Mission Broadcasting 10K 2007 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

For the fiscal year ended December 31, 2007

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 333-62916-02

MISSION BROADCASTING, INC.

(Exact name of registrant as specified in its charter)


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

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

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No ¨

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):


Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer x		Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of June 30, 2007, Mission Broadcasting, Inc. had one shareholder, David S. Smith. Mr. Smith held all 1,000 shares of the outstanding common stock of Mission Broadcasting, Inc. at June 30, 2007. As of January 31, 2008, Mission Broadcasting, Inc. had 1,000 shares of outstanding common stock.

TABLE OF CONTENTS


		Page
PART I

ITEM 1.	Business	4

ITEM 1A.	Risk Factors	11

ITEM 1B.	Unresolved Staff Comments	15

ITEM 2.	Properties	16

ITEM 3.	Legal Proceedings	17

ITEM 4.	Submission of Matters to a Vote of Security Holders	17

PART II

ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18

ITEM 6.	Selected Financial Data	18

ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	30

ITEM 8.	Financial Statements and Supplementary Data	30

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30

ITEM 9A.	Controls and Procedures	30

ITEM 9B.	Other Information	31

PART III

ITEM 10.	Directors, Executive Officers and Corporate Governance	32

ITEM 11.	Executive Compensation	32

ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33

ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	34

ITEM 14.	Principal Accountant Fees and Services	36

PART IV		37

ITEM 15.	Exhibits and Financial Statement Schedules	37

Index to Financial Statements		F-1

Index to Exhibits		E-1

General

As used in this Annual Report on Form 10-K and unless the context indicates otherwise, “Mission,” “we,” “our,” “ours”, “us” and the “Company” refer to Mission Broadcasting, Inc. Mission has entered into time brokerage, shared services and joint sales agreements (which we generally refer to as local service agreements) with certain television stations owned by Nexstar Broadcasting, Inc. (“Nexstar”), but Mission does not own any equity interests in Nexstar and Nexstar does not own any equity interests in Mission. For a description of the relationship between Mission and Nexstar, see Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

There are 210 generally recognized television markets, known as Designated Market Areas, or DMAs, in the United States. DMAs are ranked in size according to various factors based upon actual or potential audience. DMA rankings contained in this Annual Report on Form 10-K are fromInvesting in Television Market Report 2007 4^th Edition, as published by BIA Financial Network, Inc.

Cautionary Note Regarding Forward-Looking Statements

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

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ from a projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties discussed under Item 1A. “Risk Factors” elsewhere in this Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Annual Report on Form 10-K are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances unless otherwise required by law.

Available Information

We file annual, quarterly and current reports, and other information with the SEC. You may read and copy any reports, statements and other information filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549-0102. Please call (800) SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address for the SEC’s website ishttp://www.sec.gov.

PART I

Item 1. Business

Overview

We are a television broadcasting company focused exclusively on the acquisition, development and operation of television stations in medium-sized markets in the United States, primarily markets that rank from 50 to 175, as reported by A.C. Nielsen Company. As of December 31, 2007, we owned and operated 15 stations. We have tripled the size of our portfolio since January 1, 2003, having acquired 10 stations. The stations that we own and operate are in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas and Montana. These stations are diverse in their network affiliations: 13 have primary affiliation agreements with one of the four major networks––2 with NBC, 5 with Fox, 4 with ABC, and 2 with CBS, and 2 stations have an agreement with MyNetworkTV.

We believe that medium-sized markets offer significant advantages over large-sized markets, most of which result from a lower level of competition. First, because there are fewer well-capitalized acquirers with a medium-market focus, we have been successful in purchasing stations on more favorable terms than acquirers of large market stations. Second, in many of our markets only four or five local commercial television stations exist. As a result, we achieve lower programming costs than stations in larger markets because the supply of quality programming exceeds the demand.

The stations we own and operate provide free over-the-air programming to our markets’ television viewing audiences. This programming includes (a) programs produced by networks with which the stations are affiliated; (b) programs that the stations produce; and (c) first-run and rerun syndicated programs that the stations acquire. Our primary source of revenue is indirectly derived from the sale of commercial air time to local and national advertisers that is paid to us by Nexstar under local service agreements.

Our principal offices are located at 7650 Chippewa Road, Suite 305, Brecksville, Ohio 44141. Our telephone number is (440) 526-2227.

Local Service Agreements and Purchase Options

The following table summarizes the various local service agreements our stations had in effect as of December 31, 2007 with Nexstar-owned stations:


Service Agreements		Stations
TBA Only⁽¹⁾		WFXP and KHMT

SSA & JSA⁽²⁾		KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE and WTVO

⁽¹⁾	Mission has a time brokerage agreement (“TBA”) for each of these stations which allows Nexstar to program most of each station’s broadcast time, sell each station’s advertising time and retain the advertising revenue generated in exchange for monthly payments to Mission.

⁽²⁾

Mission has both a shared services agreement (“SSA”) and a joint sales agreement (“JSA”) for each of these stations. The SSA allows the sharing of services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from Mission as described in the SSAs. The JSAs permit Nexstar to sell and retain a percentage of the net revenue from the station’s advertising time in return for monthly payments to Mission of the remaining percentage of net revenue, as described in the JSAs.

In conjunction with its acquisition of KTVE, the NBC affiliate in the Monroe, Louisiana – El Dorado, Arkansas market, effective January 16, 2008, Mission entered into a SSA and JSA with Nexstar. The terms of the SSA and JSA are comparable to the terms of the SSAs and JSAs between Nexstar and Mission as discussed above.

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

The arrangements under the SSAs and JSAs have had the effect of Nexstar receiving substantially all of the available cash, after debt service costs, generated by the stations listed above. The arrangements under the TBAs have also had the effect of Nexstar receiving substantially all of the available cash generated by the TBA stations listed above. Mission anticipates that, through these local service agreements, Nexstar will continue to receive substantially all of Mission’s available cash, after payments for debt service costs, generated by the stations listed above.

Nexstar Broadcasting Group, Inc. and its subsidiaries (“Nexstar Broadcasting Group”) guarantee all obligations incurred under our senior credit facility. We are a guarantor of the senior credit facility entered into by Nexstar and the senior subordinated notes issued by Nexstar. In consideration of Nexstar Broadcasting Group’s guarantee of our senior credit facility, Mission’s sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission television station, subject to FCC consent, for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreement, or (2) the amount of its indebtedness. These option agreements (which expire on various dates between 2008 and 2014) are freely exercisable or assignable by Nexstar without consent or approval by Mission’s sole shareholder. We expect these option agreements to be renewed upon expiration.

Refer to Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence” for a more complete disclosure of the local service and option agreements our stations had in effect as of December 31, 2007.

Nexstar does not own Mission or Mission’s television stations. However, as a result of Nexstar Broadcasting Group’s guarantee of all obligations incurred under our senior credit facility and the arrangements under the local service agreements and purchase option agreements with us, Nexstar is deemed under accounting principles generally accepted in the United States of America (“U.S. GAAP”) to have a controlling financial interest in Mission while complying with the Federal Communications Commission (“FCC”) rules regarding ownership limits in television markets. In order for both Nexstar and Mission to comply with FCC regulations, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

Business Strategy

The Stations

The following chart sets forth general information about the stations that we owned and operated as of December 31, 2007:


Market Rank ⁽¹⁾	Market	Station	Affiliation	Commercial Stations in Market⁽²⁾	FCC License Expiration Date
54	Wilkes Barre-Scranton, PA	WYOU	CBS	7	⁽³⁾
74	Springfield, MO	KOLR	CBS	6	⁽³⁾
131	Amarillo, TX	KCIT	Fox	5	⁽³⁾
		KCPN-LP	MyNetworkTV		⁽³⁾
132	Rockford, IL	WTVO	ABC	4	⁽³⁾
142	Erie, PA	WFXP	Fox	4	⁽³⁾
145	Joplin, MO-Pittsburg, KS	KODE	ABC	4	⁽³⁾
148	Lubbock, TX	KAMC	ABC	5	⁽³⁾
149	Wichita Falls, TX- Lawton, OK	KJTL KJBO-LP	Fox MyNetworkTV	5	⁽³⁾ ⁽³⁾
151	Terre Haute, IN	WFXW	Fox	3	⁽³⁾
164	Abilene-Sweetwater, TX	KRBC	NBC	4	⁽³⁾
169	Utica, NY	WUTR	ABC	4	⁽³⁾
170	Billings, MT	KHMT	Fox	4	⁽³⁾
197	San Angelo, TX	KSAN	NBC	4	⁽³⁾

⁽¹⁾	Market rank refers to ranking the size of the Designated Market Area (“DMA”) in which the station is located in relation to other DMAs. Source:Investing in Television Market Report 2007 4^thEdition, as published by BIA Financial Network, Inc.

⁽²⁾	The term “commercial station” means a television broadcast station and excludes non-commercial stations, religious and Spanish-language stations, cable program services or networks. Source:Investing in Television Market Report 2007 4^th Edition, as published by BIA Financial Network, Inc.

⁽³⁾	Application for renewal of license timely was submitted to the FCC. Under the FCC’s rules, a license expiration date automatically is extended pending review of and action on the renewal application by the FCC.

Industry Background

Commercial television broadcasting began in the United States on a regular basis in the 1940s. Currently a limited number of channels are available for over-the-air broadcasting in any one geographic area and a license to operate a television station must be granted by the FCC. All television stations in the country are grouped by A.C. Nielsen Company, a national audience measuring service, into 210 generally recognized television markets, known as designated market areas (“DMAs”), that are ranked in size according to various metrics based upon actual or potential audience. Each DMA is an exclusive geographic area consisting of all counties in which the home-market commercial stations receive the greatest percentage of total viewing hours. A.C. Nielsen periodically publishes data on estimated audiences for the television stations in the DMA. The estimates are expressed in terms of a “rating,” which is a station’s percentage of the total potential audience in the market, or a “share,” which is the station’s percentage of the audience actually watching television. A station’s rating in a market can be a factor in determining advertising rates.

Most television stations are affiliated with networks and receive a significant part of their programming, including prime-time hours, from networks. Whether or not a station is affiliated with one of the four major networks (NBC, ABC, CBS or Fox) has a

significant impact on the composition of the station’s revenue, expenses and operations. Network programming, along with cash payments for some NBC, ABC and CBS affiliates, is provided to the affiliate by the network in exchange for the network’s retention of a substantial majority of the advertising time during network programs. The network then sells this advertising time and retains the revenue. The affiliate retains the revenue from the remaining advertising time it sells during network programs and from advertising time it sells during non-network programs.

Broadcast television stations compete for advertising revenue primarily with other commercial broadcast television stations, cable and satellite television systems and, to a lesser extent, with newspapers, radio stations and internet advertising serving the same market. Non-commercial, religious and Spanish-language broadcasting stations in many markets also compete with commercial stations for viewers. In addition, the Internet and other leisure activities may draw viewers away from commercial television stations.

The television broadcast industry is in the midst of a transition to an advanced digital television (“DTV”) transmission system. DTV transmissions deliver improved video and audio signals including high definition television and have substantial multiplexing and data transmission capabilities. For each licensed television station, the FCC allocated a matching DTV channel for the transition period. Television broadcasters will be required to cease analog broadcasting by February 17, 2009 and return one of their channels to the FCC.

Network Affiliations

Each of our stations is affiliated with a network pursuant to an affiliation agreement, as described below:


Station	Market	Affiliation	Expiration
KCIT	Amarillo, TX	Fox	June 2010
KHMT	Billings, MT	Fox	June 2010
KJTL	Wichita Falls, TX-Lawton, OK	Fox	June 2010
WFXP	Erie, PA	Fox	June 2010
WFXW	Terre Haute, IN	Fox	June 2010
KSAN	San Angelo, TX	NBC	December 2010
KRBC	Abilene-Sweetwater, TX	NBC	December 2010
WUTR	Utica, NY	ABC	December 2010
WTVO	Rockford, IL	ABC	December 2010
KAMC	Lubbock, TX	ABC	December 2010
KCPN-LP	Amarillo, TX	MyNetworkTV	August 2011
KJBO-LP	Wichita Falls, TX-Lawton, OK	MyNetworkTV	August 2011
KODE	Joplin, MO-Pittsburg, KS	ABC	December 2012
KOLR	Springfield, MO	CBS	June 2013
WYOU	Wilkes Barre-Scranton, PA	CBS	June 2015

Each affiliation agreement provides the affiliated station with the right to broadcast all programs transmitted by the network with which it is affiliated. In exchange, the network has the right to sell a substantial majority of the advertising time during these broadcasts. In addition, some stations receive compensation from the network based on the hours of network programming they broadcast.

We expect all of the network affiliation agreements listed above to be renewed upon expiration.

Competition

Competition in the television industry takes place on several levels: competition for audience, competition for programming and competition for advertising.

Audience. Our stations compete for audience share specifically on the basis of program popularity. The popularity of a station’s programming has a direct effect on the advertising rates it can charge its advertisers. A portion of the daily programming on the stations that we own is supplied by the network with which each station is affiliated. In those periods, the stations are dependent upon the performance of the network programs in attracting viewers. Stations program non-network time periods with a combination of self-produced news, public affairs and other entertainment programming, including movies and syndicated programs. The major television networks have also begun to sell their programming directly to the consumer via portal digital devices such as video iPods and cell phones which presents an additional source of competition for television broadcaster audience share. Other sources of competition for audience include home entertainment systems, such as VCRs, DVDs, and DVRs; video-on-demand and pay-per-view; the Internet; and television game devices.

Although the commercial television broadcast industry historically has been dominated by the ABC, NBC, CBS and Fox television networks, other newer television networks and the growth in popularity of subscription systems, such as local cable and direct broadcast satellite (“DBS”) systems which air exclusive programming not otherwise available in a market, have become significant competitors for the over-the-air television audience.

Programming. Competition for programming involves negotiating with national program distributors or syndicators that sell first-run and rerun packages of programming. Stations compete against in-market broadcast station operators for exclusive access to off-network reruns (such asSeinfeld) and first-run product (such asEntertainment Tonight) in their respective markets. Cable systems generally do not compete with local stations for programming, although various national cable networks from time to time have acquired

programs that would have otherwise been offered to local television stations. Time Warner Inc., General Electric Company, Viacom Inc., News Corporation and the Walt Disney Company each owns a television network and also owns or controls major production studios, which are the primary source of programming for the networks. It is uncertain whether in the future such programming, which is generally subject to short-term agreements between the studios and the networks, will be moved to the networks. Television broadcasters also compete for non-network programming unique to the markets they serve. As such, stations strive to provide exclusive news stories, unique features such as investigative reporting and coverage of community events and to secure broadcast rights for regional and local sporting events.

Advertising. Stations compete for advertising revenue with other television stations in their respective markets; and other advertising media such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail, local cable systems, DBS systems and the Internet. Competition for advertising dollars in the broadcasting industry occurs primarily within individual markets. Generally, a television broadcast station in a particular market does not compete with stations in other market areas.

Additional Competitive Factors. Additional factors that are material to a television station’s competitive position include signal coverage and assigned channel. Television stations can be distinguished by the frequency on which they broadcast. Analog television stations that broadcast over the very high frequency or VHF band (channels 2-13) of the spectrum generally have some competitive advantage over analog television stations which broadcast over the ultra-high frequency or UHF band (channels above 13) of the spectrum because the former usually have better signal coverage and operate at a lower transmission costs. However, the improvement of UHF transmitters and receivers, the complete elimination from the marketplace of VHF-only receivers and the expansion of cable television systems have reduced the VHF signal advantage. In addition, any disparity between VHF and UHF is likely to diminish even further in the coming era of digital television.

The broadcasting industry is continually faced with technological change and innovation which increase the popularity of competing entertainment and communications media. Further advances in technology may increase competition for household audiences and advertisers. The increased use of digital technology by cable systems and DBS, along with video compression techniques, will reduce the bandwidth required for television signal transmission. These technological developments are applicable to all video delivery systems, including over-the-air broadcasting, and have the potential to provide vastly expanded programming to highly targeted audiences. Reductions in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of increasingly specialized “niche” programming. This ability to reach very narrowly defined audiences is expected to alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that these or other technological changes will have on the broadcast television industry or on the future results of our operations.

Federal Regulation

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The following is a brief discussion of certain provisions of the Communications Act and the FCC’s regulations and policies that affect the business operations of television broadcasting stations. Over the years, Congress and the FCC have added, amended and deleted statutory and regulatory requirements to which station owners are subject. Some of these changes have a minimal business impact whereas others may significantly affect the business or operation of individual stations or the broadcast industry as a whole. The following discussion summarizes some of the statutory and regulatory rules and policies currently in effect. For more information about the nature and extent of FCC regulation of television broadcast stations you should refer to the Communications Act and the FCC’s rules, public notices, and policies.

License Grant and Renewal. The Communications Act prohibits the operation of broadcast stations except under licenses issued by the FCC. Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC is required to grant an application for license renewal if during the preceding term the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. A majority of renewal applications are routinely granted under this standard. If a licensee fails to meet this standard the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period.

After a renewal application is filed, interested parties, including members of the public, may file petitions to deny a renewal application, to which the licensee/renewal applicant is entitled to respond. After reviewing the pleadings, if the FCC determines that there is a substantial and material question of fact whether grant of the renewal application would serve the public interest, the FCC is required to hold a trial-type hearing on the issues presented. If, after the hearing, the FCC determines that the renewal applicant has met the renewal standard the FCC will grant the renewal application. If the licensee/renewal applicant fails to meet the renewal standard or show that there are mitigating factors entitling it to renewal subject to appropriate sanctions, the FCC can deny the renewal application. In the vast majority of cases where a petition to deny is filed against a renewal application, the FCC ultimately grants the renewal without a hearing. No competing application for authority to operate a station and replace the incumbent licensee may be filed against a renewal application.

In addition to considering rule violations in connection with a license renewal application, the FCC may sanction a station license for failing to observe FCC rules and policies during the license term, including the imposition of a monetary forfeiture.

The Communications Act prohibits the assignment or the transfer of control of a broadcast license without prior FCC approval.

Ownership Restrictions. The FCC has rules which establish limits on the ownership of broadcast stations. These ownership limits apply to attributable interests in a station licensee held by an individual, corporation, partnership or other entity. In the case of corporations, officers, directors and voting stock interests of 5% or more (20% or more in the case of qualified investment companies, such as insurance companies and bank trust departments) are considered attributable interests. For partnerships, all general partners and non-insulated limited partners are attributable. Limited liability companies are treated the same as partnerships. The FCC also considers attributable the holder of more than 33% of a licensee’s total assets (defined as total debt plus total equity), if that person or entity also provides over 15% of the station’s total weekly broadcast programming or has an attributable interest in another media entity in the same market which is subject to the FCC’s ownership rules, such as a radio or television station, cable television system or daily newspaper.

Local Ownership (Duopoly Rule). Under the current duopoly rule, a single entity is allowed to own or have attributable interests in two television stations in a market if (1) the two stations do not have overlapping service areas, or (2) after the combination there are at least eight independently owned and operating full-power television stations and one of the combining stations is not ranked among the top four stations in the DMA. The duopoly rule allows the FCC to consider waivers to permit the ownership of a second station only in cases where the second station has failed or is failing or unbuilt.

Under the duopoly rule, the FCC attributes toward the local television ownership limits another in-market station when one station owner programs a second in-market station pursuant to a time brokerage or local marketing agreement, if the programmer provides more than 15% of the second station’s weekly broadcast programming. However, local marketing agreements entered into prior to November 5, 1996 are exempt attributable interests until the FCC determines otherwise. This “grandfathered” period, when reviewed by the FCC, is subject to possible extension or termination.

In July 2006, the FCC initiated a proceeding with respect to its broadcast ownership rules, including the duopoly rule. In a decision adopted on December 18, 2007 and released on February 4, 2008, the FCC made one change in its broadcast ownership rules – allowing local newspaper/broadcasting cross-ownership under circumstances, but determined that it would not make any other changes in its media ownership rules. It is likely that this FCC decision will be appealed. In addition, the FCC has a separate proceeding pending to determine whether to make television joint sales agreements attributable interests under its ownership rules.

