corporate, general and administrativeexpenses through employee terminations. These measures to decrease operatingexpenses have further limited Big City Radio’s ability to compete effectivelyduring a time of industry-wide consolidation and the exposure of smaller, lesswell-capitalized companies to continued deterioration in the national andregional advertising markets.

 

Asnoted elsewhere in this report, the results of all publishing and radio stationoperations discontinued in 2002 have been classified as *l**osses from discontinued operations*.

 

**ThreeMonths Ended March 31, 2003 Compared with Three Months Ended March 31, 2002**

 

*Corporate, general andadministrative expenses* for the three months ended March 31,2003 were $2,178,000 compared with $916,000 for the three months ended March31, 2002, an increase of $1,262,000, or 137.7%. The increase was primarilyattributable to the following factors:

 

•                  higher legal andprofessional fees expense related to the sale of stations;

 

•                  higheraccounting and filing fees expense related to the sale of stations; and

 

•      higherinsurance costs.

 

*Depreciation and amortizationexpenses* were $30,000 for both of the three months endedMarch 31, 2003 and 2002.

 

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*Interest income*forthe three months ended March 31, 2003 was $5,000 compared to $74,000 for thethree months ended March 31, 2002, which represented a decrease of $69,000 or93.2%. This decrease was primarily attributable to lower average balance ofinvestments in marketable securities.

 

*Income tax expense*for the three months ended March 31, 2003 was $0, compared to $8,631,000 forthe three months ended March 31, 2002. On January 1, 2002, the Company adoptedprovision of SFAS 142 and stopped amortizing its FCC broadcast license as theseintangible assets were determined to have an indefinite useful life.Accordingly, deferred tax liabilities related to these intangible assets couldno longer be utilized to support the realization of deferred tax benefits. TheCompany has restated its quarterly results to record an additional deferred taxvaluation allowance of approximately $8.6 million during the quarter endedMarch 31, 2002 and additional tax expense relating to the increase in thedeferred tax liability of approximately $0.5 million during the quarter endedMarch 31, 2002.

 

*Losses from discontinued operations*forthe three months ended March 31, 2003 were $7,249,000 compared with $7,019,000for the three months ended March 31, 2002, which represented an increase of$230,000 or 3.3%.  This increase wasprimarily attributable to increased interest expense resulting from an increaseof the amortization of $971,000 deferred financing fees related to the seniornotes and the increase in the weighted average principal amount of the senior notesoutstanding during the three months ended March 31, 2003. Partially offsettingthis increase were (i) decreased income tax expense of $500,000 related to thedifference between book and tax amortization of FCC licenses in the threemonths ended March 31, 2003 as compared to the corresponding period of 2002,and (ii) reduced operating losses from discontinued operations of $318,000 inthe 2003 period when compared to the corresponding period of 2002.  It should be noted that under the timebrokerage agreements the Company is recording fees received as revenues.  In addition as station revenues aregenerated by the third party and such parties are responsible for certainoperating expenses.  These third partyrevenues and expenses have been excluded from the Company’s results.

 

*Net losses* for thethree months ended March 31, 2003 were $9,406,000 compared with $16,506,000 forthe three months ended March 31, 2002, which represented a decrease of$7,100,000 or 43%. This decrease was primarily attributable to the lack ofincome tax expense in the three months ended March 31, 2003, partially offsetby increased corporate, general and administrative expenses, and increasedinterest expense in the three months ended March 31, 2003 compared to thecorresponding period of 2002.

 

**Liquidity and Capital Resources**

 

As of March 31,2003, Big City Radio had available approximately $0.8 million of cash, cashequivalents and marketable securities. Big City Radio’s existing sources ofliquidity are insufficient to enable it to service its current indebtedness andto meet its operating requirements and capital needs. The independent auditors’report on Big City Radio’s financial statements for the year ended December 31,2002 notes that recurring losses from operations and negative cash flows fromoperations raise substantial doubt about Big City Radio’s ability to continueas a going concern. As discussed below, because of the severe constraints onits liquidity, Big City Radio has failed to make payments due on the senior notes.As a result, holders of the requisite amount of the notes have declared theprincipal and interest on the senior notes to be due and payable, and Big CityRadio has agreed with the holders of approximately 75% of the notes to conductan auction sale of its radio stations as soon as practicable for net cashconsideration in an amount at least sufficient to pay all principal of, andaccrued and unpaid interest on, the senior notes.

 

Since itsinception, Big City Radio has incurred substantial net operating lossesprimarily due to broadcast cash flow deficits associated with the start up ofits radio station operations. As of March 31, 2003, Big City Radio had incurreda cumulative cash flow deficit of approximately $165 million and a cumulativenet loss of approximately $144 million. Subsequent to March 31, 2003, theCompany completed three of four planned asset sale transactions, and alsoamended the fourth transaction to sell certain non-license assets (see note 8).As a result of these transactions, the Company has sold the great majority ofits operating assets. The Company continues to own one radio station subject toan asset purchase agreement, and one radio station not subject to an assetpurchase agreement in Morris, Illinois. The Company remains a party to certaincontracts  formerly used in theoperations of the sold radio stations which were not assumed by the purchasersof its radio properties.

 

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Furthermore, also as aresult of the completed and pending asset sales, the Company has Federal andState income tax liabilities of approximately $9 million, and members ofmanagement may be entitled to payments up to approximately $2.2 million. As aresult, Big City Radio expects to generatesignificant net losses for the foreseeable future.

 

As a result of these factors, the Company has met its working capitalneeds primarily through borrowings, including loans from the Company’sprincipal stockholders, Stuart and Anita Subotnick, loans under credit facilities,and proceeds from the issuance of the senior notes in March 1998. Since October31, 2001, the Company has met its working capital needs primarily from theproceeds of the sale of the Company’s Phoenix radio stations, which itcompleted on that date.

 

The Company has entered into employment contracts with 3****individuals,mainly officers and senior management that provide for minimum salaries andincentives based upon specified levels of performance. The minimum paymentsunder these contracts are $804,000 in 2003 and $46,000 in 2004.****

 

The Company has never paid cash or stock dividends and does notanticipate doing so in the foreseeable future.

