Interep National Radio Sales (IREP) 10-K 2006 FY Annual report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2006

OR

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from                to                

Commission file number 000-28395

INTEREP NATIONAL RADIO SALES, INC.

(Exact name of registrant as specified in its charter)

New York	13-1865151
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 Park Avenue, New York, New York	10017
(Address of principal executive offices)	(Zip Code)

(212) 916-0700

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Class A Common Stock, par value $0.01 per share	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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer¨        Accelerated filer¨        Non-accelerated filerx

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

The aggregate market value of the Class A Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01 per share, held by non-affiliates of the registrant, based upon the last reported sale price for the registrant’s Class A Common Stock on The Nasdaq OTC Bulletin Board, was $3,357,311 as of June 30, 2006 (this excludes shares owned beneficially by directors, executive officers and the registrant’s Stock Growth Plan).

The number of shares of the registrant’s Common Stock outstanding as of the close of business on March 16, 2007 was 7,563,905 shares of Class A Common Stock, and 3,731,971 shares of Class B Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

NONE

Throughout this Annual Report, when we refer to “Interep” or “the Company,” we refer collectively to Interep National Radio Sales, Inc. and all of our subsidiaries unless the context indicates otherwise or as otherwise noted.

IMPORTANT NOTE REGARDING FORWARD LOOKING STATEMENTS

Some of the statements made in this Annual Report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not statements of historical fact, but instead represent our belief about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. These statements are based on many assumptions and involve known and unknown risks and uncertainties that are inherently uncertain and beyond our control. These risks and uncertainties may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different than any expressed or implied by these forward-looking statements. Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should review the factors noted in “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Certain Factors That May Affect Our Results of Operations” for a discussion of some of the things that could cause actual results to differ from those expressed in our forward-looking statements.

PART I

Item 1. BUSINESS

General

Interep is the largest independent national spot radio representation or “rep” firm in the United States. We are the exclusive rep firm for over 1,500 radio stations nationwide, including radio stations owned by three of the five largest radio groups by revenue. In the ten largest U.S. radio markets (as defined by Arbitron), each week our represented stations reach an estimated 70% of persons 12 years and over. We serve innovative radio station groups, while still meeting the needs of independent stations nationwide. We have grown to be a leader in radio advertising by improving our clients’ advertising revenues, acquiring station representation contracts, creating and acquiring other rep firms and offering advertisers creative marketing solutions to achieve their goals. Today, our solutions include not only radio, but also other media, including television and the Internet.

Interep is an advertising sales and marketing company that is a preeminent leader in the radio industry. Our 17 offices across the country enable us to serve our radio station clients and advertisers in all 50 states and portions of Mexico and Canada. We provide national sales representation for clients whose diverse formats include country, rock, sports, Hispanic, classical, urban, news, talk, oldies, adult contemporary, jazz, contemporary hits, etc. We have developed strong relationships with our clients and the agencies and buying services that purchase advertising. We believe we can extend our success in radio to other types of media that we integrate into our roster of marketing and sales services. Our intention is to enable our clients to exploit strong overlap in demographic composition and usage patterns between radio listeners and users of the Internet and other media.

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Radio stations generally retain national rep firms on an exclusive basis to sell national spot commercial air time on their stations to advertisers outside of their local markets. The station’s own sales force handles sales of air time to local advertisers. National spot radio advertising is placed or “spotted” in one or more broadcast markets, in contrast to network advertising, which is broadcast simultaneously on network affiliated stations. National spot radio advertising typically accounts for approximately 20% of a radio station’s revenues.

A rep firm promotes the benefits of buying advertising time on its client radio stations to advertising agencies and media buying services and arranges for the placement of specific advertisements. Rep firms generate revenues by earning commissions on the sale of advertising time on client stations. Radio stations outsource their national spot advertising sales to rep firms to benefit from the rep firm’s professional sales staff, multiple sales offices, national coverage presence, proprietary research and established relationships with advertisers and agencies.

We believe the following factors have contributed to our position as an industry leader in radio advertising and provide a strong foundation for further growth as an advertising sales and marketing services company:

Strong Relationships with Advertisers; National Presence.    Our strong relationships with advertisers, advertising agencies and media buying services nationwide enable us to promote our client stations effectively. We understand the markets and the advertisers’ needs. We work closely with advertisers to help them develop and refine radio advertising strategies and to support their purchases of advertising time on our client stations. Our sales force is strategically located across the country to provide effective coverage of all major media buying centers. Our market leadership enhances our value to advertisers, increases our ability to sell air time for clients and allows us to package national spot time on multiple radio stations creatively to meet advertisers’ special needs. We believe that our market leadership will enable us to integrate Internet and other forms of advertising media into our business.