In certain of our markets, we own and operate both full-power and low-power television broadcast stations (in Wichita Falls, we own and operate KJTL and KJBO-LP; and in Amarillo, we own and operate KCIT and KCPN-LP). The FCC’s duopoly rules and policies regarding ownership of television stations in the same market apply only to full-power television stations and not low-power television stations such as KJBO-LP and KCPN-LP.

We currently do not operate two full-power stations in any market.

National Ownership. There is no nationwide limit on the number of television stations which a party may own. However, the FCC’s rules limit the percentage of U.S. television households which a party may reach through its attributable interests in television stations. This rule provides that when calculating a party’s nationwide aggregate audience coverage, the ownership of a UHF station is counted as 50% of a market’s percentage of total national audience. In 2004, Congress determined that one party may have an attributable interest in television stations which reach, in the aggregate, 39% of all U.S. television households; and the FCC thereafter modified its corresponding rule. The FCC currently is considering whether this act has any impact on the FCC’s authority to examine and modify the UHF discount.

Mission’s stations have a combined national audience reach of 1.6% of television households with the UHF discount.

Radio/Television Cross-Ownership Rule (One-to-a-Market Rule). In markets with at least 20 independently owned media outlets, ownership of one television station and up to seven radio stations, or two television stations (if allowed under the television duopoly rule) and six radio stations is permitted. If the number of independently owned media outlets is fewer than 20 but greater than or equal to 10, ownership of one television station (or two if allowed) and four radio stations is permitted. In markets with fewer than 10 independent media voices, ownership of one television station (or two if allowed) and one radio station is permitted. In calculating the number of independent media voices in a market, the FCC includes all radio and television stations, independently owned cable systems (counted as one voice), and independently owned daily newspapers which have circulation that exceeds 5% of the households in the market.

Local Television/Newspaper Cross-Ownership Rule. Under this rule, a party is prohibited from having an attributable interest in a television station and a daily newspaper except in cases where the market at issue is one of the 20 largest DMAs, and subject to other criteria and limitations.

Local Television/Cable Cross-Ownership. There is no FCC rule prohibiting common ownership of a cable television system and a television broadcast station in the same area.

Cable “Must-Carry” or Retransmission Consent Rights. Every three years television broadcasters are required to make an election between “must-carry” or retransmission consent rights in connection with the carriage of their analog signal on cable television systems within their DMA. The most recent election was made October 1, 2005, and is effective for the three-year period that began January 1, 2006. The next election date is October 1, 2008, for the three-year period beginning January 1, 2009.

If a broadcaster chooses to exercise its must-carry rights, it may request cable system carriage on its over-the-air channel or another channel on which it was carried on the cable system as of a specified date. A cable system generally must carry the station’s signal in compliance with the station’s carriage request, and in a manner that makes the signal available to all cable subscribers. However, must-carry rights are not absolute, and whether a cable system is required to carry the station on its system, or in the specific manner requested, depends on variables such as the location, size and number of activated channels of the cable system and whether the station’s programming duplicates, or substantially duplicates, the programming of another station carried on the cable system. If certain conditions are met, a cable system may decline to carry a television station that has elected must-carry status, although it is unusual for all the required conditions to exist.

If a broadcaster chooses to exercise its retransmission consent rights, a cable television system which is subject to that election may not carry the station’s signal without the station’s consent. This generally requires the cable system and television station operator to negotiate the terms under which the broadcaster will consent to the cable system’s carriage of its station’s signal.

We have elected to exercise retransmission consent rights for all of our stations where we have a legal right to do so. We have negotiated retransmission consent agreements with substantially all of the cable systems which carry our stations’ signals.

Direct-to-Home Satellite Services and Carriage Rights. DBS providers are permitted to carry local channels including “significantly viewed” out-of-market stations when local service is provided. Under certain circumstances, DBS providers also are permitted to provide network service from a station outside a local market for subscribers in the market who are “unserved” by a local station affiliated with the same network. In addition, DBS subscribers who were not receiving a digital signal as of December 8, 2004 may receive distant signals for digital television programming from their DBS provider if they are receiving the local analog signal of a network affiliate and the subscriber cannot receive a local digital signal of that network-affiliated station over-the-air.

Satellite carriers that provide any local-into-local service in a market must carry, upon request, all stations in that market that have elected mandatory carriage, and DBS operators are now carrying other local stations in local-into-local markets, including some noncommercial, independent and foreign language stations. However, satellite carriers are not required to carry duplicative network signals from a local market unless the stations are licensed to different communities in different states. Satellite carriers are required to carry all local television stations in a contiguous manner on their channel line-up and may not discriminate in their carriage of stations.

Commercial television stations make elections between retransmission consent and must-carry status for satellite services on the same schedule as cable elections, with the most recent elections made by October 1, 2005 for the three-year period that began on January 1, 2006. DirecTV currently provides satellite carriage of our stations in the Rockford, Springfield and Wilkes Barre-Scranton markets. EchoStar currently provides satellite carriage of our stations in the Abilene-Sweetwater, Amarillo, Billings, Erie, Joplin, MO-Pittsburg, KS, Lubbock, Rockford, San Angelo, Springfield, Terre Haute, Wichita Falls, TX-Lawton, OK and Wilkes Barre-Scranton markets. We have long-term carriage agreements that expire in 2008 with both DirecTV and EchoStar that provide for the carriage of the currently carried stations, as well as those subsequently added in new local-to-local markets, or those added by acquisition or other means.

Digital Television (“DTV”). Television broadcasters are currently required to broadcast both analog and DTV signals. On February 8, 2006, President Bush signed into law legislation that establishes February 17, 2009 as the deadline for television broadcasters to complete their transition to DTV-only operations and return their analog spectrum to the FCC. The DTV transmission system delivers video and audio signals of higher quality (including high definition television) than the existing analog transmission system. DTV also has substantial capabilities for multiplexing (the broadcast of several channels of programs concurrently) and data transmission. The introduction of digital television requires consumers to purchase new television sets that are capable of receiving and displaying DTV signals, or adapters to receive the DTV signals and convert them to analog signals for display on their existing receivers.

For the transition period the FCC allotted each licensed television station a second channel for broadcast of a DTV signal. Stations may broadcast with both analog and DTV signals until February 17, 2009. Stations are required to simulcast 100% of their analog programming on the first DTV channel during the transition period.

Except for stations which have requested waiver of the FCC’s deadline for construction, broadcast television stations are required to have completed construction of their final DTV stations and be broadcasting a full-power DTV signal. As of December 31, 2007, Mission’s stations WUTR, WTVO, WYOU, KOLR and KRBC are broadcasting with full-power DTV signals. Our station KAMC initiated full-power DTV broadcasts on February 6, 2008. The FCC has authorized Mission to operate DTV facilities for its remaining stations at low-power until certain dates established by the FCC. The FCC has established May 18, 2008 as the deadline for Mission stations KJTL, KCIT, KSAN, WFXW, WFXP and KODE. The FCC also has established August 18, 2008 as the deadline for Mission station KHMT.

Extension requests will be filed with the FCC on or before March 19, 2008 (the due date for such filings) for the Mission stations with permit expiration dates of May 18, 2008 unless the stations are scheduled to go DTV full-power by the May 18, 2008 deadline. Extension requests will be filed with the FCC on or before June 19, 2008 (the due date for such filings) for the Mission station with the permit expiration date of August 18, 2008 unless the station is scheduled to go DTV full-power by the August 18, 2008 deadline.

Channels used for analog broadcasts range from 2 through 69. The FCC designated Channels 2 through 51 as the “core” channels for use by television broadcasters’ DTV stations after February 17, 2009. One of our stations has its transitional DTV channel assignment outside the core. This station will be required to change its DTV channel to an in-core channel at the end of the transition.

Television station operators may use their DTV signals to provide ancillary services, such as computer software distribution, Internet, interactive materials, e-commerce, paging services, audio signals, subscription video, or data transmission services. To the extent a station provides such ancillary services it is subject to the same regulations as are applicable to other analogous services under the FCC’s rules and policies. Commercial television stations also are required to pay the FCC 5% of the gross revenue derived from all ancillary services provided over their DTV signals for which a station received a fee in exchange for the service or received compensation from a third party in exchange for transmission of material from that third party, not including commercial advertisements used to support broadcasting.

DTV Channel Election. On October 20, 2006, the FCC released an order establishing the permanent, post-transition DTV channels for all stations. Our stations have been assigned in-core channels for their permanent DTV operations.

DTV MVPD Carriage.Stations may choose must-carry status or retransmission consent for their analog signals, but may only elect retransmission consent for their digital signals. When a television station operates only as a DTV station, and returns its analog channel to the FCC and converts to digital-only operations, which, in most cases, will be on or about February 17, 2009, it may assert must-carry rights for a single DTV programming stream. Digital television signals carried on a cable system must be available to all subscribers on the system’s basic service tier.

The exercise of must-carry rights by a digital-only television station for its DTV signal applies only to a single programming stream and other program-related content on that stream. If a television station is concurrently broadcasting more than one program stream on its DTV signal it may select which program stream is subject to its must-carry election. Cable systems and DBS providers are not required to carry Internet, e-commerce or other ancillary services provided over DTV signals if those services are not related to the station’s primary video programming carried on the cable system and if they are not provided to viewers for free.

With respect to direct-to-the-home satellite service providers, the FCC will address DTV carriage at a later time.

Programming and Operation. The Communications Act requires broadcasters to serve “the public interest.” Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. However, television station licensees are still required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. The FCC may consider complaints from viewers concerning programming when it evaluates a station’s license renewal application, although viewer complaints also may be filed and considered by the FCC at any time. Stations also must follow various rules promulgated under the Communications Act that regulate, among other things:

•

political advertising (its price and availability);

•

sponsorship identification;

•

contest and lottery advertising;

•

obscene and indecent broadcasts;

•

technical operations, including limits on radio frequency radiation;

•

discrimination and equal employment opportunities;

•

closed captioning;

•

children’s programming;

•

program ratings guidelines; and

•

network affiliation agreements.

Employees

As of December 31, 2007, we had a total of 33 employees, comprised of 32 full-time employees and 1 part-time employee. As of December 31, 2007, none of our employees were covered by a collective bargaining agreement. We believe that our employee relations are satisfactory, and we have not experienced any work stoppages at any of our facilities.

Item 1A. Risk Factors

You should carefully consider the following risk factors, which we believe are the most significant risks related to our business, as well as the other information contained in this document.

Risks Related to Our Operations

We have a history of net losses.

We had net losses of $4.0 million, $2.9 million and $9.2 million, respectively, for the years ended December 31, 2007, 2006 and 2005. We may not be able to achieve or maintain profitability.

Our substantial debt could limit our ability to grow and compete.

As of December 31, 2007, we had $175.8 million of debt which represented 216.2% of our total capitalization. Our high level of debt could have important consequences to our business. For example, it could:

•

limit our ability to borrow additional funds or obtain additional financing in the future;

•

limit our ability to pursue acquisition opportunities;

•

expose us to greater interest rate risk since the interest rate on borrowings under our senior credit facility is variable;

•

limit our flexibility to plan for and react to changes in our business and our industry; and

•

impair our ability to withstand a general downturn in our business and place us at a disadvantage compared to our competitors that are less leveraged.

Refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations––Contractual Obligations” for disclosure of the approximate aggregate amount of principal indebtedness scheduled to mature.

We could also incur additional debt in the future. The terms of our senior credit facility limit, but do not prohibit, us from incurring substantial amounts of additional debt. To the extent we incur additional debt, we would become even more susceptible to the leverage-related risks described above.

The agreement governing our debt contains various covenants that limit our management’s discretion in the operation of our business.

Our senior credit facility contains various covenants that restrict our ability to, among other things:

•

incur additional debt and issue preferred stock;

•

pay dividends and make other distributions;

•

make investments and other restricted payments;

•

merge, consolidate or transfer all or substantially all of our assets;

•

enter into sale and leaseback transactions;

•

create liens;

•

sell assets or stock of our subsidiaries; and

•

enter into transactions with affiliates.

Our bank credit facility agreement does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. Future financing agreements may contain financial covenants which could limit our management’s ability to operate our business at its discretion, and consequently we may be unable to compete effectively, pursue acquisitions or take advantage of new business opportunities, any of which could harm our business.

If we fail to comply with the restrictions in present or future financing agreements, a default may occur. A default could allow creditors to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies. A default could also allow creditors to foreclose on any collateral securing such debt.

We guarantee the aggregate principal amount of $200.0 million of senior subordinated notes and the aggregate principal amount of $180.8 million of outstanding bank facility term and revolving loans issued or drawn by Nexstar Broadcasting, Inc.

If Nexstar, which is highly leveraged with debt, is unable to meet its obligations under the indenture governing its senior subordinated notes or its senior credit facility agreement, we can be held liable for those obligations under guarantees. Additionally, Nexstar has $61.5 million of unused revolver commitments available under its senior credit facility, which is also guaranteed by us.

Our broadcast operations could be adversely affected if our stations fail to maintain or renew their network affiliation agreements on favorable terms, or at all.

Due to the quality of the programming provided by the networks, stations that are affiliated with a network generally have higher ratings than unaffiliated independent stations in the same market. As a result, it is important for stations to maintain their network affiliations. All of the stations that we operate have network affiliation agreements – 2 stations have primary affiliation agreements with NBC, 2 with CBS, 4 with ABC, 5 with Fox and 2 with MyNetworkTV. Each of NBC, CBS and ABC generally provides affiliated stations with up to 22 hours of prime time programming per week, while each of Fox and MyNetworkTV provides affiliated stations with up to 15 hours of prime time programming per week. In return, affiliated stations broadcast the respective network’s commercials during the network programming. Under the affiliation agreements with NBC, CBS and ABC, most of the stations we operate also receive compensation from these networks.

All of the network affiliation agreements of the stations that we own and operate are scheduled to expire at various times beginning in June 2010 through June 2015. Network affiliation agreements are also subject to earlier termination by the networks under limited circumstances. For more information regarding these network affiliation agreements, see Item 1. “Business––Network Affiliations.”

The FCC could decide not to grant renewal of the FCC license of any of the stations we operate which would require that station to cease operations.

Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC is required to grant an application for license renewal, if during the preceding term, the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. A majority of renewal applications are routinely granted under this standard. If a licensee fails to meet this standard the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period.

On January 3, 2006, Cable America Corporation (“Cable America”)`submitted a petition to deny the applications for renewal of license for Nexstar’s station, KSFX, and our station, KOLR, both licensed to Springfield, Missouri. Cable America alleged that Nexstar’s local service agreement arrangements with us give Nexstar improper control over our operations. We and Nexstar submitted a joint opposition to this petition to deny and Cable America submitted a reply. Cable America subsequently requested that the FCC dismiss its petition. However, the petition remains pending with the FCC.

In May, 2006, two affiliates of Equity Broadcasting Corporation (“Equity”) filed a petition to deny against the station KFTA (Fort Smith, Arkansas) assignment application to assign the FCC license to us alleging that Nexstar improperly controls us and our stations. We and Nexstar submitted a joint opposition to Equity’s petition to deny. The FCC is currently considering the KFTA assignment application. In September 2006, Equity also submitted a petition to deny Nexstar’s application for renewal of KFTA’s FCC license. Nexstar has filed its response to Equity’s petition to deny the license renewal. Although management believes that the petitions have no merit, it is not possible to predict what action the FCC will take on the petitions to deny, or when it will take such action.

We began to submit renewal of license applications for our stations beginning in April 2005. We expect the FCC to renew the licenses for our stations in due course.

Our growth may be limited if we are unable to implement our acquisition strategy.

We intend to continue our growth by selectively pursuing acquisitions of television stations. The television broadcast industry is undergoing consolidation, which may reduce the number of acquisition targets and increase the purchase price of future acquisitions. Some of our competitors may have greater financial or management resources with which to pursue acquisition targets. Therefore, even if we are successful in identifying attractive acquisition targets, we may face considerable competition and our acquisition strategy may not be successful.

FCC rules and policies may also make it more difficult for us to acquire additional television stations. Television station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities. The need for FCC and other regulatory approvals could restrict our ability to consummate future transactions if, for example, the FCC or other government agencies believe that a proposed transaction would result in excessive concentration in a market, even if the proposed combinations may otherwise comply with FCC ownership limitations.

Growing our business through acquisitions involves risks and if we are unable to manage effectively our rapid growth, our operating results will suffer.

We have experienced rapid growth. Since January 1, 2003, we have tripled the number of stations that we operate, having acquired 10 stations. We will continue to actively pursue additional acquisition opportunities. To manage effectively our growth and address the increased reporting requirements and administrative demands that will result from future acquisitions, we will need, among other things, to continue to develop our financial and management controls and management information systems. We will also need to continue to identify, attract and retain highly skilled finance and management personnel. Failure to do any of these tasks in an efficient and timely manner could seriously harm our business.

There are other risks associated with growing our business through acquisitions. For example, with any past or future acquisition, there is the possibility that:

•

we may not be able to successfully reduce costs, increase advertising revenue or audience share or realize anticipated synergies and economies of scale with respect to any acquired station;

•

an acquisition may increase our leverage and debt service requirements or may result in our assuming unexpected liabilities;

•

our management may be reassigned from overseeing existing operations by the need to integrate the acquired business;

•

we may experience difficulties integrating operations and systems, as well as, company policies and cultures;

•

we may fail to retain and assimilate employees of the acquired business; and

•

problems may arise in entering new markets in which we have little or no experience.

The occurrence of any of these events could have a material adverse effect on our operating results, particularly during the period immediately following any acquisition.

The FCC may decide to terminate “grandfathered” time brokerage agreements.

The FCC attributes time brokerage agreements and local marketing agreements (“TBAs”) to the programmer under its ownership limits if the programmer provides more than 15% of a station’s weekly broadcast programming. However, TBAs entered into prior to November 5, 1996 are exempt attributable interests for now.

The FCC will review these “grandfathered” TBAs in the future. During this review, the FCC may determine to terminate the “grandfathered” period and make all TBAs fully attributable to the programmer. If the FCC does so, we will be required to terminate the TBAs with Nexstar for stations WFXP and KHMT unless the FCC simultaneously changes its duopoly rules to allow ownership of two stations in the applicable markets.

Failure to construct full-power DTV facilities may lead to a loss of station coverage area or other FCC sanctions.

Television broadcasters are currently broadcasting both analog and DTV signals. On February 8, 2006, President Bush signed into law legislation that establishes February 17, 2009 as the deadline for television broadcasters to complete their transition to DTV-only operations and return their analog spectrum to the FCC.

FCC actions may restrict our ability to enter into local service agreements with Nexstar, which would harm our operations.

We have entered into local service agreements with Nexstar for our stations. While all of our existing local service agreements comply with FCC rules and policies, we cannot assure you that the FCC will continue to permit local service agreements as a means of creating substantial operating efficiencies, and the FCC may challenge our existing arrangements with Nexstar in the future.

On August 2, 2004, the FCC initiated a rule making proceeding to determine whether to make television joint sales agreements attributable under its ownership rules. Comments and reply comments were filed in this proceeding in the fourth quarter of 2004. The FCC has not yet issued a decision in this proceeding. However, if the FCC adopts a JSA attribution rule for television stations we will be required to comply with the rule.

Cable America has alleged that our local service agreements with Nexstar give Nexstar improper control over our operations. If the FCC challenges our existing arrangements with Nexstar and determines that our arrangements violate the FCC’s rules and policies, we may be required to terminate such arrangements and we could be subject to sanctions, fines and/or other penalties.

We have a material amount of goodwill and intangible assets, and therefore we could suffer losses due to future asset impairment charges.

As of December 31, 2007, approximately $82.2 million, or 69.1%, of our total assets consisted of goodwill and intangible assets, including FCC licenses and network affiliation agreements. We test goodwill and FCC licenses annually, and on an interim date if factors or indicators become apparent that would require an interim test of these assets, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” We test network affiliation agreements whenever circumstances or indicators become apparent the asset may not be recoverable through expected future cash flows. The methods used to evaluate the impairment of the Company’s goodwill and intangible assets would be affected by a significant reduction in operating results or cash flows at one or more of the Company’s television stations, or a forecast of such reductions, a significant adverse change in the advertising marketplaces in which the Company’s television stations operate, the loss of network affiliations, or by adverse changes to FCC ownership rules, among others, which may be beyond our control. If the carrying amount of goodwill and intangible assets is revised downward due to impairment, such non-cash charge could materially affect the Company’s financial position and results of operations.