 

*Cash Flows From Operating Activities*

 

In thethree months ended March 31, 2003 and 2002, respectively, the Company used cashin its operations.  In the three monthsended March 31, 2003, cash used in operations related primarily to corporate,general and administrative activities, and an increased insurance prepayment. Thisincrease was partially offset by reduced payments to creditors. In the threemonths ended March 31, 2002, cash used in operations related primarily tocorporate, general and administrative activities. Furthermore, the increase wasdue to payments to creditors net of collection of receivables related to thePhoenix radio stations which the Company sold in October 2001.

 

*Cash Flows From Investing Activities*

 

In thethree months ended March 31, 2003, the Company sold $1,242,000 of marketablesecurities to generate cash for general working capital purposes. In the threemonths ended March 31, 2002, the Company sold $9,723,000 of marketablesecurities to generate cash for general working capital purposes and interestpayments on its Notes.

 

*Cash Flows From Financing Activities*

 

BigCity Radio completed a sale of $174,000,000 aggregate principal amount atmaturity of 11 1/4% senior discount notes due 2005 on March 17, 1998,generating approximately $125,400,000 of gross proceeds. Big City Radio usedapproximately $32,600,000 of these proceeds to repay outstanding indebtednessunder a credit facility with The Chase Manhattan Bank entered into in 1996. BigCity Radio used the proceeds of the senior notes offering to finance theacquisition costs of radio station properties and for general working capitalpurposes.

 

Thesenior notes were issued at an original issue discount and accreted in valueuntil March 15, 2001 at a rate of 11 1/4% per annum, compoundedsemi-annually to an aggregate principal amount of $174,000,000. Cash interestbegan accruing on the senior notes on March 15, 2001 at a rate of 11 1/4%per annum and is payable in cash semi-annually, each March 15 and September 15through and including March 15, 2005. The senior notes will mature on March 15,2005, but may be redeemed at the option of Big City Radio, in whole or in part,at a redemption price of 105.625%, 102.813% or 100.000% if redeemed during the12-month period commencing on March 15, 2002, March 15, 2003 and on and afterMarch 15, 2004, respectively. As of May 2, 2003, approximately $5.5 million ofthe senior notes remained outstanding.

 

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Holdersof the senior notes have the right to require Big City Radio to repurchasetheir senior notes upon a “change of control” of Big City Radio, as defined inthe indenture governing the senior notes, at a price equal to 101% of theprincipal amount of such notes. A “change of control” for purposes of thesenior notes is deemed to occur:

 

•                       when any person other thanStuart and Anita Subotnick, officers and members of Big City Radio’s managementas of March 17, 1998 notes and their respective family members, relatives andtrusts becomes the beneficial owner of more than 35% of the total voting powerof Big City Radio’s capital stock and the foregoing permitted holders own inthe aggregate a lesser percentage of such voting power and do not have theright or ability to designate for election a majority of the board ofdirectors; 

 

•                       upon specified changes in thecomposition of the board of directors; 

 

•                       upon the occurrence of a sale,lease, transfer, conveyance or other disposition to any person of all orsubstantially all of the assets of Big City Radio taken as a whole; or 

 

•                       upon the adoption by thestockholders of a plan for the liquidation or dissolution of Big City Radio. 

 

Paymentsunder the senior notes are guaranteed on a senior unsecured basis by Big CityRadio’s “restricted subsidiaries,” as defined in the indenture governing thesenior notes. As of March 31, 2003, all of Big City Radio’s subsidiaries wererestricted subsidiaries. The senior notes contain financial and operationalcovenants with which Big City Radio and its restricted subsidiaries mustcomply, including covenants restricting the incurrence of additionalindebtedness, investments, payment of dividends on and redemption of capitalstock, redemption of specified subordinated obligations, sales of assets andthe use of proceeds therefrom, transactions with affiliates, creation andexistence of liens, the types of businesses in which Big City Radio mayoperate, asset swaps, distributions from restricted subsidiaries, sales ofcapital stock of restricted subsidiaries, and consolidations, mergers andtransfers of all or substantially all of Big City Radio’s assets. The seniornotes contain customary events of default, including payment defaults anddefault in the performance of other covenants, specified bankruptcy defaults,cross defaults to other indebtedness and to judgments, and failure of asubsidiary guarantee to be in full force and effect.

 

Inconnection with the consummation of the senior notes offering, Big City Radioentered into a revolving credit facility with The Chase Manhattan Bankproviding for up to $15,000,000 of borrowings based upon a multiple of thepositive rolling four-quarter broadcast cash flow of Big City Radio’s stationsand subject to compliance with specified financial and operational covenants.The revolving credit facility was to mature on March 17, 2003. At December 31,2000, Big City Radio was in compliance with all material covenants andrestrictions under the revolving credit facility, with the exception that, inviolation of one such covenant, because the independent auditors’ report on BigCity Radio’s financial statements for the year ended December 31, 2000 includeda “going concern” paragraph. In April 2001, the lender declined to permit BigCity Radio to draw under the revolving credit facility due to Big City Radio’sviolation of the foregoing covenant. As a result of its inability to draw underthe revolving credit facility, Big City Radio issued a promissory note in May2001 to borrow up to $5,000,000 from Stuart Subotnick, a principal stockholder,in order to meet its short-term working capital needs. The amount outstandingunder this note, which was payable on demand, bore interest equal to JP MorganChase Bank’s prime rate plus 2.0%.

 

Cashinterest commenced accruing on the senior notes on March 15, 2001 andsemi-annual cash interest payments of $9,800,000 commenced on September 15,2001. Big City Radio failed to make the initial semi-annual interest paymentwhen due on September 15, 2001. In order to obtain the funds to make thispayment within the 30-day grace period provided under the indenture, Big CityRadio obtained a bridge loan in the amount of $15,000,000 by the assignment ofBig City Radio’s revolving credit facility from the lender thereunder to a

 

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new lender. The bridgeloan was secured to the same extent as the revolving credit facility and boreinterest at the rate of LIBOR plus 3.0%, or a base rate plus 2.0%, at theoption of Big City Radio. Big City Radio used the net proceeds of the bridgeloan to pay the semi-annual interest on the senior notes due on September 15,2001, together with applicable additional interest thereon, and to repay$2,235,000 of principal indebtedness and $51,000 of interest incurred under thepromissory note issued to Mr. Subotnick in May 2001. Big City Radio repaid thebridge loan on October 31, 2001 with a portion of the proceeds from the sale ofthe Phoenix radio station properties, as discussed below. Big City Radiocurrently does not have a credit facility.