Innovative Solutions.    We have pioneered a variety of innovative solutions for the radio industry. For example, we were the first to package and market unaffiliated portfolios of client stations by grouping them together as “unwired networks” to meet advertisers’ particular needs. Unwired networks enable radio advertisers and advertising agencies to target specific groups or markets by placing advertisements on as few as two stations or as many as all of the over 1,500 stations represented by us. Advertising agencies and media buyers derive additional benefits from our unwired networks as we often perform research, scheduling, billing, payment, pre-analysis and post-analysis functions relating to the advertising time purchase. We also use promotions and specialized agency sales targeted at boutique agencies. We developed the use of dedicated radio sales representation firms, such as ABC Radio Sales and CBS Radio Sales, which enable a client to benefit from our comprehensive services while still projecting its corporate identity to advertisers.

We Continue to Innovate.    We formed Interep Interactive, our interactive representation and web publishing division specializing in the sales and marketing of on-line advertising, including streaming media. Interep Interactive includes Winstar Interactive and Perfect Circle Media. We also provide online marketing research on a secure basis to clients and advertisers.

Our Interep Marketing Group is another example of our proactive, innovative approach to sales. This Group advances the ongoing growth of radio advertising by focusing on advertisers who do not

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use or who underutilize radio advertising. The Group’s sales force works with these advertisers to demonstrate how radio can help them achieve their goals and create marketing opportunities. We believe that the Group has contributed to the growth of radio advertising revenues in the aggregate and, by extension, our own growth.

RadioExchange, a proprietary system, is the radio industry’s first national spot radio web-based order/avail management, electronic invoicing and electronic ordering system. This system significantly reduces the overall burden of administering the process of buying radio by reducing data entry and facilitating the reconciliation of discrepancies, while providing greater accountability to advertisers and expediting payments to radio stations. The system has been developed in conjunction with two software and technology companies with extensive experience in the media industry. In 2005, we began aggressively to deploy some of the advanced functionality of RadioExchange with our business partners. We currently have three of the advertising industry’s largest radio buyers sending their orders electronically with plans to increase compatibility to facilitate rolling out additional agencies in 2007. Electronic Delivery of Orders was successfully rolled out to pilot stations by year’s end 2006. By the end of 2007, 90% of our stations will have RadioExchange accounts, and will receive, confirm and manage orders electronically. Those stations using the WideOrbit traffic system will have the ability to export a file which can be imported directly into their traffic system, drastically reducing the lost revenue that data entry errors can cause. The increased efficiency RadioExchange affords will help lower our administrative costs as well as our client stations.

Highly Skilled Sales Force and Sophisticated Sales Support.    We have a highly skilled, professional sales force. Our sales force has a team-oriented approach to sales, marketing and client relationships instilled through incentive programs and the continuous, in-house training programs of the Interep Radio University. Most of our professional employees spend approximately two weeks each year in the Interep Radio University and receive training from both staff members and instructors from leading marketing and management education programs. We support our sales efforts with sophisticated media research, including a proprietary nationwide database. This research enables us to profile for advertisers the relevant characteristics of the audiences of our clients, to assist them in reaching their target audiences. We also provide concept development and sales promotion services, such as advertising support, merchandising and sales incentive programs, which enable us to suggest promotional campaigns, including partnerships with other advertising media.

Experienced Management Team.    We have an experienced and entrepreneurial management team, headed by our new Chief Executive Officer, David E. Kennedy, who has over 30 years experience in the radio industry (please refer to his bio on Page 5). Our former Chief Executive Officer, Ralph C. Guild, a recognized leader and innovator in the radio industry will serve as Chairman of the Board, a non-executive position. Our senior sales management have an average of over 25 years of industry experience and significant equity ownership in Interep.

Cross Marketing.    Our strong relationships with advertisers places us in a unique position to offer all of our marketing services to them. The Interep Marketing Group works closely with our radio and Internet sales forces to cross-market Internet advertising with radio and to reach potential radio advertisers who currently advertise over other media. We intend to leverage our ability to cross-market as we incorporate other advertising media into the services we offer our advertisers.

Independence.    We are owned by our employees and the public. We are the only major radio representation firm that is not owned by a broadcast group. We believe that our independence reduces perceived conflicts of interest in our sales efforts on behalf of our clients.