Risks Related to Our Industry

Preemption of regularly scheduled programming by network news coverage may affect our revenue and results of operations.

We may experience a loss of advertising revenue and incur additional broadcasting expenses due to preemption of our regularly scheduled programming by network coverage of a major global news event such as a war or terrorist attack. As a result, advertising may not be aired and the revenue for such advertising may be lost unless the station is able to run the advertising at agreed-upon times in the future. Advertisers may not agree to run such advertising in future time periods, and space may not be available for such advertising. The duration of such preemption of local programming cannot be predicted if it occurs. In addition, our stations may incur additional expenses as a result of expanded news coverage of a war or terrorist attack. The loss of revenue and increased expenses could negatively affect our results of operations.

The industry-wide mandatory conversion to digital television will require us to make significant capital expenditures without assurance that we will remain competitive with other developing technologies.

The conversion from broadcasting in the analog broadcast format to the digital broadcast format is expensive. This conversion required an average initial capital expenditure of approximately $0.2 million per station for low-power transmission of digital signal programming, and we estimate that it will require an average additional capital expenditure of approximately $1.5 million per station (for 8 stations as of December 31, 2007) to modify our stations’ DTV transmitters for full-power digital signal transmission, including costs for the transmitter, transmission line, antenna and installation, and estimated costs for tower upgrades, replacements and/or modifications. Digital conversion expenditures were $2.3 million, $2.1 million and $0.8 million, respectively, for the years ended December 31, 2007, 2006 and 2005.

Since digital technology allows broadcasting of multiple channels within the additional allocated spectrum, this technology could expose us to additional competition from programming alternatives.

Technological advancements and the resulting increase in programming alternatives, such as cable television, DBS systems, pay-per-view, home video and entertainment systems, video-on-demand and the Internet, have created new types of competition to television broadcast stations and will also increase competition for household audiences and advertisers.

If direct broadcast satellite companies do not carry the stations that we own and operate, we could lose audience share and revenue.

Direct broadcast satellite television companies are permitted to transmit local broadcast television signals to subscribers in local markets provided that they offer to carry all local stations in that market. However, satellite providers have limited satellite capacity to deliver local station signals in local markets. Satellite providers, such as DirecTV and EchoStar, carry our stations in only some of our markets and may choose not to carry local stations in any of our other markets. DirecTV currently provides satellite carriage of our stations in the Rockford, Springfield and Wilkes Barre-Scranton markets. EchoStar currently provides satellite carriage of our stations only in the Abilene-Sweetwater, Amarillo, Billings, Erie, Joplin, MO-Pittsburg, KS, Lubbock, Rockford, San Angelo, Springfield, Terre Haute, Wichita Falls, TX-Lawton, OK and Wilkes Barre-Scranton markets. In those markets in which the satellite providers do not carry local station signals, subscribers to those satellite services are unable to view local stations without making further arrangements, such as installing antennas and switches. Furthermore, when direct broadcast satellite companies do carry local television stations in a

market, they are permitted to charge subscribers extra for such service. Some subscribers may choose not to pay extra to receive local television stations. In the event subscribers to satellite services do not receive the stations that we own and operate, we could lose audience share which would adversely affect our revenue and earnings.

The FCC can sanction us for programming broadcast on our stations which it finds to be indecent.

In 2004, the FCC began to impose substantial fines on television broadcasters for the broadcast of indecent material in violation of the Communications Act and its rules. The FCC also revised its indecency review analysis to more strictly prohibit the use of certain language on broadcast television. Because our stations’ programming is in large part comprised of programming provided by the networks with which the stations are affiliated, we do not have full control over what is broadcast on our stations, and we may be subject to the imposition of fines if the FCC finds such programming to be indecent.

In addition, Congress recently increased the fines which may be imposed on a television broadcaster for an indecency violation to a maximum of $325 thousand per violation.

Intense competition in the television industry could limit our growth and impair our ability to become profitable.

As a television broadcasting company, we face a significant level of competition, both directly and indirectly. Generally we compete for our audience against all the other leisure activities in which one could choose to engage rather than watch television. Specifically, stations we own compete for audience share, programming and advertising revenue with other television stations in their respective markets and with other advertising media, including newspapers, radio stations, cable television, DBS systems and the Internet.

The entertainment and television industries are highly competitive and are undergoing a period of consolidation. Many of our current and potential competitors have greater financial, marketing, programming and broadcasting resources than we do. The markets in which we operate are also in a constant state of change arising from, among other things, technological improvements and economic and regulatory developments. Technological innovation and the resulting proliferation of television entertainment, such as cable television, wireless cable, satellite-to-home distribution services, pay-per-view and home video and entertainment systems, have fractionalized television viewing audiences and have subjected free over-the-air television broadcast stations to increased competition. We may not be able to compete effectively or adjust our business plans to meet changing market conditions. We are unable to predict what form of competition will develop in the future, the extent of the competition or its possible effects on our businesses.

The FCC could implement legislation and/or regulations that might have a significant impact on the operations of the stations we own and operate or the television broadcasting industry as a whole.

The FCC’s ongoing rule making proceeding concerning implementation of the transition from analog to digital television broadcasts is likely to have a significant impact on the television industry and the operation of our stations. The FCC has initiated proceedings to determine whether to make TV joint sales agreements attributable interests under its ownership rules; to determine whether it should establish formal rules under which broadcasters will be required to serve the local public interest; and to determine whether to modify or eliminate certain of its broadcast ownership rules, including the radio-television cross-ownership rule and the newspaper-television cross-ownership rule. A change to any of these rules may have a significant impact on us and the stations we own and operate.

In addition, the FCC may decide to initiate other new rule making proceedings on its own or in response to requests from outside parties, any of which might have such an impact. Congress also may act to amend the Communications Act in a manner that could impact our stations and the stations we provide services to or the television broadcast industry in general.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We own and lease facilities in the following locations:


Station Metropolitan Area and Use	Owned or Leased	Square Footage/Acreage Approximate Size	Expiration of Lease
WYOU—Wilkes Barre-Scranton, PA
Office-Studio⁽¹⁾	—	—	—
Tower/Transmitter Site—Penobscot Mountain	100% Owned	120.33 Acres	—
Tower/Transmitter Site—Bald Mountain	100% Owned	7.2 Acres	—
Tower/Transmitter Site—Williamsport	33% Owned	1.35 Acres	—
Tower/Transmitter Site—Sharp Mountain	33% Owned	0.23 Acres	—
Tower/Transmitter Site—Stroudsburg	Leased	10,000 Sq. Ft.	Month to Month

WFXW—Terre Haute, IN
Office-Studio⁽²⁾	—	—	—
Tower/Transmitter Site	100% Owned	1 Acre	—

WFXP—Erie, PA
Office-Studio⁽³⁾	—	—	—
Tower/Transmitter Site	Leased	1 Sq. Ft.	6/30/09

KJTL—Wichita Falls, TX—Lawton, OK
Office-Studio⁽⁴⁾	—	—	—
Tower/Transmitter Site	Leased	40 Acres	1/30/15

KJBO-LP—Wichita Falls, TX-Lawton, OK
Office-Studio⁽⁴⁾	—	—	—
Tower/Transmitter Site	Leased	5 Acres	Year to Year

KODE—Joplin, MO-Pittsburg, KS
Office-Studio	100% Owned	2.74 Acres	—
Tower/Transmitter Site	Leased	215 Sq. Ft.	5/1/27

KRBC—Abilene-Sweetwater, TX
Office-Studio	100% Owned	5.42 Acres	—
Office-Studio	100% Owned	19,312 Sq. Ft.	—
Tower/Transmitter Site	100% Owned	12.78 Acres	—

KSAN—San Angelo, TX
Office-Studio⁽⁵⁾	—	—	—
Tower/Transmitter Site	Leased	10 Acres	5/15/09
Microwave Relay Station	Leased	0.3 Acres	10/31/09

KOLR—Springfield, MO
Office-Studio	100% Owned	30,000 Sq. Ft.	—
Office-Studio	100% Owned	7 Acres	—
Tower/Transmitter Site	Leased	0.5 Acres	5/12/21

KCIT/KCPN-LP—Amarillo, TX
Office-Studio⁽⁶⁾	—	—	—
Tower/Transmitter Site	Leased	100 Acres	5/12/21
Tower/Transmitter Site—Parmer County, TX	Leased	80 Sq. Ft.	Month to Month
Tower/Transmitter Site—Guyman, OK	Leased	80 Sq. Ft.	Month to Month
Tower/Transmitter Site—Curry County, NM	Leased	6 Acres	Month to Month

KAMC—Lubbock, TX
Office-Studio⁽⁷⁾	—	—	—
Tower/Transmitter Site	Leased	40 Acres	5/12/21
Tower/Transmitter Site	Leased	1,200 Sq. Ft.	Month to Month

KHMT—Billings, MT
Office-Studio⁽⁸⁾	—	—	—
Tower/Transmitter Site	Leased	4 Acres	5/12/21


Station Metropolitan Area and Use	Owned or Leased		Square Footage/Acreage Approximate Size	Expiration of Lease
WUTR—Utica, NY
Office-Studio	100% Owned		12,100 Sq. Ft.	—
Tower/Transmitter Site	100% Owned		21 Acres	—

WTVO—Rockford, IL		��
Office-Studio-Tower/Transmitter Site	100% Owned		20,000 Sq. Ft.	—

Corporate Office—Brecksville, OH	Leased		540 Sq. Ft.	10/31/10

(1)	The office space and studio used by WYOU are owned by Nexstar.

(2)	The office space and studio used by WFXW are owned by Nexstar.

(3)	The office space and studio used by WFXP are owned by Nexstar.

(4)	The office space and studio used by KJTL and KJBO-LP are owned by Nexstar.

(5)	The office space and studio used by KSAN are owned by Nexstar.

(6)	The office space and studio used by KCIT/KCPN-LP are owned by Nexstar.

(7)	The office space and studio used by KAMC are owned by Nexstar.

(8)	The office space and studio used by KHMT are owned by Nexstar.

Item 3. Legal Proceedings

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

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

We did not submit any matter to a vote of our sole shareholder during the fourth quarter of 2007.

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

As of December 31, 2007, Mission’s common stock was not traded on any market and David S. Smith, the sole shareholder of Mission, held 1,000 shares of common stock. Mission has never paid any dividends.

Item 6. Selected Financial Data

The selected historical financial data presented below for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 has been derived from our financial statements. The following financial data should be read in conjunction with Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included in Part IV, Item 15(a) of this Annual Report on Form 10-K.


	Fiscal years ended December 31,
	2007			2006			2005			2004			2003
	(in thousands)
Statement of Operations Data:
Net broadcast revenue⁽¹⁾	$	6,726		$	5,757		$	4,959		$	15,542		$	18,750
Revenue from Nexstar Broadcasting, Inc.⁽²⁾		30,556			32,556			28,141			21,186			10,204

Net revenue		37,282			38,313			33,100			36,728			28,954
Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		5,148			4,710			4,271			3,935			4,342
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately below)		2,280			2,390			2,232			4,639			6,562
Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.⁽³⁾		7,860			7,820			11,400			13,167			5,909
Gain on asset exchange		(317	)		—			—			—			—
Loss on asset disposal, net		92			12			94			3			—
Amortization of broadcast rights		4,269			3,939			4,408			4,579			4,126
Depreciation and amortization		8,603			8,682			8,918			8,064			9,499

Income (loss) from operations		9,347			10,760			1,777			2,341			(1,484	)
Interest expense		(12,344	)		(12,315	)		(9,193	)		(5,871	)		(7,574	)
Loss on extinguishment of debt		—			(269	)		(508	)		(1,094	)		(2,582	)
Interest income		92			60			30			18			7
Other income, net		—			—			—			5			750

Loss before income taxes		(2,905	)		(1,764	)		(7,894	)		(4,601	)		(10,883	)
Income tax expense		(1,135	)		(1,172	)		(1,330	)		(1,105	)		(2,724	)

Loss before minority interest in consolidated entity		(4,040	)		(2,936	)		(9,224	)		(5,706	)		(13,607	)
Minority interest in consolidated entity		—			—			—			188			420

Net loss	$	(4,040	)	$	(2,936	)	$	(9,224	)	$	(5,518	)	$	(13,187	)

Balance Sheet Data (end of period):
Cash and cash equivalents	$	9,916		$	3,577		$	1,404		$	6,981		$	1,857
Working capital deficit		(11,995	)		(20,024	)		(23,406	)		(16,466	)		(29,413	)
Net intangible assets and goodwill		82,226			87,588			92,984			98,750			88,846
Total assets		118,955			117,726			119,804			134,894			118,044
Total debt		175,814			170,541			172,268			172,740			143,000
Total shareholder’s deficit		(94,487	)		(91,947	)		(89,011	)		(79,787	)		(74,269	)

Cash Flow Data:
Net cash provided by (used for):
Operating activities	$	3,908		$	6,516		$	3,220		$	(2,108	)	$	9,716
Investing activities		(2,842	)		(2,616	)		(7,529	)		(22,144	)		(13,196	)
Financing activities		5,273			(1,727	)		(1,268	)		29,376			4,811

Other Financial Data:
Capital expenditures, net of proceeds from asset sales	$	2,455		$	2,616		$	1,400		$	251		$	1,204
Cash payments for broadcast rights		1,678			1,726			2,211			2,080			2,044

(1)	Net broadcast revenue is defined as revenue, excluding revenue from Nexstar Broadcasting, Inc., net of agency commissions.

(2)

We have joint sales agreements with Nexstar, which permits Nexstar to sell and retain a percentage of the net revenue from the advertising time on our stations in return for monthly payments to us of the remaining percentage of the net revenue. We also have time brokerage agreements with Nexstar that allow Nexstar to program most of the broadcast time for us, sell the advertising time and retain the advertising revenue generated in exchange for monthly payments to us.

(3)	We have shared services agreements with Nexstar, which allows the sharing of services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from us.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with Item 6. “Selected Financial Data” and the financial statements and related notes included in Part IV, Item 15(a) of this Annual Report on Form 10-K. As used in this discussion, unless the context indicates otherwise, “Mission” refers to Mission Broadcasting, Inc., and all references to “we”, “our”, “us” and the “Company” refer to Mission.

Overview of Operations

As of December 31, 2007, we owned and operated 15 television stations. We have local service agreements with certain television stations owned by Nexstar Broadcasting, Inc. (“Nexstar”), through which Nexstar provides various programming, sales or other services to our television stations. In order for both Nexstar and us to comply with Federal Communications Commission (“FCC”) regulations, we maintain complete responsibility for and control over programming, finances, personnel and operations of our stations.

The following table summarizes the various local service agreements our stations had in effect as of December 31, 2007 with Nexstar:


Service Agreements		Stations
TBA Only⁽¹⁾		WFXP and KHMT

SSA & JSA⁽²⁾		KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE and, WTVO

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

(2)

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

The arrangements under the SSAs and JSAs have had the effect of Nexstar receiving substantially all of the available cash, after debt service costs, generated by the stations listed above. The arrangements under the TBAs have also had the effect of Nexstar receiving substantially all of the available cash generated by the TBA stations listed above. Mission anticipates that Nexstar will continue to receive substantially all of Mission’s available cash, after payments for debt service costs, generated by the stations listed above. For more information about our local service agreements with Nexstar, refer to Note 5 of our financial statements in Part IV, Item 15(a) of this Annual Report on Form 10-K.

Nexstar Broadcasting Group, Inc. and its subsidiaries (“Nexstar Broadcasting Group”) guarantee all obligations incurred under our senior credit facility. We are a guarantor of the senior credit facility entered into by Nexstar and the senior subordinated notes issued by Nexstar. In consideration of Nexstar’s guarantee of our senior credit facility, our sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each of our television stations, subject to FCC consent. These option agreements (which expire on various dates between 2008 and 2014) are freely exercisable or assignable by Nexstar without consent or approval by our sole shareholder. We expect these option agreements to be renewed upon expiration.

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

Each of our stations has a network affiliation agreement pursuant to which the network provides programming to the station during specified time periods, including prime time. NBC, CBS and ABC compensate most of our affiliated stations for distributing the network’s programming over the air and for allowing the network to keep a portion of advertising inventory during those time periods. The affiliation agreements with Fox and MyNetworkTV do not provide for compensation. In recent years, in conjunction with the renewal of affiliation agreements with NBC, CBS and ABC, the amount of network compensation has been declining from year to year. We expect this trend to continue in the future. Therefore, revenue associated with network compensation agreements is expected to decline in future years and may be eliminated altogether at some point in time.

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

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

Station Acquisitions

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

On January 16, 2008, we completed our acquisition of KTVE, the NBC affiliate in Monroe, Louisiana-El Dorado, Arkansas, for total consideration of $7.8 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, we made an initial payment of $0.4 million against the purchase price on June 27, 2007 to acquire substantially all of the assets of KTVE. We paid the remaining $7.4 million on January 16, 2008, exclusive of transaction costs, from available cash on hand as of December 31, 2007.

Recent Developments

On April 11, 2006, we and Nexstar filed an application with the FCC for consent to assignment of the license for KFTA Channel 24 (Ft. Smith, Arkansas) from Nexstar to us. Consideration for this transaction is set at $5.6 million. Also in 2006, we entered into an affiliation agreement with the Fox network which provides Fox programming to KFTA. On August 28, 2006, we and Nexstar entered into a local service agreement whereby we pay Nexstar for the right to broadcast programming on KFTA and Nexstar pays us for the right to sell all advertising time within certain time periods. The time brokerage agreement will terminate upon the assignment of KFTA’s FCC license from Nexstar to us. Upon completing the assignment of KFTA’s license, we plan to enter into joint sales and shared services agreements with Nexstar-owned KNWA in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, whereby KNWA will provide local news, sales and other non-programming services to KFTA.

On May 22, 2006, two affiliates of Equity Broadcasting Corporation (“Equity”) filed a petition to deny against the KFTA assignment application alleging that Nexstar improperly controls us and our stations. We and Nexstar have submitted a joint opposition to Equity’s petition to deny. The FCC is currently considering the KFTA assignment application. On September 5, 2006, Equity also submitted a petition to deny Nexstar’s application for the renewal of KFTA’s FCC license. With respect to Nexstar’s operation of KFTA, Nexstar filed its response to Equity’s petition to deny the license renewal. Although management believes that the petitions have no merit, it is not possible to predict what action the FCC will take on the petitions to deny, or when it will take such action.

Historical Performance

Revenue

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


	Year Ended December 31,
	2007			2006			2005
	Amount		%	Amount		%	Amount		%
	(dollars in thousands)
Retransmission compensation	$	2,423	55.1	$	2,018	56.1	$	786	31.0
Network compensation		1,842	41.8		1,460	40.6		1,627	64.2
Other		136	3.1		117	3.3		120	4.8

Net broadcast revenue before barter revenue		4,401	100.0		3,595	100.0		2,533	100.0
Barter revenue		2,325			2,162			2,426
Revenue from Nexstar Broadcasting, Inc.		30,556			32,556			28,141

Net revenue	$	37,282		$	38,313		$	33,100

Results of Operations

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


	Year Ended December 31,
	2007					2006			2005
	Amount			%		Amount		%	Amount		%
	(dollars in thousands)
Net revenue	$	37,282		100.0		$	38,313	100.0	$	33,100	100.0
Operating expenses (income):
Corporate expenses		954		2.6			941	2.5		842	2.5
Station direct operating expenses		5,148		13.8			4,710	12.3		4,271	12.9
Selling, general and administrative expenses		1,326		3.6			1,449	3.8		1,390	4.2
Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.		7,860		21.1			7,820	20.4		11,400	34.4
Gain on asset exchange		(317	)	(0.9	)		—	—		—	—
Loss on asset disposal, net		92		0.2			12	—		94	0.3
Trade and barter expense		2,325		6.2			2,162	5.6		2,426	7.3
Depreciation and amortization		8,603		23.1			8,682	22.7		8,918	26.9
Amortization of broadcast rights, excluding barter		1,944		5.2			1,777	4.6		1,982	6.0

Income from operations	$	9,347				$	10,760		$	1,777

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006.