 

OnOctober 31, 2001, Big City Radio completed the sale of its four Phoenix radioproperties to Hispanic Broadcasting Corporation for a cash price of$34,000,000. The indenture governing the senior notes permits the Company toreinvest the approximately $18,000,000 of proceeds which remained from the saleof the Phoenix stations, after the repayment of the bridge loan, in broadcastassets for a period of up to one year from the date of these asset sales.Thereafter, any net proceeds that are not timely reinvested in broadcastassets, must be used to make an offer to repurchase senior notes. As describedabove, Big City Radio used a portion of the proceeds to repay indebtednessunder the bridge loan and to fund the semi-annual interest payment due on thesenior notes on March 15, 2002. Big City Radio has been using the remainingproceeds to fund its ongoing operations, and has not reinvested such proceedsin broadcast assets. Big City Radio has not made the required offer torepurchase senior notes, because it does not have sufficient cash resources toconsummate such an offer. Its failure to make an offer to repurchaseconstitutes an event of default under the indenture.

 

TheCompany failed to make the semi-annual interest payment of $9,800,000 due onthe senior notes on September 15, 2002. Big City Radio’s cash resources wereinsufficient to enable it to make the semi-annual interest payment within the30-day grace period provided under the indenture. The grace period expired onOctober 15, 2002, thereby resulting in an additional event of default under theindenture. On October 17, 2002, pursuant to the indenture, holders of thesenior notes delivered an acceleration notice to the Company declaring theprincipal and interest on all of the senior notes to be immediately due andpayable.

 

TheCompany has evaluated its strategic alternatives and the most efficient use ofits capital. These alternatives include the sale of its broadcast assets and,depending on market conditions, debt and/or equity financing, and purchasing,restructuring, recapitalizing, refinancing or otherwise retiring some of itssecurities in the open market or by other means. In each case, these strategicalternatives are subject to the restrictions contained in the indenturegoverning the senior notes. On November 4, 2002, Big City Radio announced ithad retained Jorgenson Broadcast Brokerage to market and conduct an auctionsale of all of its radio stations. As discussed below, proceeds from the salesof the stations have been and will be applied first to repay the senior notes.

 

BigCity Radio, the subsidiary guarantors of the senior notes, and the holders ofapproximately $128,000,000 in principal amount of the senior notes actingthrough an ad hoc committee of noteholders, entered into a forbearanceagreement on November 13, 2002. Under the forbearance agreement, the signatorynoteholders have agreed to forbear, through January 31, 2003 (later extended toMarch 31, 2003 and again subsequently to through and including April 30, 2003),from taking, initiating or continuing any action to enforce Big City Radio’spayment obligations under the senior notes, including, without limitation, anyinvoluntary bankruptcy filing against Big City Radio, or against any property,officers, directors, employees or agents of Big City Radio to collect on orenforce payment of any indebtedness or obligations, or to otherwise assert anyclaims or causes of action seeking payment under the senior notes, in each casearising under or relating to the payment default or the default arising fromthe failure to make the required offer to repurchase senior notes or otherexisting defaults known to the signatory noteholders as of November 13, 2002.Under the forbearance agreement, Big City Radio agreed to conduct the auctionof its radio stations in a good faith manner designed to sell the assets assoon as practicable for net cash consideration in an amount at least sufficientto pay all principal of, and accrued and unpaid interest on, the senior notes.If signatory noteholders reasonably believe that Big City Radio is notconducting the auction process in good faith or is not operating or managingthe business and financial affairs of Big City Radio in good faith in theordinary course and consistent with past practices, they may notify Big City

 

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Radio in writing and mayelect to terminate the forbearance agreement. Big City Radio further has agreednot to pay, discharge or satisfy any liability or obligation except forobligations reflected on Big City Radio’s balance sheet as of December 31, 2001or incurred in the ordinary course since that date which are paid, dischargedor satisfied for fair and equivalent value in the ordinary course of businessand consistent with past practices. The forbearance agreement will not preventthe trustee under the indenture or noteholders that are not parties to theforbearance agreement from pursuing remedies under the indenture.

 

BigCity Radio and the noteholders executed an amendment to the forbearanceagreement as of January 14, 2003, in which the expiration date of the forbearanceperiod was extended from January 31, 2003 through and including March 31, 2003.The forbearance agreement was further amended to provide that:

 

•                  BigCity Radio will pay the noteholders the net cash proceeds of any asset salewithin five business days after the completion of such asset sale, until suchtime as the noteholders have received cash in an amount equal to all principalof, and accrued and unpaid interest on, the senior notes; 

 

•                  theforbearance agreement may be terminated by either Big City Radio or the ad hoccommittee upon written notice if 

 

•                  anyparty to the forbearance agreement fails to perform any of its obligations, orbreaches any of its representations, covenants or warranties, under theforbearance agreement, 

 

•                  BigCity Radio or any party to any asset purchase agreement for any asset salewhich Big City Radio had publicly announced on or before January 6, 2003,  breaches any representation, warranty orcovenant in such asset purchase agreement, and does not cure such breach withinten days, or 

 

•                  oneor more of the asset purchase agreements is terminated or modified in anymaterial respect; and 

 

•                  BigCity Radio must immediately notify the ad hoc committee by written notice of 

 

•                  anybreach by Big City Radio of the forbearance agreement, 

 

•                  anybreach by Big City Radio or any other party of any of the foregoing assetpurchase agreements, whether or not such breach is curable, and 

•                  anytermination by Big City Radio or any other party thereto of any of such assetpurchase agreements. 