Revenue

Net revenue for the year ended December 31, 2007, decreased by $1.0 million, or 2.7%, from the same period in 2006. This decrease was primarily attributed to the decrease in revenue from Nexstar, partially offset by increases in revenue from retransmission compensation and network compensation, as discussed below.

Revenue from Nexstar was $30.6 million for the year ended December 31, 2007, compared to $32.6 million for the same period in 2006, a decrease of $2.0 million, or 6.1%. The decrease was primarily attributed to a decrease in the political revenue that Nexstar generated from selling all of the advertising of our stations, which in turn decreased the revenue we earned from Nexstar through the JSAs.

Compensation from retransmission consent and network affiliation agreements was $4.3 million for the year ended December 31, 2007, compared to $3.5 million for the same period in 2006, an increase of $0.8 million, or 22.6%. The increase was primarily due to an increase in the compensation we receive under retransmission consent agreements which primarily resulted from increases in the number cable and satellite subscribers in our markets.

Operating Expenses

Corporate expenses, related to costs associated with the centralized management of our stations, increased by $13 thousand, or 1.4% for the year ended December 31, 2007, compared to the same period in 2006. The increase was primarily attributed to higher compensation costs incurred in 2007 compared to 2006, partially offset by a lower amount of audit and tax preparation fees incurred in 2007.

Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses increased by $0.3 million, or 5.1% for the year ended December 31, 2007, compared to the same period in 2006. The increase was primarily due to an increases in network affiliate related fees.

Local service agreement fees associated with Nexstar relate to services provided by Nexstar in the production of newscasts, technical maintenance, promotional and administrative support under the SSAs. SSA fees increased by $40 thousand, or 0.5%, for the year ended December 31, 2007 compared to the same period in 2006. These fees increased in 2007 due to the TBA entered into with Nexstar-owned KFTA that did not commence until the third quarter of 2006.

Amortization of broadcast rights, excluding barter, increased by $0.2 million, or 9.4%, for the year ended December 31, 2007, compared to the same period in 2006. The increase was primarily due to an increase in the amount of programming write-downs incurred in 2007 compared to 2006.

Amortization of intangible assets was $5.4 million for both the years ended December 31, 2007 and 2006.

Depreciation of property and equipment increased by $0.1 million, or 1.4%, for the year ended December 31, 2007, compared to the same period in 2006.

For the year ended December 31, 2007, we recognized a non-cash gain of $0.3 million from the exchange of equipment under an arrangement we first transacted with Sprint Nextel Corporation in the third quarter of 2007.

Income from Operations

Income from operations was $9.3 million for the year ended December 31, 2007, compared to $10.8 million for the same period of 2006, a decrease of $1.5 million, or 13.1%. The decrease in income from operations for the year ended December 31, 2007 was primarily attributed to the decrease in total net revenue and increases in certain operating costs, partially offset by the gain on asset exchange, as discussed above.

Interest Expense

Interest expense, including amortization of debt financing costs, increased by $29 thousand, or 0.2%, for the year ended December 31, 2007, compared to the same period in 2006. The increase in interest expense was primarily attributed to higher average interest rates incurred during the year ended December 31, 2007 compared to the same period in 2006, partially offset by a reduction in the average amount outstanding during 2007 under our senior credit facility.

Income Taxes

Income taxes were $1.1 million for the year ended December 31, 2007, compared to $1.2 million for the same period in 2006. The decrease in income taxes was primarily due to a $0.3 million reduction in our deferred state income tax provision for the year ended December 31, 2007 resulting from the enactment of recent legislation revising the Texas Margin Tax and its computation of the temporary credit for Texas business loss carryovers. The decrease was partially offset by a provision for current state income tax of $0.1 million for the year ended December 31, 2007 related to the Texas Margin Tax. Our provision for income taxes is primarily created by an increase in the deferred tax liabilities position during the year arising from the amortizing of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No tax benefit was recorded with respect to the losses for 2007 and 2006, as the utilization of such losses is not likely to be realized in the foreseeable future.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005.

Revenue

Net revenue for the year ended December 31, 2006 increased by $5.2 million, or 15.8%, from the same period in 2005. As discussed below, this increase was primarily attributed to increases in revenue from Nexstar and retransmission compensation. As of January 1, 2005, we do not earn any direct advertising revenue because Nexstar sells all of the advertising time of our stations.

Retransmission compensation was $2.0 million for the year ended December 31, 2006, compared to $0.8 million for the same period in 2005, an increase of $1.2 million, or 156.7%. The increase in retransmission compensation was primarily the result of a significant increase in the number of retransmission consent agreements with compensation terms entered into with content distributors that provide for cash compensation, the majority of which were completed in late 2005.

Revenue from Nexstar under our local service agreements was $32.6 million for the year ended December 31, 2006, compared to $28.1 million for the same period in 2005, an increase of $4.5 million, or 15.7%. The increase was primarily attributed to the additional political year revenue that Nexstar generated from selling all of the advertising of our stations, which in turn increased the revenue we earned from Nexstar in 2006 through the JSAs.

Operating Expenses

Corporate expenses, related to costs associated with the centralized management of our stations, were $0.9 million for the year ended December 31, 2006 compared to $0.8 million for the same period in 2005, an increase of $0.1 million, or 11.8%. The increase was primarily attributed to higher audit-related services fees incurred during 2006.

Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses increased by $0.5 million, or 8.8% for the year ended December 31, 2006 compared to the same period in 2005. The increase was primarily due to higher programming costs relating to fees attributed to the renewal of network affiliation agreements, along with an increase in fees for news services provided by the networks.

Fees incurred pursuant to local service agreements with Nexstar relate to fees for services provided by Nexstar for the production of newscasts, technical maintenance, promotional and administrative support. For the year ended December 31, 2006, these expenses decreased $3.6 million, or 31.4%, from the same period in 2005. The decrease was primarily attributed to the amendment of certain SSAs effective January 1, 2006, which decreased our payments to Nexstar.

Amortization of broadcast rights, excluding barter, for the year ended December 31, 2006 decreased by $0.2 million, or 10.3% from the same period in 2005. The decrease was primarily attributed to our negotiating the replacement of previous program licenses at lower costs.

Amortization of intangible assets for the year ended December 31, 2006 decreased by $0.7 million, or 11.7%, compared to the same period in 2005. The decrease was primarily the result of intangible assets at certain stations becoming fully amortized.

Depreciation of property and equipment for the year ended December 31, 2006 increased by $0.5 million, or 17.0%, compared to the same period in 2005. The increase was primarily attributed to accelerating the depreciation of certain assets due to the Company’s reassessment of their estimated remaining useful lives.

Income from Operations

Income from operations was $10.8 million for the year ended December 31, 2006 compared to $1.8 million for the same period of 2005, an increase of $9.0 million, or 505.5%. The increase in income from operations for the year ended December 31, 2006 was primarily attributed to the increase in total net revenue and decrease in fees incurred pursuant to local service agreements with Nexstar, as discussed above.

Interest Expense

Interest expense, including amortization of debt financing costs, increased by $3.1 million, or 34.0%, for the year ended December 31, 2006 compared to the same period in 2005. The increase in interest expense was primarily attributed to higher average interest rates in 2006 under our senior credit facility.

Loss on Extinguishment of Debt

Loss on extinguishment of debt of $0.3 million for the year ended December 31, 2006 consisted of the write-off of $0.3 million of previously capitalized debt financing costs related to the reduction of the revolving loan commitment of our senior secured credit facility in December 2006. Loss on extinguishment of debt of $0.5 million for the year ended December 31, 2005 consisted of the write-off of $0.1 million of previously capitalized debt financing costs and $0.4 million of transaction costs related to the refinancing of our senior secured credit facility in April 2005.

Income Taxes

Income taxes were $1.2 million for the year ended December 31, 2006 compared to $1.3 million for the same period in 2005, a decrease of $0.1 million, or 11.9%. The decrease in income taxes was primarily due to a $0.1 million reduction in our net deferred tax liabilities position resulting from enactment of the new Texas Margin Tax in the second quarter of 2006. Our provision for income taxes is primarily created by an increase in the deferred tax liabilities position during the year arising from the amortizing of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No tax benefit was recorded with respect to the losses for 2006 and 2005, as the utilization of such losses is not likely to be realized in the foreseeable future.

Liquidity and Capital Resources

We are highly leveraged, which makes us vulnerable to changes in general economic conditions. Our ability to meet the future cash requirements described below depends on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other conditions, many of which are beyond our control. Our ability to meet future cash requirements is also dependent upon the local service agreements we have entered into with Nexstar. Under our local service agreements, Nexstar sells our advertising time and pays us a percentage of the amount collected. The payments we receive from Nexstar under the local service agreements are a significant component of our cash flows. On March 7, 2008, Nexstar represented to us that it will continue the various local service agreements under which it provides sales and other services to our television stations thereby providing financial support to enable us to continue to operate as a going concern. We believe that with Nexstar’s pledge to continue the local service agreements, our available cash, anticipated cash flow from operations and available borrowings under our senior credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from December 31, 2007. In order to meet future cash needs we may, from time to time, borrow under our available credit facility. We will continue to evaluate the best use of our operating cash flow among capital expenditures, acquisitions and debt reduction.

Overview

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


	Year Ended December 31,
	2007			2006			2005
	(in thousands)
Net cash provided by operating activities	$	3,908		$	6,516		$	3,220
Net cash used for investing activities		(2,842	)		(2,616	)		(7,529	)
Net cash provided by (used for) financing activities		5,273			(1,727	)		(1,268	)

Net increase (decrease) in cash and cash equivalents	$	6,339		$	2,173		$	(5,577	)

Cash paid for interest	$	12,369		$	12,181		$	9,148
Cash paid for income taxes, net	$	—		$	—		$	11


	December 31,
	2007		2006
	(in thousands)
Cash and cash equivalents	$	9,916	$	3,577
Long-term debt including current portion	$	175,814	$	170,541
Unused commitments under senior secured credit facility⁽¹⁾	$	8,000	$	15,000

(1)	As of December 31, 2007, all $8.0 million of total unused commitments under Mission’s credit facility were available for borrowing.

Cash Flows – Operating Activities

The comparative net cash flows provided by operating activities decreased by $2.6 million during the year ended December 31, 2007 compared to the same period in 2006. The decrease was primarily due to (1) less favorable operating results as reflected in the $1.4 million increase in net loss (excluding loss on extinguishment of debt), (2) a decrease of $0.7 million resulting from the timing of payments made for accounts payable and accrued expenses, and (3) a decrease of $0.4 million in cash flows from deferred revenue, partially offset by an increase of $0.4 million resulting from the timing of payments made to reduce our payable to Nexstar.

Cash paid for interest increased by $0.2 million during the year ended December 31, 2007 compared to the same period in 2006 due to higher average interest rates incurred during the year ended December 31, 2007 compared to the same period in 2006 under our senior credit facility, partially offset by a reduction in the average amount outstanding during 2007 under our senior credit facility.

The comparative net cash flows from operating activities increased by $3.3 million during the year ended December 31, 2006 compared to the same period in 2005 primarily due to an increase in the revenue we earned from Nexstar through JSAs.

Cash paid for interest increased by $3.0 million during the year ended December 31, 2006 compared to the same period in 2005 due to higher interest rates in 2006 under our senior credit facility.

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

Cash Flows – Investing Activities

The comparative net cash flows used for investing activities increased by $0.2 million during the year ended December 31, 2007 compared to the same period in 2006. Cash flows from investing activities consisted of cash used for capital additions and acquisition-related payments.

Capital expenditures were $2.5 million for the year ended December 31, 2007, compared to $2.6 million for the same period in 2006. The decrease was attributed to non-digital conversion expenditures which decreased by $0.3 million in 2007 compared to 2006, partially offset by digital conversion expenditures, which increased from $2.1 million for the year ended December 31, 2006 to $2.3 million for the same period in 2007.

Acquisition-related payments for the year ended December 31, 2007 consisted of $0.4 million related to the down payment for our acquisition of KTVE. There was no cash used for station acquisitions for the year December 31, 2006.

The comparative net cash used for investing activities decreased by $4.9 million during the year ended December 31, 2006 compared to the same period in 2005. Cash flows from investing activities consist primarily of cash used for capital additions and station acquisitions.

Capital expenditures were $2.6 million for the year ended December 31, 2006, compared to $1.4 million for the year ended December 31, 2005. The increase was primarily attributable to digital conversion expenditures, which increased from $0.8 million for the year ended December 31, 2005 to $2.1 million for the same period in 2006.

There was no cash used for station acquisitions for the year ended December 31, 2006, compared to $6.1 million for the year ended December 31, 2005. Acquisition-related payments for the year ended December 31, 2005 included the remaining payment of $5.75 million, exclusive of transaction costs, for our acquisition of WTVO.

Cash Flows – Financing Activities

The comparative net cash flows from financing activities increased by $7.0 million during the year ended December 31, 2007 compared to the same period in 2006 due to $7.0 million of proceeds from revolving loan borrowings made in 2007 under our senior secured credit facility. The $7.0 million borrowing in December 2007 was made in contemplation of closing on our pending acquisition of KTVE. We made a remaining payment of $7.4 million on January 16, 2008 to complete our acquisition of KTVE. Scheduled term loan maturities under our senior secured credit facility were $1.7 million for both the years ended December 31, 2007 and 2006.

The comparative net cash used for financing activities increased by $0.5 million during the year ended December 31, 2006, compared to the same period in 2005, primarily due to the increase in repayments of term loans during 2006 under our senior secured credit facility. Scheduled term loan maturities were $1.7 million for the year ended December 31, 2006 compared to $0.8 million for the year ended December 31, 2005, an increase of $0.9 million. In 2005, scheduled term loan maturities under our Term Loan B did not commence until December 30, 2005 and we made no principal payments in the second and third quarters of 2005. During the year ended December 31, 2005, cash used for financing activities included payments of debt financing costs of $0.8 million made in connection with the April 2005 refinancing of our senior secured credit facility.

The April 2005 refinancing of our senior credit facility provided net cash proceeds of $0.3 million, before the payment of transaction fees and expenses, consisting of gross proceeds obtained under senior credit facility term loans of $172.7 million and the repayments of previous senior credit facility term and revolving borrowings of $172.4 million.

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

Future Sources of Financing and Debt Service Requirements

As of December 31, 2007, we had debt of $175.8 million, which represented 216.2% of our total capitalization. Our high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt which will reduce the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.

The total amount of borrowings available to us under the revolving loan commitment of our senior secured credit facility is based on covenant calculations contained in Nexstar’s credit agreement. As of December 31, 2007, $8.0 million of total unused commitments under our credit facility were available for borrowing.

The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the periods referenced as of December 31, 2007:


	Total		2008	2009-2010		2011-2012		Thereafter
	(in thousands)
Mission senior credit facility	$	175,814	$1,727	$	3,454	$	170,633	$	—

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

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

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

Collateralization and Guarantees of Debt

Nexstar Broadcasting Group and its subsidiaries guarantee full payment of all obligations under our bank credit facility in the event of our default. Similarly, we are a guarantor of Nexstar’s bank credit facility and the senior subordinated notes issued by Nexstar. The bank credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and us. As of December 31, 2007, Nexstar had a maximum commitment of $242.3 million under its bank credit facility, of which $180.8 million of debt was outstanding, and had issued an aggregate principal amount of $200.0 million of senior subordinated notes.

Debt Covenants

As of December 31, 2007 and throughout the corresponding year, Nexstar was in compliance with all covenants contained in the credit agreements governing its senior secured credit facility and the indentures governing its publicly-held notes. Nexstar anticipates compliance with all the covenants through December 31, 2008.

On April 1, 2008, Nexstar is required to redeem a principal amount of its $130.0 million 11.375% senior discount notes (“11.375% Notes”) outstanding which will be sufficient to ensure that the 11.375% Notes will not be “applicable high yield discount obligations” within the meaning of Section 163(i)(1) of the Internal Revenue Code. This principal payment is approximately $46.9 million and Nexstar expects to fund the payment with cash generated from operations and from borrowings under its senior secured credit facility.

Effective on April 1, 2008 under its bank credit facility agreement, Nexstar is required to include the remaining principal balance of Nexstar Finance Holdings 11.375% Notes in the calculation of its total leverage ratio. Accordingly, as of June 30, 2008, the outstanding principal of $83.1 million on the 11.375% Notes will be included as debt outstanding in this covenant compliance ratio.

Given the impact of including the 11.375% notes in its June 30, 2008 total leverage ratio, Nexstar is currently pursuing certain initiatives to enhance its ability to comply with this June 30, 2008 covenant. These initiatives included modifying certain vendor payment terms which will have a more favorable impact on its cash flows relative to covenant calculations, prior to June 30, 2008. Nexstar also has repositioned approximately $13 million of capital expenditures originally planned for the first six months of 2008 into the last six months of 2008. In addition, Nexstar’s management believes that it has certain other cash management and cost containment measures that could be implemented by the management team to ensure compliance with its covenants at June 30, 2008. Notwithstanding the operational initiatives described above, Nexstar would also have the ability to seek a debt covenant waiver from its lenders.

Cash Requirements for DTV Conversion

Television broadcasting in the United States is moving from an analog transmission system to a digital transmission system. The conversion from broadcasting in the analog format to the digital format is expensive. Our conversion to a low-power DTV signal required an average initial capital expenditure of approximately $0.2 million per station. All of the television stations that we own and operate are broadcasting at least a low-power digital television signal.

DTV conversion expenditures were $2.3 million, $2.1 million and $0.8 million, respectively, for the years ended December 31, 2007, 2006 and 2005. We estimate that it will require an average capital expenditure of approximately $1.5 million per station (for 8 stations as of December 31, 2007) to modify our remaining stations’ DTV transmitting equipment for full-power DTV operations, including costs for the transmitter, transmission line, antenna and installation, and estimated costs for tower upgrades, replacements and/or modifications. We anticipate these expenditures will be funded through available cash on hand and cash generated from operations as incurred in future years.

Cash Requirements for Pending Transaction

On April 18, 2006, we and Nexstar announced that we had filed an application with the FCC for consent to assignment of the license for KFTA Channel 24 (Ft. Smith, Arkansas) from Nexstar to us. Consideration for this transaction is set at $5.6 million. We intend to finance this transaction through cash on hand and borrowings under our senior secured credit facility.

No Off-Balance Sheet Arrangements

At December 31, 2007, 2006 and 2005, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of

facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Contractual Obligations

The following summarizes our contractual obligations at December 31, 2007, and the effect such obligations are expected to have on our liquidity and cash flow in future periods:


	Total		2008		2009-2010		2011-2012		Thereafter
	(in thousands)
Senior credit facility	$	175,814	$	1,727	$	3,454	$	170,633	$	—
Cash interest on debt		54,862		11,534		23,392		19,936		—
Broadcast rights current cash commitments⁽¹⁾		2,522		1,235		893		362		32
Broadcast rights future cash commitments		3,209		351		1,875		966		17
Operating lease obligations		17,041		855		1,792		1,935		12,459
KTVE purchase price obligation		7,332		7,332		—		—		—

Total contractual cash obligations	$	260,780	$	23,034	$	31,406	$	193,832	$	12,508

(1)	Excludes broadcast rights barter payable commitments recorded on the financial statements at December 31, 2007 in the amount of $2.9 million.

As discussed in Note 11, “Income Taxes” of the Notes to the Financial Statements, we adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN No. 48”) as of January 1, 2007. At December 31, 2007, we had $3.7 million of unrecognized tax benefits. This liability represents an estimate of tax positions that the corporation has taken in its tax returns which may ultimately not be sustained upon examination by the tax authorities. The resolution of these tax positions may not require cash settlement due to the existence of net operating loss carryforwards.

Critical Accounting Policies and Estimates

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

For an overview of our significant accounting policies, we refer you to Note 2 to the financial statements in Part IV, Item 15(a) of this Annual Report on Form 10-K. We believe the following critical accounting policies are those that are the most important to the presentation of our financial statements, affect our more significant estimates and assumptions, and require the most subjective of complex judgments by management.