 

Inaddition, the forbearance agreement provides that it will automaticallyterminate upon the filing of a voluntary or involuntary petition under theinsolvency or bankruptcy laws of the United States or any state with respect toBig City Radio, except that, upon the filing of an involuntary bankruptcypetition by unaffiliated, arm’s length creditors, Big City Radio will have aperiod of ten days to obtain the dismissal or withdrawal of such a petitionbefore the forbearance agreement terminates as a result of the filing.  In March 2003, a second amendment to theforbearance agreement was signed extending the forbearance period through andincluding April 30, 2003. Although Big City Radio and the signatory noteholdershave discussed a further extension of the forbearance period, no such extensionhas been executed and the Company cannot provide any assurances that a furtherextension will be forthcoming. Accordingly, the signatory noteholders arepresently able to exercise any and all remedies under the Indenture governingthe Notes.

 

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Subsequentto March 31, 2003, Big City has completed three of the four asset purchaseagreements and has amended the fourth asset purchase agreement resulting in aninitial payment to Big City from the purchaser in that agreement of $29.875million. Under the senior notes forbearance agreement described above, Big CityRadio is obligated to apply the net proceeds of the asset sales first to paythe principal amount of the senior notes and all accrued and unpaid interestthereon through the date of such payment. As of March 31, 2003, Big City Radioowed holders of the senior notes payment of a total of approximately$195,000,000, consisting of $174,000,000 of principal and approximately  $21,000,000 of accrued and unpaid interest.Following completion of the three asset purchase transactions and the amendmentof the fourth asset purchase agreement, Big City paid a total of $189.9 millionto the trustee for the bondholders. Approximately $5.5 million was outstandingon the senior notes as of May 2, 2003.

 

BigCity Radio will apply any remaining net proceeds from the asset sales, togetherwith its other liquidity sources, to pay expenses relating to the asset sales,including employee severance and change in control amounts, tax liabilities andexpenses associated with termination of contracts not assumed by the buyers, aswell as trade payables and other operating expenses.

 

If BigCity Radio completes its pending station sale and sells the sole station thatwas not subject to a binding purchase agreement as of the date of thisquarterly report on form 10-Q, it will have disposed of substantially all ofits operating properties. Its principal sources of liquidity will then consistof cash on hand, including any remaining proceeds of the station sales, andamounts earned on its investment of such cash, and collections of tradereceivables, which amounted to approximately $443,000 as of March 31, 2003. BigCity Radio also may seek to obtain additional liquidity by selling shares ofthe Entravision Class A common stock it has received upon completion of theasset sale. Assuming the closing of its pending station sales, Big City Radiobelieves that these liquidity sources will be sufficient to meet its short-termcash needs. The amount and nature of Big City Radio’s long-term liquidity needswill depend on, among other things, a decision by the board of directorsregarding future operations, if any, of Big City Radio. As of the date of thisquarterly report on form 10-Q, the board of directors has not determined theuses to which Big City Radio will apply any cash or other assets remainingafter it has repaid the senior notes and its other liabilities. Thisdetermination will depend on various factors.

 

If theremaining radio station sales are not completed, and the holders of the seniornotes continue to forbear from exercise their remedies, Big City Radio willattempt to continue to finance its operations and obligations while it seeksnew buyers for its unsold stations. Big City Radio’s principal sources ofliquidity would then consist of cash on hand and operating revenues of stationsno longer subject to time brokerage agreements with potential purchasers. BigCity Radio would seek to manage its operating expense levels by furtherreducing corporate, general and administrative expenses and expenditures forpromotional and programming activities.

 

*Cashprovided by (used in) discontinued operations*

 

In thethree months ended March 31, 2003, the Company recorded a cash surplus from itsdiscontinued operations. The surplus was primarily attributed to the collectionof receivables less payments to creditors of these discontinued operations, andthe absence of any payment of interest on the Notes. This increase was offsetby  the operating loss of itsdiscontinued stations. In the three months ended March 31, 2002, the Companyused the cash primarily to make the semi-annual interest payment on the Notesand to fund operating cash deficits in the New York and Chicago stationoperations.

 

**Application of Asset Sale Proceeds;Future Operations of Big City Radio**

 

Underits purchase agreements with Entravision, Nassau, Spanish Broadcasting andHispanic Broadcasting, pursuant to which Big City Radio has committed to sell11 of its 12 radio stations, Big City Radio has received gross cash proceeds ofapproximately $194.9 million, and will receive gross cash proceeds of anadditional $3.0 million, if the asset sale to HBC is completed. In addition,Entravision has issued 3,766,478 shares

 

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of Entravision’s Class Acommon stock to Big City Radio in connection with the asset sale toEntravision. Based on the closing sale price of the Class A common stock asreported by The New York Stock Exchange on May 14, 2003, the shares issued toBig City Radio have an aggregate value of approximately $36.4 million. The aggregate value of these shares ofEntravision Common Stock at the date of their receipt by the Company, April 16,2003, was approximately $24.4 million. Big City Radio may have to sell at leasta portion of its Entravision shares to obtain sufficient cash to repay itssenior notes and satisfy its other liabilities and obligations. If and when BigCity Radio seeks to sell its shares of Entravision’s Class A common stock, itmay not be able to do so for proceeds that approximate the value on the date ofthis Quarterly Report on Form 10-Q or that are sufficient to meet its cashneeds.

 

Big City Radio currentlyestimates that it will incur federal, state and local income taxes ofapproximately $9.0 million in connection with the asset sales and othermatters, after the application of available net operating loss carryforwards.Big City Radio estimates that the brokerage, legal and accounting fees payableby it relating to the transactions will total approximately $3 million. BigCity Radio will incur other transaction costs, including payments to itsexecutive officers and directors, severance and change in control payments,lease termination expense and other similar expenses associated with thetermination of contracts which are not being assumed by the buyers of the radiostations.

 

Under its forbearanceagreement with holders of its senior notes, Big City Radio is obligated toapply the aggregate net cash proceeds of the asset sales first to pay theprincipal amount of the senior notes and all accrued and unpaid interestthereon through the date of such payment. As of March 31, 2003, Big City Radio owedholders of the senior notes approximately $195 million, consisting of $174million of principal and approximately $21 million of accrued and unpaidinterest. Following completion of the three asset purchase transactions and theamendment of the fourth asset purchase agreement, Big City Radio paid a totalof $189.9 million to the trustee for the bondholders. Approximately $5.5million was outstanding on the senior notes as of May 2, 2003.

 

If Big City Radiocompletes its proposed asset sales, it will have sold substantially all of itsoperating assets. At such time, Big City Radio’s board of directors woulddetermine whether it would then be in the best interests of Big City Radio andits stockholders for Big City Radio to distribute any available proceeds to thestockholders, whether under a plan of dissolution or otherwise. If Big CityRadio is unable to complete the remaining asset sale, it will not be in aposition to make such a distribution. Accordingly, Big City Radio’s board ofdirectors will be in a position only at a later date to determine whether BigCity Radio should make a distribution of available proceeds of the asset salesto its stockholders and, if it determines to make a distribution, the amountthereof. These determinations will depend on various factors, a number of whichare not within Big City Radio’s control, including the following:

 

•                  whether, in thejudgment of Big City Radio’s board of directors, it is in the best interests ofBig City Radio and its stockholders to distribute any remaining assets tostockholders or seek to deploy those assets into new operations; 

 

•                  the dates on which the remainingasset sale is completed; 

 

•                  the prices atwhich Big City Radio is able to sell the shares of Entravision’s Class A commonstock it has received in the asset sale, if Big City Radio determines to sellsome or all of these shares; 

 

•                  the amount ofBig City Radio’s liabilities and other obligations to be paid in the future; 

 

•                  the resolutionof pending litigation and other contingent liabilities; 

 

•                  the outcome ofpending or proposed tax legislation; and 

 

•                  general businessand economic conditions. 

 

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One alternative Big CityRadio’s board of directors would consider following completion of the assetsales is adoption of a plan for the dissolution of Big City Radio. A plan ofdissolution would require approval by Big City Radio’s stockholders underDelaware law. If it were to adopt a plan of dissolution, the Big City Radioboard of directors would determine the terms of such a plan at the time ofadoption consistent with the requirements of Delaware law. Big City Radioexpects that such a plan generally would provide that Big City Radio would sellor otherwise dispose of all of its remaining property and assets, with suchexceptions as its board of directors may approve at the time, such as retentionof property and assets that the board of directors may deem necessary oradvisable to enable Big City Radio to pursue any claims and causes of action.Following the liquidation of its remaining assets, Big City Radio would pay, orprovide for the payment of, its remaining liabilities and obligations to theextent possible, as required by Delaware law. Subject to the payment, or theprovision for payment, of Big City Radio’s liabilities and obligations, anyremaining assets would be available for distribution from time to time on a prorata basis to stockholders. Big City Radio may not be able to determine for asignificant period following adoption of a plan of dissolution whether anyassets would be available for distribution to its stockholders. Such adetermination would be made only after Big City Radio’s creditors have receivedlegally required notices concerning the plan and after adequate provision hasbeen made for contingent as well as known liabilities. Big City Radio cannotprovide any assurance that there would ultimately be sufficient proceeds fromthe asset sales to provide for Big City Radio’s liabilities and obligations orto make distributions to Big City Radio’s stockholders under a plan ofdissolution.

 

Even if Big City Radio isable to repay its senior notes and other liabilities and has additionalproceeds from the asset sales, its board of directors may determine not to approvea plan of dissolution or otherwise authorize a distribution of such proceeds toits stockholders, but instead may approve use of the proceeds for investment inopportunities for new operations for Big City Radio. Big City Radio does notknow whether, if it does have available assets and determines to seek newopportunities, it will have any success in establishing any new operations. Inaddition, Big City Radio expects that for some period following completion ofthe auction sale of all of its radio station properties, during which it mayseek to identify new opportunities, it would not be engaged in operatingactivities.

 

Whether or not Big CityRadio’s board of directors adopts a plan of dissolution, Big City Radio will beobligated to continue to comply with the applicable reporting requirements ofthe Securities Exchange Act of 1934, as amended, or the Exchange Act, eventhough compliance with such reporting requirements is financially burdensome.If the dissolution of Big City Radio pursuant to a plan of dissolution isapproved, in order to curtail expenses, Big City Radio may seek relief from theSEC from the reporting requirements under the Exchange Act.

 

Because of theuncertainties discussed above, Big City Radio cannot provide any assurance thatit will have any assets available for distribution to its stockholders fromproceeds of the asset sales or, if it does have assets available fordistribution, that it will make a distribution of any or all of such assets.

 

**Special Note Regarding Forward-LookingStatements**

 

Certain statements inthis report, including those utilizing the phrases “will,” “expects,”“intends,” “estimates,” “contemplates,” and similar phrases, are“forward-looking” statements (as such term is defined in Section 27A of theSecurities Act of 1933, as amended (the “Securities Act”), and Section 21E ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”)),including statements regarding, among other items,  the Company’sexpectation of consummating the pending and planned sales of the Company’sradio stations.  Certain, but notnecessarily all, of such forward-looking statements can be identified by theuse of forward-looking terminology such as “believes,” “expects,” “may,” “will,”“should,” or “anticipates” or the negative thereof or other variations thereonor comparable terminology, or by discussions of strategy that involve risks anduncertainties. Such forward-looking statements involve known and unknown risks,uncertainties and other factors which may cause the actual results, performanceand achievements of the Company and its subsidiaries to be materially differentfrom any future results, performance or achievements expressed or implied bysuch forward-looking statements. Such factors include, but are not limited to,the following: (i) changes in the 

 

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competitive market place,including the introduction of new technologies or formatting changes by theCompany’s competitors, (ii) changes in the financial markets and in theCompany’s ability to sell its remaining radio stations, (iii) changes in theregulatory framework, (iv) risks that the FCC may not approve theCompany’s pending applications with respect to the sale of the Company’s radiostation to be sold to Hispanic Broadcasting Corporation, (v) changes inaudience tastes, and (vi) changes in the economic conditions of localmarkets. Other factors which may materially affect actual results include,among others, the following: general economic and business conditions, industrycapacity, demographic changes, changes in political, social and economicconditions and various other factors beyond the Company’s control. The Companydoes not undertake and specifically declines any obligation to publicly releasethe results of any revisions which may be made to any forward-lookingstatements to reflect events or circumstances after the date of such statementsor to reflect the occurrence of anticipated or unanticipated events.