Valuation of Goodwill and Intangible Assets

The process of establishing the value of goodwill and intangible assets and performing our annual impairment testing of goodwill and broadcast licenses (“FCC licenses”) requires us to make a significant number of assumptions and estimates in determining a fair value based on the present value of projected future cash flows (“discounted cash flows analysis”). To assist in this process, we utilize the services of independent appraisal and valuation consulting firms. The assumptions and estimates required for the discounted cash flows analysis included market revenue share, future market revenue growth, operating profit margins, cash flow multiples, weighted-average cost of capital and our ability to renew affiliation contracts, among others.

The value of FCC licenses is determined assuming a hypothetical independent start-up station whose only intangible asset is the FCC license. The value of network affiliation agreements is determined as the difference between the value derived for the hypothetical independent start-up station and the value derived assuming that the start-up station has a network affiliation.

We test the impairment of goodwill and FCC licenses annually or whenever events or changes in circumstances indicate that such assets might be impaired. The impairment tests consist of a comparison of the assets’ fair value, based on a discounted cash flows analysis, to their carrying amount on a station-by-station basis. The projected future cash flows used to test FCC licenses exclude network compensation payments. Our estimate of future cash flows may be significantly impacted due to an adverse change in the advertising marketplace or other economic factors affecting our industry at the time the impairment tests are performed. We completed the annual test of impairment for goodwill and FCC licenses as of December 31, 2007, 2006 and 2005, which resulted in no impairment being recognized in 2007, 2006 and 2005.

We test network affiliation agreements for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. The process we use for determining the recoverability of network affiliation agreements is subjective and

requires us to make estimates and judgments about the cash flows attributable to the network affiliation agreements over their estimated remaining useful lives. Management has determined that 15 years is a reasonable estimated useful life. An impairment in the carrying amount of a network affiliation agreement is recognized when the expected future operating cash flow derived from the operations to which the asset relates to is less than its carrying value.

Allowance for Doubtful Accounts

We provide for allowances for doubtful accounts when necessary for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. There was no allowance for doubtful accounts at December 31, 2007 and 2006 since the accounts receivable balance consisted primarily of billings to cable and satellite carriers for compensation associated with retransmission consent agreements and amounts due from the major television networks under the network affiliation agreements.

Broadcast Rights Carrying Amount

Broadcast rights are stated at the lower of unamortized cost or net realizable value. Cash broadcast rights are initially recorded at the amount paid or payable to program distributors for the limited right to broadcast the distributors’ programming. Barter broadcast rights are recorded at our estimate of the value of the advertising time exchanged, which approximates the fair value of the programming received. The value of the advertising time exchanged is estimated by applying average historical rates for specific time periods. Amortization of broadcast rights is computed using the straight-line method based on the license period or programming usage, whichever yields the greater expense. The current portion of broadcast rights represents those rights available for broadcast which will be amortized in the succeeding year. When projected future net revenue associated with a program is less than the current carrying amount of the program broadcast rights, for example, due poor ratings, we write-down the unamortized cost of the broadcast rights to equal the amount of projected future net revenue. If the expected broadcast period was shortened or cancelled , we would be required to write-off the remaining value of the related broadcast rights to operations on an accelerated basis or possibly immediately. As of December 31, 2007, the amounts of our current broadcast rights and non-current broadcast rights were $2.9 million and $1.9 million, respectively.

Characterization of SSA Fees

We present the fees incurred pursuant to SSAs with Nexstar as an operating expense in our financial statements. Our decision to characterize the SSA fees in this manner is based on our conclusion that (a) the benefit our stations receive from these local service agreements is sufficiently separate from the consideration paid to us from Nexstar under JSAs, (b) we can reasonably estimate the fair value of the benefit our stations receive under the SSA agreement, and (c) the SSA fee we pay to Nexstar does not exceed the estimated fair value of the benefit our stations receive.

Barter Transactions

We barter advertising time for certain program material. These transactions, except those involving exchange of advertising time for network programming, are recorded at management’s estimate of the value of the advertising time exchanged, which approximates the fair value of the program material received. The value of advertising time exchanged is estimated by applying average historical advertising rates for specific time periods. We recorded both barter revenue and barter expense of $2.3 million, $2.2 million and $2.4 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Income Taxes

We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under this method, we account for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. A valuation allowance is applied against net deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. While we have considered future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance, in the event that we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the valuation allowance would be charged to income in the period such a determination was made.

On January 1, 2007, we adopted FIN No. 48, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. For interest and penalties relating to income taxes we recognize these items as components of income tax expense.

Claims and Loss Contingencies

In the normal course of business, we are party to various claims and legal proceedings. We record a liability for these matters when an adverse outcome is probable and the amount of loss is reasonably estimated. We consider a combination of factors when estimating probable losses, including judgments about potential actions by counterparties.

Nonmonetary Asset Exchanges

These transactions are recorded at the estimated fair market value of the equipment received. We derive our estimate of fair market value from the most recent prices paid to manufacturers and vendors for the specific equipment we acquire. As equipment is exchanged, the Company records a gain to the extent that the fair market value of the equipment received exceeds the carrying amount of the equipment relinquished.

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”), which addresses how companies should determine fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Under SFAS No. 157, the definition of fair value retains the “exchange price” notion in earlier definitions of fair value, but clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, which is the Company’s 2008 fiscal year. Delayed application is permitted for all nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually) in financial statements issued for fiscal years beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS No. 157 will have on the Company’s financial statements, but does not presently anticipate it will have a material effect on its financial position or results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB No. 115” (“SFAS No. 159”), which provides a fair value measurement option for eligible financial assets and liabilities. Under SFAS No. 159, an entity is permitted to elect to apply fair value accounting to a single eligible item, subject to certain exceptions, without electing it for other identical items and include unrealized gains and losses in earnings. The fair value option established by this Statement is irrevocable, unless a new election date occurs. This standard reduces the complexity in accounting for financial instruments and mitigates volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007 which for the Company is January 1, 2008. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of Statement 157. The Company will adopt the provisions of this Statement beginning in fiscal 2008. Management is currently evaluating the impact the adoption of SFAS No. 159 will have on the Company’s financial statements, but does not presently anticipate it will have a material effect on its financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R, “Business Combinations” (“SFAS No. 141R”), which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. Early adoption is not permitted. Management is currently evaluating the impact the adoption of SFAS No. 141R will have on the Company’s financial statements, but does not presently anticipate it will have a material impact on its financial position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

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

All term loan borrowings at December 31, 2007 under our senior credit facility bear interest at 6.58%, which represented the base rate, or LIBOR, plus the applicable margin, as defined. All revolving loan borrowings at December 31, 2007 under our senior credit facility bear interest at 7.25%, which represented the base rate, or prime, plus the applicable margin, as defined. Interest is payable in accordance with the credit agreement.

The following table estimates the changes to cash flow from operations as of December 31, 2007 if interest rates were to fluctuate by 100 or 50 basis points, or BPS (where 100 basis points represents one percentage point), for a twelve-month period:


	Interest rate decrease				Interest rate increase
	100 BPS		50 BPS		50 BPS			100 BPS
	(in thousands)				(in thousands)
Senior credit facility	$	1,758	$	879	$	(879	)	$	(1,758	)

Given the interest rates that were in effect at December 31, 2006, as of that date, we estimated that our cash flows from operations would have increased by approximately $1.7 million and $0.9 million, respectively, for a 100 BPS and 50 BPS interest rate decrease, and decreased by approximately $0.9 million and $1.7 million, respectively, for a 50 BPS and 100 BPS interest rate increase.

Impact of Inflation

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

Item 8. Financial Statements and Supplementary Data

Our Financial Statements are filed with this report. The Financial Statements and supplementary data are included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Mission’s management, with the participation of Mission’s President and Treasurer (who is Mission’s principal executive officer and principal financial and accounting officer), conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Mission’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.

Based upon that evaluation, Mission’s President and Treasurer concluded that as of the end of the period covered by this report Mission’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by Mission in the reports it files or submits under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Mission’s management, including its President and Treasurer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarterly period as of the end of the period covered by this report, there have been no changes in Mission’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Mission’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Mission’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Mission’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management assessed the effectiveness of Mission’s internal control over financial reporting as of December 31, 2007 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control –

Integrated Framework. Based on management’s assessment, we have concluded that, as of December 31, 2007, Mission’s internal control over financial reporting was effective based on those criteria.

This Annual Report on Form 10-K does not include an attestation report of Mission’s independent registered public accounting firm regarding the effectiveness of Mission’s internal control over financial reporting. Management’s report was not subject to attestation by Mission’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit Mission to provide only management’s report in this Annual Report on Form 10-K.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers of the Registrant and Corporate Governance

The table below sets forth information about Mission’s director and executive officers:


Name	Age	Position With Company
David S. Smith	52	President, Treasurer and Director
Nancie J. Smith	54	Vice President and Secretary
Dennis Thatcher	60	Executive Vice President and Chief Operating Officer

David S. Smith has served as Mission’s President and Treasurer since December 1997. Prior to that, Mr. Smith was the General Manager of WSTR television in Cincinnati, Ohio from 1990 to 1995. He is currently an ordained Evangelical Lutheran Church of America pastor at St. Paul Lutheran Church in Sharon Center, Ohio.

Nancie J. Smith has served as Mission’s Vice President and Secretary since December 1997. Nancie J. Smith is married to David S. Smith.

Dennis Thatcherhas served as Executive Vice President and Chief Operating Officer since October 2004. From November 2003 to March 2004, Mr. Thatcher served as Regional Market Manager for United Media Partners. From November 2002 to October 2003, Mr. Thatcher served as General Sales Manager of KZTV for Eagle Creek Broadcasting. From July 2000 to October 2002, Mr. Thatcher pursued personal interests. From April 1998 to June 2000, Mr. Thatcher served as Senior Vice President and Central Regional Manager for Paxson Communications.

Code of Ethics

Our sole director adopted a code of ethics that applies to our president and treasurer, vice president and secretary, and executive vice president and chief operating officer. The purpose of the code of ethics is to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by us, and to promote compliance with all applicable rules and regulations that apply to us and our officers and directors. The code of ethics is filed hereby as Exhibit 14.1 to this Annual report on Form 10-K. Any amendments to or waivers from a provision of this code of ethics will be filed on a Current Report on Form 8-K.

Item 11. Executive Compensation

David S. Smith, as the sole director of Mission’s Board of Directors, has submitted the following report and has recommended that the Compensation Discussion and Analysis set forth below be included in this Annual Report on Form 10-K for the year ended December 31, 2007 for filing with the SEC.

Compensation Discussion and Analysis

The Company has entered into a management services agreement with its President and Vice President which provides for their compensation in exchange for performing certain services in connection with the ownership and operations of the Company’s television stations. Under the agreement, our President David S. Smith is paid a base salary of up to $0.3 million per year. The agreement also provides for an additional cash bonus that Mr. Smith may receive based on the Company’s performance throughout the year. However, the agreement limits Mr. Smith’s total compensation to $0.4 million per year. Under the agreement, our Vice President Nancie J. Smith is paid an hourly salary for her services.

Our Chief Operating Officer is paid an annual salary that is based on his scope of responsibilities, taking into account competitive market compensation paid by other similarly situated companies for this position. The Chief Operating Officer’s salary is reviewed annually, and adjusted to ensure its alignment with market levels and taking into account individual accomplishments and overall performance in the past year. In addition, the Chief Operating Officer is eligible to earn an annual cash bonus. The Company does not utilize defined formulas when determining the bonus. The payment of the bonus is made on a discretionary basis and is meant to reward contributions which positively affect the overall success of the Company.

At this time, no other form of compensation is provided to the Company’s executive officers.

The following table sets forth the compensation earned or awarded for services rendered to the Company by our executive officers for the fiscal year ended December 31, 2007.

Summary Compensation Table


	Year	Salary		Bonus		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Non-Qualified Deferred Compensation Earnings		All Other Compensation		Total
	(in thousands)
David S. Smith	2007	$	250,000	$	130,000	$	—	$	—	$	—	$	—	$	—	$	380,000
President, Treasurer and Director	2006		250,000		105,000		—		—		—		—		—		355,000
Nancie J. Smith	2007		6,240		—		—		—		—		—		—		6,240
Vice President and Secretary	2006		6,240		—		—		—		—		—		—		6,240
Dennis Thatcher	2007		111,538		25,000		—		—		—		—		—		136,538
Executive Vice President and Chief Operating Officer	2006		99,712		20,000		—		—		—		—		—		119,712

Employment Agreements

We are a party to a management services agreement with David S. Smith and Nancie J. Smith. Under this agreement, David S. Smith is paid up to $0.4 million per year for certain management services and Nancie J. Smith is paid by the hour for certain management services.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

David S. Smith owns 100% of the equity interests in Mission, which comprises 1,000 shares of common stock.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The following table summarizes the various local service agreements Mission-owned stations had in effect with Nexstar as of December 31, 2007:


Station	Market	Affiliation	Type of Agreement	Expiration	Consideration received from or paid to Nexstar
Mission-owned:
WFXP	Erie, PA	Fox	TBA	8/16/11	Monthly payments received from Nexstar⁽¹⁾

KJTL and	Wichita Falls, TX-Lawton, OK	Fox	SSA	5/31/09	$60 thousand per month paid to Nexstar
KJBO-LP		MyNetworkTV	JSA	5/31/09	70% of the KJTL/KJBO-LP net revenue collected each month received from Nexstar

WYOU	Wilkes Barre-Scranton, PA	CBS	SSA	1/4/08	$110 thousand per month paid to Nexstar
			JSA	9/30/14	70% of the WYOU net revenue collected each month received from Nexstar

KODE	Joplin, MO-Pittsburg, KS	ABC	SSA	3/31/12	$75 thousand per month paid to Nexstar
			JSA	9/30/14	70% of the KODE net revenue collected each month received from Nexstar

KRBC	Abilene-Sweetwater, TX	NBC	SSA	6/12/13	$25 thousand per month paid to Nexstar
			JSA	6/30/14	70% of the KRBC net revenue collected each month received from Nexstar

KSAN	San Angelo, TX	NBC	SSA	5/31/14	$10 thousand per month paid to Nexstar
			JSA	5/31/14	70% of the KSAN net revenue collected each month received from Nexstar

WFXW	Terre Haute, IN	Fox	SSA	5/8/13	$10 thousand per month paid to Nexstar
			JSA	5/8/13	70% of the WFXW net revenue collected each month received from Nexstar

KCIT and	Amarillo, TX	Fox	SSA	4/30/09	$50 thousand per month paid to Nexstar
KCPN-LP		MyNetworkTV	JSA	4/30/09	70% of the KCIT/KCPN-LP net revenue collected each month received from Nexstar

KHMT	Billings, MT	Fox	TBA	12/13/09	Monthly payments received from Nexstar⁽¹⁾

KAMC	Lubbock, TX	ABC	SSA	2/15/09	$75 thousand per month paid to Nexstar
			JSA	2/15/09	70% of the KAMC net revenue collected each month received from Nexstar

KOLR	Springfield, MO	CBS	SSA	2/15/09	$150 thousand per month paid to Nexstar
			JSA	2/15/09	70% of the KOLR net revenue collected each month received from Nexstar

WUTR	Utica, NY	ABC	SSA	3/31/14	$10 thousand per month paid to Nexstar
			JSA	3/31/14	70% of the WUTR net revenue collected each month received from Nexstar

WTVO	Rockford, IL	ABC	SSA	10/31/14	$75 thousand per month paid to Nexstar
			JSA	10/31/14	70% of the WTVO net revenue collected each month received from Nexstar
Nexstar-owned:
KFTA	Ft. Smith-Fayetteville-Springdale-Rogers, AR	Fox/NBC	TBA	⁽²⁾	$5 thousand per month paid to Nexstar $20 thousand per month received from Nexstar

(1)	Payments are variable based on station’s monthly operating expenses.

(2)	TBA will terminate upon the assignment of KFTA’s FCC license from Nexstar.

In conjunction with its acquisition of KTVE, the NBC affiliate in the Monroe, Louisiana – El Dorado, Arkansas market, effective January 16, 2008, Mission entered into a JSA and SSA with Nexstar. Under terms of the JSA, 70% of the KTVE net revenue collected each month is to be received from Nexstar and under terms of the SSA, Mission will pay Nexstar $20,000 per month in SSA fees.

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

For disclosure of the amounts of revenue associated with and the fees incurred by Mission pursuant to the local service agreements Mission’s stations have with Nexstar, we refer you to Note 5 to the financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

Option Agreements

In consideration of Nexstar’s guarantee of our indebtedness, Nexstar has options to purchase the assets of all of our stations, subject to prior FCC approval. Our owner, David S. Smith, is a party to these option agreements.

The following table summarizes the option agreements Mission and David S. Smith have in effect with Nexstar as of December 31, 2007:


Station	Market	Affiliation	Date of Execution	Expiration Date
WFXP	Erie, PA	Fox	12/01/05	12/01/14
KJTL and	Wichita Falls, TX-Lawton, OK	Fox	06/01/99	06/01/08
KJBO-LP		MyNetworkTV	06/01/99	06/01/08
WYOU	Wilkes Barre-Scranton, PA	CBS	05/19/98	05/19/08
KODE	Joplin, MO-Pittsburg, KS	ABC	04/24/02	04/24/11
KRBC	Abilene-Sweetwater, TX	NBC	06/13/03	06/13/12
KSAN	San Angelo, TX	NBC	06/13/03	06/13/12
WFXW	Terre Haute, IN	Fox	05/09/03	05/09/12
KCIT and	Amarillo, TX	Fox	05/01/99	05/01/08
KCPN-LP		MyNetworkTV	05/01/99	05/01/08
KHMT	Billings, MT	Fox	12/30/03	12/30/12
KAMC	Lubbock, TX	ABC	12/30/03	12/30/12
KOLR	Springfield, MO	CBS	12/30/03	12/30/12
WUTR	Utica, NY	ABC	04/01/04	04/01/13
WTVO	Rockford, IL	ABC	11/01/04	11/01/13

In conjunction with its acquisition of KTVE, the NBC affiliate in the Monroe, Louisiana – El Dorado, Arkansas market, effective January 16, 2008, Mission and David Smith entered into an option agreement with Nexstar, pursuant to which Nexstar has an option to acquire the assets and assume the liabilities of KTVE, subject to consent by the FCC. The term of the option agreement is 9 years.

Under the terms of these option agreements, Nexstar may exercise its option upon written notice to us and David S. Smith. In each option agreement, the exercise price is the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreement, or (2) the amount of its indebtedness. We and/or David S. Smith may terminate each option agreement by written notice any time after the seventh anniversary date of the relevant option agreement.

Management Services Agreement

Mission, David S. Smith and Nancie J. Smith, the wife of David S. Smith, are parties to a management services agreement. Under this agreement, Mission pays David S. Smith up to $0.4 million per year for certain management services and pays Nancie J. Smith by the hour for certain management services.

Item 14. Principal Accountant Fees and Services

We retained PricewaterhouseCoopers LLP to audit the financial statements of Mission Broadcasting, Inc. for the fiscal years ended December 31, 2007 and 2006, and review the financial statements included in each of its Quarterly Reports on Form 10-Q during such fiscal years and for tax compliance matters. The aggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP in fiscal years 2007 and 2006 for these various services were:


Type of Fees	Fiscal Year Ended
	December 31, 2007		December 31, 2006
Audit Fees⁽¹⁾	$	174,650	$	225,000
Audit Related Fees⁽²⁾		55,985		—
Tax Fees⁽³⁾		50,000		48,000
All Other Fees⁽⁴⁾		—		—

Total	$	280,635	$	273,000

(1)

“Audit Fees” are fees billed by PricewaterhouseCoopers LLP for professional services for the audit of the financial statements included in our Annual Report on Form 10-K and review of financial statements included in our Quarterly Reports on Form 10-Q, or for services that are normally provided by the auditors in connection with statutory and regulatory filings or engagements.

(2)	“Audit Related Fees” are fees billed by PricewaterhouseCoopers LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.

(3)	“Tax Fees” are fees billed by PricewaterhouseCoopers LLP for tax compliance, tax advice and tax planning.

(4)	“All Other Fees” are fees billed by PricewaterhouseCoopers LLP for any services not included in the first three categories. Amount represents fees incurred to audit acquired company financial statements.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:

(1)Financial Statements. The following financial statements of Mission Broadcasting, Inc. have been included on pages F-1 through F-24 of this Annual Report on Form 10-K:

•

See the Index to the Financial Statements on page F-1 for a list of financial statements filed with this report.