 

**Factors that May Affect Future Results and FinancialCondition**

 

The following factors (inaddition to others) could have a material and adverse impact on the Company’sbusiness:

** **

If the remaining assetsale does not occur, Big City Radio will have to re-commence operations at oneof its Chicago 103.1 radio stations which has been operated by the proposedpurchasers since January 2003 under a time brokerage agreement. The Chicagoradio station has been reformatted by the prospective buyers. Big City Radiowould have to attempt to re-hire employees, re-build its previous revenue baseand advertise in order to inform the radio audience in Chicago of such changes.

 

Big City Radio’s highlyleveraged financial position poses the following risks to stockholders:

 

•                                          a substantialportion of Big City Radio’s cash flow from operations will be required toservice its indebtedness;

 

•                                          Big CityRadio’s ability to obtain financing in the future for working capital, capitalexpenditures and general corporate purposes, including acquisitions might beimpeded; and

 

•                                          Big CityRadio is more vulnerable to economic downturns and its ability to withstandcompetitive pressures is limited.

 

Big City Radio derivessubstantially all of its revenues from advertisers in diverse industries.  If a number of Big City Radio’s advertisersreduce their expenditures because of a general economic downturn, or aneconomic downturn in one or more industries or regions, or for any otherreason, Big City Radio’s results of operations would be materially andadversely affected.

 

Cash on hand isinsufficient to meet Big City Radio’s obligations and commitments. Big CityRadio’s  debt has been accelerated underthe indenture governing its senior notes. In addition, because the Company ishighly leveraged, its ability to respond to market conditions or meetextraordinary capital needs is limited. Big City Radio is unable to generatesufficient cash flow from operations to meet its obligations and commitments,as such it is required to refinance or restructure its indebtedness or raiseadditional debt or equity capital, or seek protection under the Bankruptcylaws. Big City Radio may be required to sell all remaining assets oroperations. These alternative strategies might not be effected on satisfactoryterms, if at all.

 

Big City Radio’s SeniorDiscount Notes Indenture contains restrictive covenants that may limit itsability to:

 

•                                    incur additionaldebt;

 

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•                                    pay dividends;

 

•                                    merge, consolidateor sell assets;

 

•                                    make acquisitionsor investments; or

 

•                                    change the natureof its business.

 

Big City Radio currentlydoes not have a credit agreement. The Company may not be able to obtain a newcredit agreement.

 

Big City Radio hasincurred losses from continuing operations in each of its fiscal years sinceinception and expects to continue to experience net losses in the foreseeablefuture. These net losses, which may be greater than its net losses in the past,are principally a result of interest expense on its outstanding debt andoperating deficits.

 

**If Big City Radio cannot consummate one or more ofthe pending or planned dispositions, the Company’s ability to improve operatingresults could be limited. The Company’s ability to improve operating results is affected, amongst other reasons,by the following;**

 

•                                          manycompeting radio station groups have greater resources available to finance thestart up losses often associated with a format change;

 

•                                          Big CityRadio does not have the financial resources necessary to implement any FCCengineering upgrades or enhancements;

 

•                                          Big CityRadio might be unable to obtain FCC approval of requested upgrades andenhancements.

 

**Critical AccountingPolicies and Material Estimates**

 

BigCity Radio’s discussion and analysis of its financial condition and results ofoperations are based upon its consolidated financial statements, which havebeen prepared in accordance with the accounting principles generally acceptedin the United States. The preparation of these financial statements requiresBig City Radio to make estimates and judgments that affected the reportedamounts of assets, liabilities, revenues and expenses, and related disclosureof contingent assets and liabilities. On an on-going basis, Big City Radioevaluates its estimates, including those to broadcast rights, bad debts,intangible assets, income taxes, and contingencies and litigation. Big CityRadio bases its estimates on historical experience and on various otherassumptions that it believes to be reasonable under the circumstances, theresults of which form the basis for making judgments about the carrying valuesof assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions orconditions. Big City Radio believes the following critical accounting policiesaffect its more significant judgment and estimates used in the preparation ofits consolidated financial statements.

 

***Revenue Recognition****.*BigCity Radio records revenue from the sale of airtime related to advertising andcontracted time at the time of broadcast. Big City Radio maintains allowancesfor doubtful accounts for estimated losses resulting from the inability of itscustomers to make required payments. Big City Radio utilizes informationavailable to Big City Radio, including the timing of payments and the financialcondition of its customers to estimate the allowance for doubtful accounts. Ifthe financial condition of Big City Radio’s customers were to deteriorate,resulting in an impairment of their ability to make payments, additionalallowances may be required. Big City Radio does not have a significantconcentration of accounts receivable from one customer or industry segment.

 

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***Business Combinations and Goodwill andother Intangible Assets.***    In July2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 141,Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.SFAS No. 141 requires that the purchase method of accounting be used for allbusiness combinations initiated after June 30, 2001 as well as all purchasemethod business combinations completed after June 30, 2001. SFAS No. 141 alsospecifies criteria that intangible assets acquired in a purchase methodbusiness combination must meet to be recognized and reported apart fromgoodwill, noting that any purchase price allocable to an assembled workforcemay not be accounted for separately. SFAS No. 142 requires that goodwill andintangible assets with indefinite useful lives no longer be amortized, butinstead be tested for impairment at least annually in accordance with theprovisions of SFAS No. 142. SFAS No. 142 requires that intangible assets withdefinite useful lives be amortized over their respective estimated useful livesto their estimated residual values, and reviewed for impairment in accordancewith SFAS No. 144, Accounting for the Impairment or Disposal of Long-LivedAssets.

 

BigCity Radio adopted SFAS No. 141 and SFAS No. 142 effective January 1, 2002. Anygoodwill and any intangible asset determined to have an indefinite useful lifethat was acquired in a purchase business combination completed after June 30,2001 will not be amortized, but will continue to be evaluated for impairment inaccordance with the appropriate pre-SFAS No. 142 accounting literature.Goodwill and intangible assets acquired in business combinations completedbefore July 1, 2001 have been amortized through December 31, 2001.

 

SFASNo. 141 requires that upon adoption of SFAS No. 142, Big City Radio evaluateits existing intangible assets and goodwill that was acquired in a priorpurchase business combination, and make any necessary reclassifications inorder to conform with the new criteria in SFAS No. 141 for recognition apartfrom goodwill. Upon adoption of SFAS No. 142, Big City Radio reassessed theuseful lives and residual values of all intangible assets acquired in businesscombinations accounted for using the purchase method. In addition, to theextent Big City Radio identified an intangible asset as having an indefiniteuseful life, Big City Radio was required to test the intangible asset forimpairment in accordance with the provisions of SFAS No. 142 within the firstinterim period. Any impairment loss would have been measured as of the date ofadoption and recognized as the cumulative effect of a change in accountingprinciple. No significant adjustments or impairment losses resulted from theadoption of SFAS No. 141 and SFAS No. 142.

 

Inconnection with the transitional goodwill impairment evaluation, SFAS No. 142required Big City Radio to perform an assessment of whether there was anindication that goodwill was impaired as of the date of adoption. To accomplishthis, Big City Radio identified its reporting units and determined the carryingvalue of each reporting unit by assigning the assets and liabilities, includingthe existing goodwill and intangible assets, to those reporting units as of thedate of adoption. As each reporting unit’s carrying amount did not exceed itsfair value, there was no indication that the reporting unit’s goodwill may beimpaired and Big City Radio was not required to perform the second step of thetransitional impairment test. In the second step, Big City Radio would comparethe implied fair value of the reporting unit’s goodwill, determined byallocating the reporting unit’s fair value to all of its assets, recognized andunrecognized, and liabilities in a manner similar to a purchase priceallocation in accordance with SFAS No. 141, to its carrying amount, both ofwhich would be measured as of the date of adoption. Any transitional impairmentloss was required to be recognized as the cumulative effect of a change inaccounting principle in Big City Radio’s statement of earnings. No such lossresulted from Big City Radio’s adoption of SFAS No. 142.

 

Inaccordance with SFAS No. 142, Big City Radio discontinued the amortization ofgoodwill and intangible assets, consisting of a broadcast license (intangibleasset with an indefinite useful life), effective January 1, 2002. During thequarter ended March 31, 2002, Big City Radio completed the transitionalimpairment test, which did not result in impairment of recorded intangibleassets. In June 2002, Big City Radio ceased the operation of its publishingoperations, and wrote off the remaining $108,000 of goodwill associated withsuch operations. During the fourth quarter of 2002, the Company made thedecision to sell its broadcast licenses. In accordance with SFAS No.144, theselicenses are reported as assets held for sale. The Company compared thelicenses’ carrying value to

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their fair value, lessthe estimated cost to sell them. The fair value of the stations were based onasset sale agreements for 11 of the 12 stations, and an estimate for theremaining station based on offers received during the auction process. Thisreview of the carrying value of its intangible assets resulted in a charge of$630,000 relating to the impairment in value of some of its FCC broadcastlicenses. As of December 31, 2002, Big City Radio has no remaining un-amortizedgoodwill, and has un-amortized broadcast licenses in the amount of $76,325,000.

 

***Accounting for Impairment of Long-LivedAssets and Long-Lived Assets to be Disposed of.***   InAugust 2001, the FASB issued SFAS No. 144, Accounting for the Impairment orDisposal of Long-Lived Assets (“SFAS No. 144”), which supersedes both SFAS No.121, Accounting for the Impairment of Long-Lived Assets and for Long-LivedAssets to Be Disposed Of (“SFAS No. 121”), and the accounting and reportingprovisions of APB Opinion No. 30, Reporting the Results of Operations—Reportingthe Effects of Disposal of a Segment of a Business, and Extraordinary, Unusualand Infrequently Occurring Events and Transactions (“Opinion 30”), for thedisposal of a segment of a business (as previously defined in that Opinion).SFAS No. 144 retains the fundamental provisions in SFAS No. 121 for recognizingand measuring impairment losses on long-lived assets held for use andlong-lived assets to be disposed of by sale, while also resolving significantimplementation issues associated with SFAS No. 121. For example, SFAS No. 144provides guidance on how a long-lived asset that is used as part of a groupshould be evaluated for impairment, establishes criteria for when a long-livedasset is held for sale, and prescribes the accounting for a long-lived assetthat will be disposed of other than by sale. SFAS No. 144 retains the basicprovisions of Opinion 30 on how to present discontinued operations in theincome statement but broadens that presentation to include a component of anentity, rather than a segment of a business. Unlike SFAS No. 121, an impairmentassessment under SFAS No. 144 will never result in a write-down of goodwill.Rather, goodwill is evaluated for impairment under SFAS No. 142, Goodwill andOther Intangible Assets.

 

BigCity Radio adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No.144 did not have a material impact on the financial position, cash flows, orresults of operations of Big City Radio. Big City Radio discontinued itspublishing operations during June 2002. This was treated as a discontinuedoperation under SFAS No. 144. In December2002, the Company announced sales of eleven of its twelve radio stations in LosAngeles, New York, and Chicago. The Company also intends to sell its remainingstation. Big City Radio’s consolidated financial statements for all periodspresented have been adjusted to reflect the radio station sales and ceasedpublishing operations as discontinued operations in accordance with SFAS No.144.

 

***Accounting for Cost Associated with Exit orDisposal Activities****.* In June 2002, the Financial AccountingStandards Board issued FASB Statement No. 146, Accounting for Costs Associatedwith Exit or Disposal Activities (“SFAS No. 146”), which nullifies EmergingIssues Task Force (EITF) Issue No. 94-3 Liability Recognition for CertainEmployee Termination Benefits and Other Costs to Exit an Activity (includingCertain Costs Incurred in a Restructuring) (“Issue 94-3”).