(2) Financial Statement Schedules. The schedule of Valuation and Qualifying Accounts appears in Note 15 to the financial statements filed as a part of this report.

(3) Exhibits. The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index beginning on page E-1 of this Annual Report on Form 10-K.

SIGNATURES

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


Mission Broadcasting, Inc.

		/s/ DAVID S. SMITH
By:		David S. Smith
Its:		President and Treasurer
		(Principal Executive Officer and Principal Financial and Accounting Officer)

Dated: March 11, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following person on behalf of the registrant and in the capacities indicated on March 11, 2008.

Name

Title

/s/ David S. Smith

David S. Smith

President, Treasurer and Director

(Principal Executive Officer and

Principal Financial and Accounting Officer)

MISSION BROADCASTING, INC.

INDEX TO FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm		F-2

Balance Sheets at December 31, 2007 and 2006		F-3

Statements of Operations for the years ended December 31, 2007, 2006 and 2005		F-4

Statements of Changes in Shareholder’s Deficit for the years ended December 31, 2007, 2006 and 2005		F-5

Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005		F-6

Notes to Financial Statements		F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholder of Mission Broadcasting, Inc.:

In our opinion, the accompanying balance sheets and the related statements of operations, changes in shareholder’s deficit and cash flows present fairly, in all material respects, the financial position of Mission Broadcasting, Inc. (the “Company”) at December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, the Company changed the manner in which it accounts for uncertain tax positions in 2007.

The Company has a significant relationship with Nexstar Broadcasting Group, Inc. which is discussed in Notes 1, 2, 4, 5, 8 and 13 to the financial statements.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas

March 11, 2008

F-2

MISSION BROADCASTING, INC.

BALANCE SHEETS

December 31, 2007 and 2006

(in thousands, except share information)


	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	9,916		$	3,577
Accounts receivable, net of allowance for doubtful accounts of $0 and $0, respectively		849			619
Current portion of broadcast rights		2,872			2,919
Prepaid expenses and other current assets		198			145
Deferred tax asset		8			2

Total current assets		13,843			7,262
Property and equipment, net		20,061			20,420
Broadcast rights		1,877			2,121
Goodwill		17,122			16,651
FCC licenses		28,736			28,736
Other intangible assets, net		36,368			42,201
Other noncurrent assets		596			253
Deferred tax asset		352			82

Total assets	$	118,955		$	117,726

LIABILITIES AND SHAREHOLDER’S DEFICIT
Current liabilities:
Current portion of debt	$	1,727		$	1,727
Current portion of broadcast rights payable		2,998			3,028
Accounts payable		427			379
Accrued expenses		1,115			997
Interest payable		32			102
Taxes payable		72			—
Deferred revenue		982			886
Due to Nexstar Broadcasting, Inc.		18,485			20,167

Total current liabilities		25,838			27,286
Debt		174,087			168,814
Broadcast rights payable		2,470			2,467
Deferred tax liabilities		7,085			5,746
Deferred revenue		379			337
Deferred gain on sale of assets		2,085			2,258
Other liabilities		1,498			2,765

Total liabilities		213,442			209,673

Commitments and contingencies
Shareholder’s deficit:
Common stock, $1 dollar par value, 1,000 shares authorized; 1,000 shares issued and outstanding at December 31, 2007 and 2006, respectively		1			1
Subscription receivable		(1	)		(1	)
Accumulated deficit		(94,487	)		(91,947	)

Total shareholder’s deficit		(94,487	)		(91,947	)

Total liabilities and shareholder’s deficit	$	118,955		$	117,726

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

F-3

MISSION BROADCASTING, INC.

STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2007, 2006 and 2005

(in thousands)


	2007			2006			2005
Net broadcast revenue	$	6,726		$	5,757		$	4,959
Revenue from Nexstar Broadcasting, Inc.		30,556			32,556			28,141

Net revenue		37,282			38,313			33,100

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		5,148			4,710			4,271
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		2,280			2,390			2,232
Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.		7,860			7,820			11,400
Amortization of broadcast rights		4,269			3,939			4,408
Amortization of intangible assets		5,362			5,396			6,109
Depreciation		3,241			3,286			2,809
Gain on asset exchange		(317	)		—			—
Loss on asset disposal, net		92			12			94

Total operating expenses		27,935			27,553			31,323

Income from operations		9,347			10,760			1,777
Interest expense, including amortization of debt financing costs		(12,344	)		(12,315	)		(9,193	)
Loss on extinguishment of debt		—			(269	)		(508	)
Interest income		92			60			30

Loss before income taxes		(2,905	)		(1,764	)		(7,894	)
Income tax expense		(1,135	)		(1,172	)		(1,330	)

Net loss	$	(4,040	)	$	(2,936	)	$	(9,224	)

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

F-4

MISSION BROADCASTING, INC.

STATEMENTS OF CHANGES IN SHAREHOLDER’S DEFICIT

For the Years Ended December 31, 2007, 2006 and 2005

(in thousands, except share information)


	Common Stock			Subscription Receivable			Accumulated Deficit			Total Shareholder’s Deficit
	Shares	Par Value		Subscription Receivable			Accumulated Deficit			Total Shareholder’s Deficit
Balance at January 1, 2005	1,000	$	1	$	(1	)	$	(79,787	)	$	(79,787	)
Net loss	—		—		—			(9,224	)		(9,224	)

Balance at December 31, 2005	1,000		1		(1	)		(89,011	)		(89,011	)
Net loss	—		—		—			(2,936	)		(2,936	)

Balance at December 31, 2006	1,000		1		(1	)		(91,947	)		(91,947	)
Adjustment for the cumulative effect of adopting FIN No. 48	—		—		—			1,500			1,500
Net loss	—		—		—			(4,040	)		(4,040	)

Balance at December 31, 2007	1,000	$	1	$	(1	)	$	(94,487	)	$	(94,487	)

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

F-5

MISSION BROADCASTING, INC.

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2007, 2006 and 2005

(in thousands)


	2007			2006			2005
Cash flows from operating activities:
Net loss	$	(4,040	)	$	(2,936	)	$	(9,224	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes		1,063			1,172			1,327
Depreciation of property and equipment		3,241			3,286			2,809
Amortization of intangible assets		5,362			5,396			6,109
Amortization of debt financing costs		44			94			91
Amortization of broadcast rights, excluding barter		1,944			1,777			1,982
Payments for broadcast rights		(1,678	)		(1,726	)		(2,211	)
Loss on asset disposal, net		92			12			94
Gain on asset exchange		(317	)		—			—
Loss on extinguishment of debt		—			269			508
Deferred gain recognition		(173	)		(173	)		(173	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(230	)		(263	)		92
Prepaid expenses and other current assets		(53	)		(22	)		22
Other noncurrent assets		(204	)		(4	)		209
Taxes payable		72			—			(14	)
Accounts payable and accrued expenses		166			847			(463	)
Interest payable		(70	)		41			40
Deferred revenue		138			520			511
Other noncurrent liabilities		233			274			218
Due to Nexstar Broadcasting, Inc.		(1,682	)		(2,048	)		1,293

Net cash provided by operating activities		3,908			6,516			3,220

Cash flows from investing activities:
Additions to property and equipment		(2,461	)		(2,636	)		(1,401	)
Proceeds from sale of assets		6			20			1
Acquisition of broadcast properties and related transaction costs		—			—			(6,129	)
Down payment on acquisition of station		(387	)		—			—

Net cash used for investing activities		(2,842	)		(2,616	)		(7,529	)

Cash flows from financing activities:
Proceeds from debt issuance		—			—			172,700
Repayment of long-term debt		(1,727	)		(1,727	)		(173,172	)
Proceeds from revolver draws		7,000			—			—
Payments for debt financing costs		—			—			(796	)

Net cash provided by (used for) financing activities		5,273			(1,727	)		(1,268	)

Net increase (decrease) in cash and cash equivalents		6,339			2,173			(5,577	)
Cash and cash equivalents at beginning of year		3,577			1,404			6,981

Cash and cash equivalents at end of year	$	9,916		$	3,577		$	1,404

Supplemental schedule of noncash activities:
Cash paid during the period for:
Interest	$	12,369		$	12,181		$	9,148

Income taxes, net	$	—		$	—		$	11

Non-cash investing activities:
Equipment acquired from asset exchange	$	323		$	—		$	—

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

F-6

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS

1. Business Operations

As of December 31, 2007, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and operated 15 television stations all of which were affiliated with the NBC, ABC, CBS, Fox or MyNetworkTV television networks in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas and Montana. The Company operates in one reportable television broadcasting segment. Through local service agreements, Nexstar Broadcasting, Inc. (“Nexstar”) provides sales and operating services to all of the Mission television stations (see Notes 2 and 5).

The Company is highly leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond its control, as well as Nexstar maintaining its pledge to continue the local service agreements with the Company’s stations. Management believes that with Nexstar’s pledge to continue the local service agreements, as described in a letter of support dated March 7, 2008, our available cash, anticipated cash flow from operations and available borrowings under our senior credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from December 31, 2007, enabling Mission to continue to operate as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

Certain prior year financial statement amounts have been reclassified to conform to the current year presentation.

Local Service Agreements and Purchase Options

The following table summarizes the various local service agreements Mission’s stations had in effect as of December 31, 2007 with Nexstar:


Service Agreements		Stations
TBA Only ⁽¹⁾		WFXP and KHMT

SSA & JSA ⁽²⁾		KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE and WTVO

(1)	Mission has a time brokerage agreement (“TBA”) for each of these stations which allows Nexstar to program most of each station’s broadcast time, sell each station’s advertising time and retain the advertising revenue generated in exchange for monthly payments to Mission.

(2)

Mission has both a shared service agreement (“SSA”) and a joint services agreement (“JSA”) for each of these stations. The SSA allows the sharing of services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from Mission as described in the SSAs. The JSAs permit Nexstar to sell and retain a percentage of the net revenue from the station’s advertising time in return for monthly payments to Mission of the remaining percentage of the net revenue, as described in the JSAs.

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

The arrangements under the SSAs and JSAs have had the effect of Nexstar receiving substantially all of the available cash, after debt service costs, generated by the stations listed above. The arrangements under the TBAs have also had the effect of Nexstar receiving substantially all of the available cash generated by the TBA stations listed above. Mission anticipates that through these local service agreements, Nexstar will continue to receive substantially all of Mission’s available cash, after payments for debt service costs, generated by the stations listed above.

Mission’s sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to Federal Communications Commission (“FCC”) consent, for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreement, or (2) the amount of its indebtedness. Cash flow is defined as income or loss from operations, plus depreciation and amortization (including

F-7

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

2. Summary of Significant Accounting Policies—(Continued)

amortization of broadcast rights), interest income, non-cash trade and barter expenses, nonrecurring expenses (including time brokerage agreement fees), network compensation payments received or receivable and corporate management fees, less payments for broadcast rights, non-cash trade and barter revenue and network compensation revenue. These option agreements (which expire on various dates between 2008 and 2014) are freely exercisable or assignable by Nexstar without consent or approval by Mission’s sole shareholder. The Company expects these option agreements to be renewed upon expiration.

Nexstar does not own Mission or Mission’s television stations. However, as a result of the guarantee of all obligations incurred under Mission’s senior secured credit facility by Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries (“Nexstar Broadcasting Group”) and the arrangements under the local service agreements and purchase option agreements with Nexstar, Nexstar is deemed, under accounting principles generally accepted in the United States of America (“U.S. GAAP”), to have a controlling financial interest in Mission while complying with the FCC’s rules regarding ownership limits in television markets. In order for both Nexstar and Mission to comply with the FCC regulations, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

Characterization of SSA Fees

Variable Interest Entities

In accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised 2003), “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51” (“FIN No. 46R”), the Company will consolidate an entity when it is determined that the Company is the primary beneficiary of such entity.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant estimates made by management include those relating to the allowance for doubtful accounts, barter transactions, income taxes, the recoverability of broadcast rights and the carrying amounts, recoverability, and useful lives of intangible assets. Actual results may vary from estimates used.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of ninety days or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s accounts receivable consists primarily of billings to cable and satellite carriers for compensation associated with retransmission consent agreements and amounts due from the major television networks under the network affiliation agreements. The Company maintains an allowance for doubtful accounts when necessary for estimated losses resulting from the inability of customers to make required payments. Management evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations, an allowance is recorded to reduce their receivable amount to an amount estimated to be collected. The Company had no allowance for doubtful accounts at December 31, 2007 and 2006 given the composition of its accounts receivable at those dates. The Company had no bad debt expense for the years ended December 31, 2007, 206 and 2005.

Concentration of Credit Risk

Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents. Cash deposits are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits; however, the Company believes these deposits are maintained with financial institutions of reputable credit and are not subject to any unusual credit risk.

Revenue Recognition

The Company’s revenue is primarily derived from the sale of television advertising by Nexstar under JSAs, network compensation and other broadcast related revenues. Advertising revenue is recognized, net of agency commissions, in the period during which the commercial is aired.

F-8

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

2. Summary of Significant Accounting Policies—(Continued)

•

Revenue from Nexstar, representing a percentage of net advertising revenue derived from the sale of commercials on the Company’s stations, is recognized in the period during which the time spots are aired.

•

Network compensation is either recognized when the Company’s station broadcasts specific network programming based upon a negotiated hourly-rate, or on a straight-line basis based upon the total negotiated compensation to be received by the Company over the term of the agreement.

•

Retransmission compensation is recognized based on the number of subscribers over the contract period.

•

Other revenues, which may include tower rent revenue and other similar activities from time to time, are recognized in the period during which the services are provided.

The Company barters advertising time for certain program material. These transactions, except those involving exchange of advertising time for network programming, are recorded at management’s estimate of the value of the advertising time exchanged, which approximates the fair value of the program material received. The value of advertising time exchanged is estimated by applying average historical advertising rates for specific time periods. Revenue from barter transactions is recognized as the related advertisement spots are broadcast. The Company recorded $2.3 million, $2.2 million and $2.4 million of barter revenue for the years ended December 31, 2007, 2006 and 2005, respectively.

Barter expense is recognized at the time program broadcast rights assets are used. The Company recorded $2.3 million, $2.2 million and $2.4 million of barter expense for the years ended December 31, 2007, 2006 and 2005, respectively, which was included in amortization of broadcast rights in the Company’s statement of operations.

Broadcast Rights and Broadcast Rights Payable

The Company records rights to programs, primarily in the form of syndicated programs and feature movie packages obtained under license agreements for the limited right to broadcast the suppliers’ programming when the following criteria are met: 1) the cost of each program is known or reasonably determinable, 2) the license period has begun, 3) the program material has been accepted in accordance with the license agreement, and 4) the programming is available for use. Broadcast rights are initially recorded at the amount paid or payable to program suppliers; or, in the case of barter transactions, at management’s estimate of the value of the advertising time exchanged using historical advertising rates, which approximates the fair value of the program material received. Broadcast rights are stated at the lower of unamortized cost or net realizable value. The current portion of broadcast rights represents those rights available for broadcast which will be amortized in the succeeding year. Amortization of broadcast rights is computed using the straight-line method based on the license period or programming usage, whichever yields the greater expense. Broadcast rights liabilities are reduced by monthly payments to program suppliers; or, in the case of barter transactions, are amortized over the life of the associated programming license contract as a component of trade and barter revenue. When projected future net revenue associated with a program is less than the current carrying amount of the program broadcast rights, for example, due to poor ratings, the Company writes down the unamortized cost of the broadcast rights to equal the amount of projected future net revenue. If the expected broadcast period was shortened or cancelled, the Company would be required to write-off the remaining value of the related broadcast rights on an accelerated basis or possibly immediately. Such reductions in unamortized costs is included in amortization of broadcast rights in the statement of operations.

Property and Equipment

Property and equipment is stated at cost. The cost and related accumulated depreciation applicable to assets sold or retired are removed from the accounts and the gain or loss on disposition is recognized. Major renewals and betterments are capitalized and ordinary repairs and maintenance are charged to expense in the period incurred. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets ranging from 3 to 39 years (see Note 6).

F-9

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

2. Summary of Significant Accounting Policies—(Continued)

Network Affiliation Agreements

Network affiliation agreements are stated at estimated fair value at the date of acquisition using a discounted cash flow method. Amortization is computed on a straight-line basis over the estimated useful life of 15 years.

Each of the Company’s stations has a network affiliation agreement pursuant to which the broadcasting network provides programming to the station during specified time periods, including prime time. Under the affiliation agreements with NBC, CBS and ABC, most of the Company’s stations receive compensation for distributing the network’s programming over the air and for allowing the network to keep a portion of advertising inventory during those time periods. The affiliation agreements with Fox and MyNetworkTV do not provide for compensation.

Intangible Assets

Intangible assets consist primarily of goodwill, broadcast licenses (“FCC licenses”) and network affiliation agreements that are stated at estimated fair value at the date of acquisition using a discounted cash flow method. The Company’s goodwill and FCC licenses are considered to be indefinite-lived intangible assets and are not amortized but instead are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. Network affiliation agreements are subject to amortization computed on a straight-line basis over the estimated useful life of 15 years. An impairment assessment of the Company’s intangible assets could be triggered by a significant reduction in operating results or cash flows at one or more of the Company’s television stations, or a forecast of such reductions, a significant adverse change in the advertising marketplaces in which the Company’s television stations operate, the loss of network affiliations, or by adverse changes to FCC ownership rules, among others.

The impairment test for goodwill utilizes a two-step fair value approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a station (“reporting unit”) to its carrying amount. The fair value of a reporting unit is determined using a discounted cash flows analysis. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by performing an assumed purchase price allocation, using the reporting unit fair value (as determined in Step 1) as the purchase price. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.

The impairment test for FCC licenses consists of a station-by-station comparison of the carrying amount of FCC licenses with their fair value, using a discounted cash flows analysis.

The Company completed the annual tests of impairment for goodwill and FCC licenses as of December 31, 2007, 2006 and 2005, which resulted in no impairment being recognized for the Company in 2007, 2006 and 2005.

The Company tests network affiliation agreements whenever events or changes in circumstances indicate that their carry amount may not be recoverable, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. An impairment in the carrying amount of a network affiliation agreement is recognized when the expected future cash flow derived from the operation to which the asset relates to is less than its carrying value.

Debt Financing Costs

Debt financing costs represent direct costs incurred to obtain long-term financing and are amortized to interest expense over the term of the related debt. Previously capitalized debt financing costs are expensed and included in loss on extinguishment of debt if the Company determines that there has been a substantial modification of the related debt. As of December 31, 2007 and 2006, debt financing costs of $0.2 million and $0.3 million, respectively, were included in other noncurrent assets.

Advertising Expense

The cost of advertising is expensed as incurred. The Company had no advertising expense for the years ended December 31, 2007, 2006 and 2005.

F-10

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

2. Summary of Significant Accounting Policies—(Continued)

Financial Instruments

The carrying amount of cash and cash equivalents, broadcast rights payable, accounts payable and accrued expenses approximates fair value due to their short-term nature. The interest rates on the Company’s term loan and revolving credit facility are adjusted regularly to reflect current market rates. Accordingly, the carrying amount of the Company’s term loan and revolving credit facility approximates fair value.

Income Taxes

The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. A valuation allowance is applied against net deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

On January 1, 2007, the Company adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN No. 48”). FIN No. 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. For interest and penalties relating to income taxes the Company recognizes these items as components of income tax expense.

Nonmonetary Asset Exchanges

In connection with a spectrum allocation exchange ordered by the FCC within the 1.9 GHz band, Sprint Nextel Corporation (“Nextel”) is required to replace certain existing analog equipment with comparable digital equipment. The Company has agreed to accept the substitute equipment that Nextel will provide and in turn must relinquish its existing equipment to Nextel. Neither party will have any continuing involvement in the equipment transferred following the exchange. We account for this arrangement as an exchange of assets in accordance with Accounting Principles Board No. 29, “Accounting for Nonmonetary Transactions”, as amended by SFAS No. 153, “Exchanges of Nonmonetary Assets”. The equipment the Company receives under this arrangement is recorded at their estimated fair market value and depreciated over estimated useful lives ranging from 5 to 15 years. Management’s determination of the fair market value is derived from the most recent prices paid to manufacturers and vendors for the specific equipment acquired. As equipment is exchanged, the Company records a gain to the extent that the fair market value of the equipment received exceeds the carrying amount of the equipment relinquished.