 

Theprincipal difference between SFAS No. 146 and Issue 94-3 relates to itsrequirements for recognition of a liability for a cost associated with an exitor disposal activity. SFAS No. 146 requires that a liability for a costassociated with an exit or disposal activity be recognized when the liabilityis incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue94-3 was recognized at the date of an entity’s commitment to an exit plan.Under SFAS No. 146, a commitment to a plan, by itself, does not create apresent obligation to others that meets the definition of a liability. SFAS No.146 also establishes that fair value is the objective for initial measurementof the liability.

 

BigCity Radio is required to adopt SFAS No. 146 on exit and disposal activitiesthat are initiated after December 31, 2002, with early application encouraged.Big City Radio has adopted SFAS No. 146 in relation to exit and disposalactivities initiated after September 30, 2002.

 

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**Off Balance Sheet Transactions**

 

TheCompany did not have any off-balance sheet transaction as of December 31, 2002.

 

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**ITEM3. Quantitative and Qualitative Disclosures About Market Risk**

 

The Company isexposed to the impact of interest rate changes and the change in the marketvalues of its investments.

 

The Company’sexposure to market rate risk for changes in interest rates relates primarily tothe Company’s investment portfolio. The Company has not used derivativefinancial instruments in its investment portfolio. The Company invests itsexcess cash in debt instruments of the U.S. Government and its agencies and, bypolicy, limits the amount of credit exposure to any one issuer. The Companyprotects and preserves its invested funds by limiting default, market andreinvestment risk.

 

Investmentsin fixed rate interest earning instruments carry a degree of interest rate risk.Fixed rate securities may have their fair market value adversely impacted dueto a rise in interest rates. The Company may suffer losses in principal ifforced to sell securities which have declined in market value due to changes ininterest rates.

 

**ITEM4. Controls and Procedures**

 

(a)          Evaluationof Disclosure Controls and Procedures

 

The Company’sChief Executive Officer and Chief Financial Officer have evaluated theeffectiveness of the Company’s disclosure controls and procedures (as such termis defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Actof 1934, as amended, or the Exchange Act) as of a date within 90 days prior tothe filing date of this quarterly report, or the Evaluation Date. Based on suchevaluation, such officers have concluded that as of the Evaluation Date, theCompany’s disclosure controls and procedures are effective in alerting them ona timely basis to material information relating to the Company, including itsconsolidated subsidiaries, that is required to be included in its reports filedor submitted under the Exchange Act.

 

(b)         Changesin Internal Controls

 

Since theEvaluation Date, there have not been any significant changes in the Company’sinternal controls or in other factors that could significantly affect suchcontrols.

** **

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**PartII – Other Information**

 

**Item 1 – Legal Proceedings**

 

The Company isinvolved in litigation from time to time in the ordinary course of itsbusiness.   In management’s opinion, theoutcome of all pending legal proceedings, individually and in the aggregate,will not have a material adverse effect on the Company.

 

**Item2 – Changes in Securities and Use of Proceeds**

 

None.

 

**Item3 – Defaults Upon Senior Securities**

 

An event ofdefault has occurred under the Indenture governing the Company’s 11.25% SeniorDiscount Notes due 2005 (the “Notes”) as a result of the Company’s failure tomake payment of a semi-annual interest payment due under the Notes on September15, 2002 or during the applicable grace period, and an event of default hasoccurred under section 3.7 of the Indenture concerning the Company’s failure tomake an offer to repurchase Notes using a portion of the cash proceeds from theOctober 31, 2001 sale of the Company’s four Phoenix radio stations to HispanicBroadcasting Corporation. On October 17, 2002, pursuant to the indenture,holders of the senior notes delivered an acceleration notice to Big City Radiodeclaring notice to Big City Radio declaring the principal and interest on allof the senior notes to be immediately due and payable.

 

**Item4 – Submission of Matters to a Vote of Security Holders**

 

On March 5, 2003,Stuart Subotnick, Anita Subotnick and Subotnick Partners, L.P. executed anddelivered to Big city Radio a written consent approving the sale of theCompany’s assets.

 

**Item 5 – Other Information**

 

None.

 

**Item6 – Exhibits and Reports on Form 8-K**

 

(a)   Exhibits

 

Exhibit 99.1 Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.

 

(b)   Reports on Form 8-K

 

The registrantfiled a Current Report on Form 8-K on April 2, 2003, reporting its ChiefExecutive Officers and Chief Financial Officers certification pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.

 

The registrantfiled a Current Report on Form 8-K on April 21, 2003, reporting the sale ofstations properties.

 

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# **SIGNATURES**

 

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

 

 
|   |                | BIG  CITY RADIO, INC. |
|--------|---------------------|-----------------------|
|   |                |                  |   |
|   |                |                  |   |
|   |                | By:                   | /s/ PAUL R. THOMSON |   |
|   |                |                  |   |
|   |                |                  | Paul R. Thomson |
|   |                |                  | *Vice  President, Chief Financial Officer   and Treasurer* |
|   | Dated: May 15, 2003 |                  |   |

 

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**CERTIFICATIONS**

 

I,Charles M. Fernandez, Chief Executive Officer, certify that:

 

1.             I have reviewed this quarterly report on Form 10-Qof  Big City Radio, Inc.;

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to          statea material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report(the “Evaluation Date”); and

 

c)              presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                                       Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)    any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.                                     Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses. 

 
| Date: May 15, 2003 | /s/  Charles  M. Fernandez |   |
|--------------------|--------------------------------------|--------|
|               |                                 |
|               | Charles M. Fernandez                 |
|               | *Chief Executive Officer*            |

 

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**CERTIFICATIONS**

 

I,Paul R. Thomson, Chief Financial Officer, certify that:

 

1.             I have reviewed this quarterly report on Form 10-Qof  Big City Radio, Inc.

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to          statea material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)     designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)    evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within90 days       prior to the filingdate of this quarterly report (the “Evaluation Date”); and

 

c)     presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.                                       Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)     all significant deficiencies in the designor operation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

b)    any fraud, whether or not material, thatinvolves management or other employees who have a significant role in the registrant’sinternal controls; and

 

6.                                       Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date: May 15, 2003 | /s/  PAUL R.  THOMSON |   |
|--------------------|---------------------------------|--------|
|               | Paul R. Thomson                 |   |
|               | *Chief Financial Office*        |   |
|               |                            |
|                    |                                 |        |  |

 

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