Recent Accounting Pronouncements

On January 1, 2007, the Company adopted FIN No. 48, which clarifies whether the benefit of tax positions taken in a filed tax return, or expected to be taken in a future tax return, should be reflected in income tax expense in the financial statements. FIN No. 48 requires that the benefit from an uncertain tax position be recognized in the financial statements only if it is more likely than not that the tax position will be sustained, based on its technical merits, upon examination by a taxing authority. The amount recognized in the financial statements from an uncertain tax position is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent a tax return position has not been reflected in the financial statements, a liability (“unrecognized tax benefit”) is recorded. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in

F-11

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

2. Summary of Significant Accounting Policies—(Continued)

income tax expense, which is consistent with its recognition of these items in prior period financial statements. As a result of adopting FIN No. 48, the Company recorded a $1.5 million decrease to other liabilities and a cumulative-effect adjustment decreasing the January 1, 2007 balance of accumulated deficit by a corresponding amount. See Note 11 for further discussion of the Company’s unrecognized tax benefits.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB No. 115” (“SFAS No. 159”), which provides a fair value measurement option for eligible financial assets and liabilities. Under SFAS No. 159, an entity is permitted to elect to apply fair value accounting to a single eligible item, subject to certain exceptions, without electing it for other identical items. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be included in earnings. The fair value option established by this Statement is irrevocable, unless a new election date occurs. This Standard reduces the complexity in accounting for financial instruments and mitigates volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007 which for the Company is January 1, 2008. The Company will adopt the provisions of this Statement beginning in fiscal 2008. Management is currently evaluating the impact the adoption of SFAS No. 159 will have on the Company’s financial statements, but does not presently anticipate it will have a material effect on its financial position or results of operations.

3. Acquisitions

Purchase Acquisitions

During 2005, the Company consummated the acquisition listed below. This acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair value on the acquisition date. The excess of the purchase price over the fair values assigned to the net assets acquired was recorded as goodwill. The financial statements include the operating results of the business from the earlier of the TBA commencement date if required by FIN No. 46R or the date of acquisition.


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

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

WTVO

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

F-12

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

3. Acquisitions—(Continued)

The following table summarizes the estimated fair values of the assets acquired. Mission estimated these fair values, including certain acquired intangible assets, with the assistance of a third-party valuation (in thousands).


Property and equipment	$	7,161
Intangible assets		10,279
Goodwill		3,644

Assets acquired	$	21,084

Of the $10.3 million of acquired intangible assets, $2.9 million was assigned to FCC licenses that are not subject to amortization and $6.7 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $0.7 million of acquired intangible assets have an estimated useful life of approximately 1 year. Goodwill of $3.6 million is expected to be deductible for tax purposes.

Subsequent Acquisition

On January 16, 2008, Mission completed the acquisition of KTVE, the NBC affiliate in Monroe, Louisiana-El Dorado, Arkansas for a total consideration of $7.8 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, Mission made an initial payment of $0.4 million against the purchase price on June 27, 2007 to acquire substantially all of the assets of KTVE. Mission paid the remaining $7.4 million on January 16, 2008, exclusive of transaction costs, from available cash on hand as of December 31, 2007.

4. Pending Transaction with Nexstar

On April 11, 2006, Nexstar and Mission filed an application with the FCC for consent to assignment of the license for KFTA Channel 24 (Ft. Smith, Arkansas) from Nexstar to Mission. Consideration for this transaction is set at $5.6 million. On August 28, 2006, Mission and Nexstar entered into a local service agreement whereby Mission pays Nexstar for the right to broadcast programming on KFTA and Nexstar pays Mission for the right to sell all advertising time on KFTA within certain time periods. Also in 2006, Mission entered into an affiliation agreement with the Fox network which provides Fox programming to KFTA. Upon completing the assignment of KFTA’s license, the Company plans to enter into JSA and SSA agreements with Nexstar-owned KNWA in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, whereby KNWA will provide local news, sales and other non-programming services to KFTA. See Note 5 for a more complete discussion of the KFTA local service agreement.

In May 2006, two affiliates of Equity Broadcasting Corporation (“Equity”) filed a petition to deny against the KFTA assignment application alleging that Nexstar improperly controls Mission and its stations. Nexstar and Mission submitted a joint opposition to Equity’s petition to deny. The FCC is currently considering the KFTA assignment application. In September 2006, Equity also submitted a petition to deny Nexstar’s application for the renewal of KFTA’s FCC license. Nexstar has filed its response to Equity’s petition to deny the license renewal. Although management believes that the petitions have no merit, it is not possible to predict what action the FCC will take on the petitions to deny, or when it will take such action.

5. Related Party Transactions

Local Service Agreements

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

The arrangements under the local service agreements each Mission station has entered into with Nexstar has had the effect of Nexstar receiving substantially all of the available cash, after Mission’s payment of operating costs and debt service, generated by the Company’s stations. Mission anticipates that Nexstar will continue to receive substantially all of Mission’s available cash, after payments for operating costs and debt service, generated by its stations.

F-13

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5. Related Party Transactions—(Continued)

In order for both Nexstar and Mission to comply with FCC regulations, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

The following table summarizes the various local service agreements Mission-owned stations had in effect with Nexstar as of December 31, 2007:


Station	Market	Affiliation	Type of Agreement		Expiration	Consideration received from or paid to Nexstar
Mission-owned:
WFXP	Erie, PA	Fox	TBA		8/16/11	Monthly payments received from Nexstar⁽¹⁾

KJTL and	Wichita Falls, TX-Lawton, OK	Fox	SSA		5/31/09	$60 thousand per month paid to Nexstar
KJBO-LP		MyNetworkTV	JSA		5/31/09	70% of the KJTL/KJBO-LP net revenue collected each month received from Nexstar

WYOU	Wilkes Barre-Scranton, PA	CBS	SSA		1/4/08	$110 thousand per month paid to Nexstar
			JSA		9/30/14	70% of the WYOU net revenue collected each month received from Nexstar

KODE	Joplin, MO-Pittsburg, KS	ABC	SSA		3/31/12	$75 thousand per month paid to Nexstar
			JSA		9/30/14	70% of the KODE net revenue collected each month received from Nexstar

KRBC	Abilene-Sweetwater, TX	NBC	SSA	��	6/12/13	$25 thousand per month paid to Nexstar
			JSA		6/30/14	70% of the KRBC net revenue collected each month received from Nexstar

KSAN	San Angelo, TX	NBC	SSA		5/31/14	$10 thousand per month paid to Nexstar
			JSA		5/31/14	70% of the KSAN net revenue collected each month received from Nexstar

WFXW	Terre Haute, IN	Fox	SSA		5/8/13	$10 thousand per month paid to Nexstar
			JSA		5/8/13	70% of the WFXW net revenue collected each month received from Nexstar

KCIT and	Amarillo, TX	Fox	SSA		4/30/09	$50 thousand per month paid to Nexstar
KCPN-LP		MyNetworkTV	JSA		4/30/09	70% of the KCIT/KCPN-LP net revenue collected each month received from Nexstar

KHMT	Billings, MT	Fox	TBA		12/13/09	Monthly payments received from Nexstar⁽¹⁾

KAMC	Lubbock, TX	ABC	SSA		2/15/09	$75 thousand per month paid to Nexstar
			JSA		2/15/09	70% of the KAMC net revenue collected each month received from Nexstar

KOLR	Springfield, MO	CBS	SSA		2/15/09	$150 thousand per month paid to Nexstar
			JSA		2/15/09	70% of the KOLR net revenue collected each month received from Nexstar

WUTR	Utica, NY	ABC	SSA		3/31/14	$10 thousand per month paid to Nexstar
			JSA		3/31/14	70% of the WUTR net revenue collected each month received from Nexstar

WTVO	Rockford, IL	ABC	SSA		10/31/14	$75 thousand per month paid to Nexstar
			JSA		10/31/14	70% of the WTVO net revenue collected each month received from Nexstar
Nexstar-owned:
KFTA	Ft. Smith-Fayetteville-Springdale-Rogers, AR	Fox/NBC	TBA		⁽²⁾	$5 thousand per month paid to Nexstar $20 thousand per month received from Nexstar

(1)	Payments are variable based on station’s monthly operating expenses.

(2)	TBA will terminate upon the assignment of KFTA’s FCC license from Nexstar.

F-14

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5. Related Party Transactions—(Continued)

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

F-15

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5. Related Party Transactions—(Continued)

Management Services Agreement

Mission’s sole shareholder and his spouse are parties to a management services agreement. Under this agreement, Mission pays the sole shareholder up to $0.4 million per year for certain management services and pays his spouse by the hour for certain management services. Pursuant to the management services agreement, Mission paid compensation to its sole shareholder in the amount of $0.4 million for each of the years ended December 31, 2007, 2006 and 2005, respectively, which is included in selling, general and administrative expenses in the Company’s statement of operations.

6. Property and Equipment

Property and equipment consisted of the following:


	Estimated useful life (years)	December 31,
	Estimated useful life (years)	2006			2005
		(in thousands)
Buildings and building improvements	39	$	6,840		$	6,522
Land and land improvements	N/A-39		1,479			1,479
Leasehold improvements	term of lease		60			60
Studio and transmission equipment	5-15		31,467			29,578
Office equipment and furniture	3-7		1,295			1,618
Vehicles	5		1,096			1,149
Construction in progress	N/A		2,843			2,422

			45,080			42,828
Less: accumulated depreciation			(25,019	)		(22,408	)

Property and equipment, net of accumulated depreciation		$	20,061		$	20,420

The Company recorded depreciation expense in the amounts of $3.2 million, $3.3 million and $2.8 million for the years ended December 31, 2007, 2006 and 2005, respectively.

On February 8, 2006, President Bush signed into law legislation that establishes February 17, 2009 as the deadline for television broadcasters to complete their transition to digital transmission and return their analog spectrum to the FCC. As a result, the Company reassessed the estimated useful lives of its analog transmission equipment and has accelerated the depreciation of certain equipment affected by the digital conversion. Equipment having a net book value of approximately $2.4 million as of February 1, 2006, which was previously being depreciated over various remaining useful lives which extended from 2013 to 2020, is now being depreciated over a remaining useful life of three years. During the year ended December 31, 2007 and 2006, the accelerated depreciation of analog transmission equipment increased depreciation expense and net loss by approximately $0.6 million and $0.5 million, respectively.

On May 11, 2001, the Company sold its telecommunications tower facilities associated with KCIT, KOLR, KHMT and KAMC for cash and entered into noncancellable operating leases with the buyer for tower space. In 2001, the Company recorded a gain on the sale which has been deferred and is being recognized over the lease term which expires in May 2021. The deferred gain at December 31, 2007 and 2006 was approximately $2.3 million and $2.4 million, respectively ($0.2 million was included in current liabilities at December 31, 2007 and 2006).

7. Intangible Assets and Goodwill

Intangible assets subject to amortization consisted of the following:


	Estimated useful life (years)	December 31, 2006							December 31, 2005
	Estimated useful life (years)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
		(in thousands)							(in thousands)
Network affiliation agreements	15	$	66,744	$	(35,556	)	$	31,188	$	66,744	$	(31,106	)	$	35,638
Other definite-lived intangible assets	1-15		13,117		(7,937	)		5,180		14,117		(7,554	)		6,563

Total intangible assets subject to amortization		$	79,861	$	(43,493	)	$	36,368	$	80,861	$	(38,660	)	$	42,201

F-16

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

7. Intangible Assets and Goodwill—(Continued)

Total amortization expense from definite-lived intangibles for the years ended December 31, 2007, 2006 and 2005 was $5.4 million, $5.4 million and $6.1 million, respectively.

The estimated useful life of network affiliation agreements contemplates renewals of the underlying agreements based on the Company’s historical ability to renew such agreements without significant cost or modifications to the conditions from which the value of the affiliation was derived. These renewals can result in estimated useful lives of individual affiliations ranging from 12 to 20 years. Management has determined that 15 years is a reasonable estimate within the range of such estimated useful lives.

The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets recorded on its books as of December 31, 2007 (in thousands):


Year ending December 31,
2008	$	5,329
2009	$	5,329
2010	$	5,329
2011	$	5,274
2012	$	5,262

The aggregate carrying value of indefinite-lived intangibles, consisting of FCC licenses and goodwill, was $45.9 million and $45.4 million at December 31, 2007 and 2006, respectively. Indefinite-lived intangible assets are not subject to amortization, but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. The use of an indefinite life for FCC licenses contemplates the Company’s historical ability to renew their licenses, that such renewals generally may be obtained indefinitely and at little cost, and that the technology used in broadcasting is not expected to be replaced in the foreseeable future. Therefore, cash flows derived from the FCC licenses are expected to continue indefinitely.

The change in carrying amount of goodwill for the years ended December 31, 2007 and 2006 was as follows:


	December 31,
	2007		2006
	(in thousands)
Beginning balance	$	16,651	$	16,651
Reclassification of an asset		471		—

Ending balance	$	17,122	$	16,651

During 2007, the Company reclassified certain amounts representing goodwill that were improperly classified as other intangible assets.

8. Debt

Long-term debt consisted of the following:


	December 31,
	2007			2006
	(in thousands)
Term loans	$	168,814		$	170,541
Revolving credit facility		7,000			—

		175,814			170,541
Less: current portion		(1,727	)		(1,727	)

	$	174,087		$	168,814

Senior Secured Credit Facility

On April 1, 2005, Mission entered into an amended and restated senior secured credit facility agreement (the “Mission Facility”) with a group of commercial banks which replaced its previous bank credit facility that had provided for a $152.0 million Term Loan D and a $30.0 million revolving loan. The Mission Facility consists of a Term Loan B and a $15.0 million revolving. Proceeds obtained under the Term Loan B were used to repay Mission’s existing Term Loan D in the amount of $150.9 million plus accrued interest and repay outstanding borrowings under the revolving loan in the amount of $21.5 million plus accrued interest.

F-17

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

8. Debt—(Continued)

As of December 31, 2007 and 2006, Mission had $168.8 million and $170.5 million, respectively, outstanding under its Term Loan B and $7.0 million and no borrowings were outstanding under its revolving loan.

The Term Loan B matures in October 2012, and is payable in consecutive quarterly installments amortized at 0.25% quarterly, which commenced on December 30, 2005, with the remaining 93.25% due at maturity. During the year ended December 31, 2007 repayments of Mission’s Term Loan B totaled $1.7 million. The revolving loan is not subject to incremental reduction and matures in April 2012. Mission is required to prepay borrowings outstanding under the Mission Facility with certain net proceeds, recoveries and excess cash flows as defined in the credit facility agreement.

The Term Loan B bears interest at either the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% (the “Base Rate”), plus an applicable margin of 0.50%; or LIBOR plus 1.75%. The revolving loan bears interest at either the Base Rate plus an applicable margin ranging between 0.00% and 0.75%; or LIBOR plus an applicable margin ranging between 0.75% and 2.00%. Interest rates are selected at Mission’s option and the applicable margin is adjusted quarterly as defined in the credit facility agreement. The total weighted-average interest rate of the Mission Facility was 6.61% and 7.11% at December 31, 2007 and 2006, respectively. Interest is payable periodically based on the type of interest rate selected. Additionally, Mission is required to pay quarterly commitment fees on the unused portion of its revolving loan commitment ranging from 0.375% to 0.50% per annum, based on the consolidated senior leverage ratio of Nexstar and Mission for that particular quarter.

As of December 31, 2007, there were approximately $8.0 million of unused commitments under Mission’s credit facility. The total amount of borrowings available under the revolving loan commitment of Mission’s senior secured credit facility is based on covenant calculations contained in Nexstar’s credit agreement. As of December 31, 2007, all $8.0 million of total unused commitments under the Mission credit facility were available for borrowing.

Collateralization and Guarantees of Debt

Nexstar Broadcasting Group (Nexstar’s ultimate parent) and its subsidiaries guarantee full payment of all obligations under Mission’s bank credit facility in the event of its default. Similarly, Mission is a guarantor of Nexstar’s bank credit facility and the senior subordinated notes issued by Nexstar. The bank credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and Mission.

Debt Covenants

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

Debt Maturities

At December 31, 2007, scheduled maturities of Mission’s debt (undiscounted) are summarized as follows (in thousands):


Year ended December 31,
2008	$	1,727
2009		1,727
2010		1,727
2011		1,727
2012		168,906
Thereafter		—

	$	175,814

Loss on Extinguishment of Debt

The redemption, repayment, refinancing, or amendment of the Company’s debt obligations may result in the write-off of debt financing costs previously capitalized and certain other costs incurred in the transaction. The reduction of Mission’s revolving loan commitment under its senior secured credit facility in December 2006 resulted in the write-off of $0.3 million of previously capitalized debt financing costs. The refinancing of Mission’s senior secured credit facility in April 2005 resulted in the write-off of $0.1 million of previously capitalized debt financing costs and $0.4 million of transaction costs during the second quarter of 2005. These amounts are included in loss on extinguishment of debt.

F-18

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

9. Common Stock

The Company is 100% owned by one shareholder, David S. Smith. As of December 31, 2007 and 2006, the Company had authorized, issued and outstanding 1,000 shares of common stock with a $1 dollar par value. Each share of common stock is entitled to one vote.

10. Gain on Asset Exchange

In 2004, the FCC approved a spectrum allocation exchange between Sprint Nextel Corporation (“Nextel”) and public safety entities to eliminate interference being caused to public safety radio licensees by Nextel’s operations. As part of this spectrum exchange, the FCC granted Nextel the right to certain spectrum within the 1.9 GHz band that is currently used by television broadcasters. In order to utilize this spectrum, Nextel is required to relocate the broadcasters to new spectrum by replacing all analog equipment currently used by broadcasters with comparable digital equipment. The Company has agreed to accept the substitute equipment that Nextel will provide and in turn must relinquish its existing equipment back to Nextel. This transition began on a market by market basis beginning in the third quarter of 2007. The equipment the Company receives under this arrangement is recorded at their estimated fair market value and depreciated over estimated useful lives ranging from 5 to 15 years. Management’s determination of fair market value is derived from the most recent prices paid to manufacturers and vendors for the specific equipment acquired. As equipment is exchanged, the Company records a gain to the extent that the fair market value of the equipment received exceeds the carrying amount of the equipment relinquished. For the year ended December 31, 2007, the Company recognized a gain of $0.3 million from the exchange of this equipment.

11. Income Taxes

The provision for income taxes consisted of the following components:


	Years Ended December 31,
	2007			2006		2005
	(in thousands)
Current tax expense:
Federal	$	—		$	—	$	—
State		72			—		3

		72			—		3

Deferred tax expense:
Federal		1,215			1,062		1,179
State		(152	)		110		148

		1,063			1,172		1,327

Income tax expense	$	1,135		$	1,172	$	1,330

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 35% to loss from operations before income taxes. The sources and tax effects of the differences were as follows:


	Years Ended December 31,
	2007			2006			2005
	(in thousands)
Tax benefit at 35% statutory federal rate	$	(1,017	)	$	(617	)	$	(2,763	)
Change in valuation allowance		2,478			1,471			4,323
State and local taxes, net of federal benefit		(327	)		318			(231	)
Other, net		1			—			1

Income tax expense	$	1,135		$	1,172		$	1,330

F-19

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

11. Income Taxes—(Continued)

The components of the net deferred tax asset and liability were as follows:


	December 31,
	2007			2006
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	28,211		$	30,638
Other intangible assets		3,198			3,630
Deferred revenue		1,398			1,340
Other		1,007			618

Total deferred tax assets		33,814			36,226
Valuation allowance		(32,881	)		(35,584	)

Net deferred tax assets		933			642

Deferred tax liabilities:
Goodwill		(2,529	)		(2,050	)
FCC licenses		(4,556	)		(3,694	)
Property and equipment		(573	)		(560	)

Total deferred tax liabilities		(7,658	)		(6,304	)

Net deferred tax liability	$	(6,725	)	$	(5,662	)

The Company’s provision for income taxes is primarily comprised of deferred income taxes created by an increase in the deferred tax liabilities position during the year resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. These deferred tax liabilities do not reverse on a scheduled basis and are not used to support the realization of deferred tax assets. The Company’s deferred tax assets primarily result from federal and state net operating loss carryforwards (“NOLs”). The Company’s NOLs are available to reduce future taxable income if utilized before their expiration. The Company has provided a valuation allowance for certain deferred tax assets as it believes they may not be realized through future taxable earnings.

On May 18, 2006, the State of Texas enacted legislation to change its existing franchise tax from a tax based on taxable capital or earned surplus to a new tax based on modified gross revenue (“Margin Tax”). The former Texas franchise tax structure remained in existence until the end of 2006. Beginning in 2007, the Margin Tax imposes a 1% tax on revenues, less certain costs, as specified in the legislation, generated from Texas activities. Additionally, the legislation provides a temporary credit for Texas business loss carryovers existing through 2006 to be used as an offset to the Margin Tax. On June 15, 2007, the Texas Governor signed legislation that provided various technical corrections to the Texas Margin Tax. Based on the changes provided in this newly enacted tax law, the Company adjusted its temporary credit for Texas business loss carryovers to be utilized as an offset to the Margin Tax and a related deferred tax asset during the second quarter of 2007. The effect of the revision made to the temporary credit increased the Company’s deferred tax assets position resulting in approximately a $0.3 million reduction in the deferred state income tax provision for the year ended December 31, 2007.

As discussed in Note 2, the Company adopted FIN No. 48 on January 1, 2007. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in thousands):


Gross unrecognized tax benefits at January 1, 2007	$	4,123
Increases in tax positions from prior years		—
Decreases in tax positions from prior years		(446	)
Increases in tax positions from current year		—
Settlements		—
Lapse in statute of limitations		—

Gross unrecognized tax benefits at December 31, 2007	$	3,677

Interest expense and penalties related to the Company’s uncertain tax positions are reflected as a component of income tax expense in the Company’s Consolidated Statements of Operations. As of December 31, 2007, the Company has not accrued interest on the unrecognized tax benefits as an unfavorable outcome upon examination would not result in a cash outlay but would reduce NOLs subject to a valuation allowance.

As of December 31, 2007, the total gross unrecognized tax benefits were approximately $3.7 million. If recognized, this amount would result in a favorable effect on the Company’s effective tax rate excluding impact on the Company’s valuation allowance position. The Company does not expect the amount of unrecognized tax benefits to significantly change in the next twelve months.

F-20

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

11. Income Taxes—(Continued)

The valuation allowance decreased for the year ended December 31, 2007 by $2.7 million primarily related to certain adjustments to the deferred tax assets offset by the generation of current year net operating losses, the benefit of which may not be realized. The valuation allowance increased for the year ended December 31, 2006 by $1.8 million related to the generation of net operating losses and other deferred tax assets, the benefit of which may not be realized.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal tax examinations for years after 2003. Additionally, any NOLs that were generated in prior years and will be utilized in the future may also be subject to examination by the Internal Revenue Service. State jurisdictions that remain subject to examination are not considered significant.

At December 31, 2007, the Company has NOLs available of approximately $77.1 million, which are available to reduce future taxable income if utilized before their expiration. The federal NOLs begin to expire in 2016 through 2027 if not utilized. Utilization of NOLs in the future may be limited if changes in the Company’s ownership occurs.

12. FCC Regulatory Matters

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations. In addition, the U.S. Congress may act to amend the Communications Act in a manner that could impact the Company’s stations and the television broadcast industry in general.

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

Digital Television (“DTV”) Conversion

Television broadcasting in the United States is moving from an analog transmission system to a digital transmission system. For the transition period, the FCC allotted each licensed television station a second channel for broadcast of a DTV signal. In 2006, President Bush signed into law legislation that establishes February 17, 2009 as the deadline for television broadcasters to broadcast on a single DTV channel and return their analog channel to the FCC. Prior to February 17, 2009, television stations must broadcast with both analog and DTV signals. See Note 6 for a discussion of the impact this legislation is expected to have on the estimated useful lives of certain broadcasting equipment of the Company.

DTV conversion expenditures were $2.3 million, $2.1 million and $0.8 million, respectively, for the years ended December 31, 2007, 2006 and 2005. The Company will incur various capital expenditures to modify its remaining stations’ DTV transmitting equipment for full-power DTV operations, including costs for the transmitter, transmission line, antenna and installation, and estimated costs for tower upgrades, replacements and/or modifications. The Company anticipates these expenditures will be funded through available cash on hand and cash generated from operations as incurred in future years.

Media Ownership

In 2006, the FCC initiated a rulemaking proceeding which provides for a comprehensive review of all of its media ownership rules, as required by the Communications Act. The Commission is considering rules relating to ownership of two or more TV stations in a

F-21

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

12. FCC Regulatory Matters —(Continued)

market, ownership of local TV and radio stations by daily newspapers in the same market, cross-ownership of local TV and radio stations, and changes to how the national TV ownership limits are calculated. The proceeding, which will include several public hearings to be held throughout the country, has extended into 2008. At this time, it is not possible to predict the outcome of any changes, if any, to the FCC’s media ownership rules.

13. Commitments and Contingencies

Broadcast Rights Commitments

Broadcast rights acquired for cash under license agreements are recorded as an asset and a corresponding liability at the inception of the license period. Future minimum payments arising from unavailable future broadcast license commitments outstanding are as follows at December 31, 2007 (in thousands):


Year ended December 31,
2008	$	351
2009		1,001
2010		874
2011		624
2012		342
Thereafter		17

Future minimum payments for unavailable cash broadcast rights	$	3,209

Unavailable broadcast rights commitments represent obligations to acquire cash program rights for which the license period has not commenced and, accordingly, for which no asset or liability has been recorded.

Operating Leases

The Company leases towers, office space and operating equipment under noncancelable operating lease arrangements expiring through May 2027. Charges to operations for such leases aggregated approximately $1.3 million for each of the years ended December 31, 2007, 2006 and 2005. Future minimum lease payments under these operating leases are as follows at December 31, 2007 (in thousands):


Year ended December 31,
2008	$	855
2009		881
2010		911
2011		948
2012		987
Thereafter		12,459

Future minimum lease payments under operating leases	$	17,041

Guarantees of Nexstar Debt

Mission is a guarantor of and has pledged substantially all its assets, excluding FCC licenses, to Nexstar’s bank credit facility. Nexstar’s bank credit facility, which matures in 2012, consists of a Term Loan B and a $82.5 million revolving loan.

Mission is also a guarantor of $200.0 million of 7% senior subordinated notes (“7% Notes”) due 2014 issued by Nexstar. The 7% Notes are general unsecured senior subordinated obligations subordinated to all of Mission’s senior debt.

Mission guarantees full payment of all obligations incurred under Nexstar’s bank credit facility agreement and senior subordinated notes. In the event that Nexstar is unable to repay amounts due under these debt obligations, Mission will be obligated to repay such amounts. The maximum potential amount of future payments that Mission would be required to make under these guarantees would be generally limited to the amount of borrowings outstanding under Nexstar’s bank credit facility and the 7% Notes. At December 31, 2007, Nexstar had issued an aggregate principal amount of $200.0 million of senior subordinated notes and had $180.8 million outstanding under its bank credit facility.

F-22

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

13. Commitments and Contingencies —(Continued)

Purchase Options Granted to Nexstar

In consideration of Nexstar Broadcasting Group’s guarantee of Mission’s bank credit facility, Mission’s sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent, for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreement, or (2) the amount of its indebtedness. Cash flow is defined as income or loss from operations, plus depreciation and amortization (including amortization of broadcast rights), interest income, non-cash trade and barter expenses, nonrecurring expenses (including time brokerage agreement fees), network compensation payments received or receivable and corporate management fees, less payments for broadcast rights, non-cash trade and barter revenue and network compensation revenue. These option agreements (which expire on various dates between 2008 and 2014) are freely exercisable or assignable by Nexstar without consent or approval by Mission’s sole shareholder. The Company expects these option agreements to be renewed upon expiration.

Indemnification Obligations

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

Litigation

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

14. Employment Benefits

Retirement Savings Plan

The Company has established a retirement savings plan under Section 401(k) of the Internal Revenue Code (the “Plan”). The Plan covers substantially all employees of the Company who meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. Contributions to the Plan may be made at the discretion of the Company. Mission recorded contributions of $17 thousand, $12 thousand and $13 thousand for the years ended December 31, 2007, 2006 and 2005, respectively.

F-23

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

15. Valuation and Qualifying Accounts

Allowance for Doubtful Accounts Rollforward

Balance at
Beginning
of Period

Additions
Charged to Costs
and Expenses

Increase
Due to
Acquisitions

Deductions⁽¹⁾

Balance at
End of
Period

(in thousands)

Year ended December 31, 2005

—

Year ended December 31, 2006

—

Year ended December 31, 2007

—

(1)	Uncollectible accounts written off, net of recoveries.

Valuation Allowance for Deferred Tax Assets Rollforward


	Balance at Beginning of Period		Additions Charged to Costs and Expenses⁽¹⁾		Additions Charged to Other Accounts		Deductions⁽²⁾			Balance at End of Period
	(in thousands)
Year ended December 31, 2005	$	31,324	$	2,449	$	—	$	—		$	33,773
Year ended December 31, 2006		33,773		1,811		—		—			35,584
Year ended December 31, 2007		35,584		2,478		—		(5,181	)		32,881

(1)	Increase in valuation allowance related to the generation of net operating losses and other deferred tax assets.

(2)	Decrease in valuation allowance associated with adjustments to certain deferred tax assets and their related allowance.

16. Subsequent Event

F-24


Exhibit No.		Exhibit Index
3.1		Certificate of Incorporation of Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (Incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 333-62916-02) filed by Mission Broadcasting of Wichita Falls, Inc.)

3.2		By-laws of Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (Incorporated by reference to Exhibit 3.2 to Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 333-62916-02) filed by Mission Broadcasting of Wichita Falls, Inc.)

10.1		Purchase and Sale Agreement, dated as of December 31, 2001, by and among Mission Broadcasting of Joplin, Inc., GOCOM Broadcasting of Joplin, LLC and GOCOM of Joplin License Sub, LLC. (Incorporated by reference to Exhibit 10.24 to Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 333-68964) filed by Nexstar Finance Holdings, L.L.C. and Nexstar Finance Holdings, Inc.)

10.2		Time Brokerage Agreement, dated as of December 31, 2001, by and between GOCOM of Joplin License Sub, LLC and Mission Broadcasting of Joplin, Inc. (Incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 333-68964) filed by Nexstar Finance Holdings, L.L.C. and Nexstar Finance Holdings, Inc.)

10.3		Option Agreement, dated as of January 12, 2001, made by each of the Nexstar Broadcasting of Wichita Falls, L.P. (Incorporated by reference to Exhibit 10.10 to Registration Statement on Form S-4 (File No. 333-62916) filed by Nexstar Finance, L.L.C. and Nexstar Finance, Inc.)

10.4		Shared Services Agreement, dated as of June 1, 1999, among Mission Broadcasting of Joplin, Inc., David Smith and Nexstar Broadcasting of Wichita Falls, L.P. (Incorporated by reference to Exhibit 10.24 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.5		Agreement, dated as of June 1, 1999, among Mission Broadcasting of Joplin, Inc. (Incorporated by reference to Exhibit 10.25 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.6		Option Agreement, dated as of June 5, 2002, among Nexstar Finance, L.P. (Incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.7		Shared Services Agreement, dated as of June 5, 2002, among Bastet Broadcasting, Inc. (Incorporated by reference to Exhibit 10.10 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.8		Option Agreement, dated as of November 30, 2002, among Bastet Broadcasting, Inc., David Smith and Nexstar Broadcasting Group, L.L.C. (Incorporated by reference to Exhibit 10.37 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.9		Time Brokerage Agreement, dated as of April 1, 1996, by and between SJL Communications, L.P. and NV Acquisitions Co. (Incorporated by reference to Exhibit 10.48 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.10		Shared Services Agreement, dated as of June 1, 1999, among Mission Broadcasting of Wichita Falls, Inc., David Smith and NV Acquisitions Co. (Incorporated by reference to Exhibit 10.43 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.11		Agreement, dated as of June 1, 1999, among Mission Broadcasting of Joplin, Inc. and Nexstar Broadcasting of Joplin, L.P. (Incorporated by reference to Exhibit 10.44 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.12		Shared Services Agreement, dated as of April 1, 2002, by and between Mission Broadcasting of Joplin, Inc. and Nexstar Broadcasting of Joplin, L.L.C. (Incorporated by reference to Exhibit 10.51 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.13		Amendment to Option Agreements, dated as of October 18, 2002, among Mission Broadcasting, Inc., David Smith, Nexstar Broadcasting of Northeastern Pennsylvania, L.L.C., Nexstar Broadcasting Group, L.L.C., Nexstar Broadcasting of Wichita Falls, L.L.C., and Nexstar Broadcasting of Joplin, L.L.C. (Incorporated by reference to Exhibit 10.54 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.14		Asset Purchase Agreement, dated as of December 13, 2002, by and among LIN Television Corporation, TVL Broadcasting of Abilene, Inc., Abilene Broadcasting, L.L.C. and Mission Broadcasting, Inc. (Incorporated by reference to Exhibit 10.47 to Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 333-62916) filed by Nexstar Finance, L.L.C. and Nexstar Finance, Inc.)

E-1


Exhibit No.		Exhibit Index
10.15		Local Marketing Agreement, dated as of December 13, 2002, by and among LIN Television Corporation, TVL Broadcasting of Abilene, Inc., Abilene Broadcasting, L.L.C. and Mission Broadcasting, Inc. (Incorporated by reference to Exhibit 10.48 to Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 333-62916) filed by Nexstar Finance, L.L.C. and Nexstar Finance, Inc.)

10.16		Shared Services Agreement, dated as of June 13, 2003, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting of Abilene, L.L.C. (Incorporated by reference to Exhibit 10.63 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.17		Option Agreement, dated as of June 13, 2003, among Mission Broadcasting, Inc., David Smith and Nexstar Broadcasting of Abilene, L.L.C. (Incorporated by reference to Exhibit 10.64 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)

10.18		Shared Services Agreement, dated as of May 9, 2003, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting of the Midwest, Inc. (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

10.19		Agreement for the Sale of Commercial Time, dated as of May 9, 2003, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting of the Midwest, Inc. (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

10.20		Option Agreement, dated as of May 9, 2003, among Mission Broadcasting, Inc., David Smith and Nexstar Broadcasting of the Midwest, Inc. (Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

10.21		Indenture, among Nexstar Finance Holdings, L.L.C., Nexstar Finance Holdings, Inc., Mission Broadcasting, Inc. and The Bank of New York, dated as of March 27, 2003. (Incorporated by reference to Exhibit 4.4 to Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 333-68964) filed by Nexstar Finance Holdings, L.L.C. and Nexstar Finance Holdings, Inc.)

10.22		First Restated Guaranty Agreement, dated as of December 30, 2003, executed by Mission Broadcasting, Inc. in favor of the banks set forth therein. (Incorporated by reference to Exhibit 10.37 to Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

10.23		First Restated Security Agreement, dated as of December 30, 2003, by Mission Broadcasting, Inc. in favor of Bank of America, N.A., as collateral agent. (Incorporated by reference to Exhibit 10.38 to Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

10.24		First Restated Pledge and Security Agreement, dated as of December 30, 2003, by Mission Broadcasting, Inc. in favor of Bank of America, N.A., as collateral agent. (Incorporated by reference to Exhibit 10.39 to Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

10.25		Indenture, among Nexstar Broadcasting, Inc., the guarantors and The Bank of New York, dated as of December 30, 2003 (Incorporated by reference to Exhibit 10.91 to Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc.)

10.26		Amendment to Agreement for Sale of Commercial Time, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KAMC-KLBK). (Incorporated by reference to Exhibit 10.91 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.27		Amendment to Shared Services Agreement, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KAMC-KLBK). (Incorporated by reference to Exhibit 10.92 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.28		Amendment to Agreement for Sale of Commercial Time, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KOLR-KSFX (formerly KDEB)). (Incorporated by reference to Exhibit 10.93 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.29		Amendment to Shared Services Agreement, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KOLR-KSFX). (Incorporated by reference to Exhibit 10.94 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.30		Amendment to Agreement for Sale of Commercial Time, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KCIT-KAMR). (Incorporated by reference to Exhibit 10.95 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.31		Amendment to Shared Services Agreement, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KCIT-KAMR). (Incorporated by reference to Exhibit 10.96 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.32		Amendment to Agreement for Sale of Commercial Time, dated January 13, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WFXW-WTWO). (Incorporated by reference to Exhibit 10.97 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

E-2


Exhibit No.		Exhibit Index
10.33		Amendment to Shared Services Agreement, dated January 13, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WFXW-WTWO). (Incorporated by reference to Exhibit 10.98 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.34		Agreement for Sale of Commercial Time, dated April 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WUTR-WFXV). (Incorporated by reference to Exhibit 10.99 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.35		Shared Services Agreement, dated April 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WUTR-WFXV). (Incorporated by reference to Exhibit 10.100 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.36		Amendment to Agreement for Sale of Commercial Time, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. (as successor to Nexstar Broadcasting of Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (KJBO-KFDX). (Incorporated by reference to Exhibit 10.101 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.37		Amendment to Shared Services Agreement, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. (as successor to Nexstar Broadcasting of Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (KJBO-KFDX). (Incorporated by reference to Exhibit 10.102 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

10.38		Asset Purchase Agreement, dated October 4, 2004, by and among Mission Broadcasting, Inc., Young Broadcasting, Inc. and Winnebago Television Corporation. (Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on October 8, 2004).

10.39		Supplemental Indenture, dated as of April 1, 2005, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Mission Broadcasting, Inc., and The Bank of New York, as Trustee. (Incorporated by reference to Exhibit 99.4 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on April 6, 2005)

10.40		Guarantee, dated as of April 1, 2005, of Nexstar Broadcasting Group, Inc. executed pursuant to the Indenture dated as of December 30, 2003, among Nexstar Broadcasting, Inc., Mission Broadcasting, Inc. and The Bank of New York, as Trustee, as amended and supplemented by the Supplemental Indenture (as defined therein). (Incorporated by reference to Exhibit 99.5 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on April 6, 2005)

10.41		Third Amended and Restated Credit Agreement, dated as of April 1, 2005, among Mission Broadcasting, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Bank of America, N.A., as the Administrative Agent for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents. (Incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 7, 2005)

10.42		First Amendment and Confirmation Agreement to Mission Guarantee of Nexstar Obligations, dated as of April 1, 2005, by and among Mission Broadcasting, Inc. as Guarantor and Bank of America, N.A. as Collateral Agent, on behalf of the Majority Lenders (as defined therein). (Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 7, 2005)

10.43		Confirmation Agreement for the Smith Pledge Agreement, dated as of April 1, 2005, by David S. Smith and Bank of America, N.A. as Collateral Agent. (Incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. April 7, 2005)

10.44		Fourth Amended and Restated Credit Agreement, dated as of April 1, 2005, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., certain of its subsidiaries from time to time parties to the Credit Agreement, the several banks and other financial institutions or entities from time to time parties hereto, Bank of America, N.A., as the Administrative Agent for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents. (Incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting, Inc., on April 6, 2005)

10.45		Asset Purchase Agreement, dated as of June 27, 2007 (entered into by Mission Broadcasting, Inc. on June 27, 2007), by, between and among Mission Broadcasting, Inc. and Piedmont Television Holdings LLC, Piedmont Television Communications LLC, Piedmont Television of Monroe/El Dorado LLC and Piedmont Television of Monroe/El Dorado License LLC.

14.1		Mission Broadcasting, Inc. Code of Ethics. (Incorporated by reference to Exhibit 14.1 to Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)

23.1		Consent of PricewaterhouseCoopers LLP on March 11, 2008.*

31.1		Certification of David S. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certification of David S. Smith pursuant to 18 U.S.C. ss. 1350.*

*	Filed herewith

E-3

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	8th grade Avg

Mission Broadcasting 10-K2007 FY Annual report

Content analysis