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Television.    In November 2005, we entered into the television representation business by organizing Azteca America Spot Television Sales, Inc., the country’s only independent Hispanic television rep firm. We began with 16 television affiliate stations and now represent a total of 48 affiliates. We place business with our station clients from over 120 national advertisers and over 60 advertising agencies.

Clients

Our client radio stations generally retain us on an exclusive basis through written agreements. These rep contracts generally provide for an initial term followed by an “evergreen” period, meaning that the contract term continues until canceled following 12 months’ prior notice. If the client terminates the contract without cause, the rep contract generally provides for termination payments equal to the estimated commissions that would have been payable to the rep firm during the remaining portion of the term and the evergreen period, plus two months. For example, if a contract with an initial term of five years and a one-year evergreen period is canceled after three years, we would be compensated in an amount equal to 38 months of commissions: 24 months for the remaining term, 12 months for the evergreen notice period, plus two “spill over” months. “Spill over” commissions are those earned on advertising placed or committed to prior to the contract termination but broadcast later. It is customary in the industry for the successor rep firm to make this payment. However, certain contracts representing material revenues permit clients in certain circumstances to terminate their agreements with less than 12 months’ notice and pay termination and evergreen payments over shorter periods of time.

For the year ended December 31, 2006, no station or station group, other than CBS Broadcasting Corporation and Entercom Communications Corp., accounted for more than 10 percent of our commission revenues.

Competition

Our success in radio advertising sales depends on our ability to acquire and retain representation contracts with radio stations. The media representation business is highly competitive, both in the competition for clients and in the sale of air time to advertisers. Our only significant competitor in the national spot radio representation industry is Katz Radio Group, Inc., a subsidiary of Clear Channel Communications, Inc., a major media company. We also compete with other independent and network media representatives, direct national advertisers, national radio networks, syndicators and other brokers of radio advertising. Moreover, on behalf of our clients, we compete for advertising dollars with other media such as broadcast and cable television, newspapers, magazines, outdoor and transit advertising, Internet advertising, point-of-sale advertising and yellow pages directories. Certain of our competitors have greater financial and other resources than we do, and such resources may provide them with a competitive advantage in competing for client stations or advertising expenditures.

A change in the ownership of a client station frequently results in a change of representation firm. The consolidation of the radio industry that followed the enactment of the Telecommunications Act of 1996 resulted in larger station groups and an increase in the number of station ownership changes. This, in turn, increased the frequency of the termination or buyout of representation contracts. Further, as station groups have become larger, they have gained bargaining power with representation firms over rates and terms. As a result, we continually compete for both the acquisition of new client stations as well as the maintenance of existing relationships.

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We believe that our ability to compete successfully is based on:

• the number of stations we represent and the inventory of commercials and marketing opportunities they provide;

• our strong relationships with advertisers;

• the experience of our management and the training and motivation of our sales personnel;

• our past performance;

• our ability to offer unwired networks;

• our use of technology; and

• our research and marketing services for clients and advertisers.

We believe that we compete effectively, in part, through our employees’ knowledge of, and experience in, our business and industry and their long standing relationships with clients.

Employees

As of December 31, 2006, we employed approximately 390 employees, substantially all of whom were sales-related personnel. None of our employees is represented by a union. We believe that our relations with our employees are excellent.

Executive Officers

The following table sets forth certain information regarding our executive officers:

Name	Age	Positions
Ralph C. Guild	78	Non-Executive Chairman of the Board and Director
David E. Kennedy	54	Chief Executive Officer, President, Vice Chairman and Director
William J. McEntee, Jr.	63	Senior Vice President and Chief Financial Officer

All executive officers are appointed for terms of one year.

Ralph C. Guild had been our Chairman of the Board and Chief Executive Officer since 1986, and has served as a director since 1967. He has been employed by us or our predecessors since 1957 in various capacities. In February 2007, Mr. Guild was replaced as Chief Executive Officer by David E. Kennedy. Mr. Guild will continue to serve as Chairman of the Board, which is a non-executive position. Mr. Guild is a prominent figure in the radio business, and has received many of the most prestigious awards in the industry. In November 1991, Mr. Guild became one of the first inductees into the Broadcasting Hall of Fame. He also received the Golden Mike Award from the Broadcasters Foundation in 1998 for outstanding contributions to the radio industry. In March 2001, Mr. Guild received the International Radio & Television Society’s Golden Medal Award. Mr. Guild is active in a broad range of industry associations and charitable organizations. Currently, he serves on the Boards of Trustees of the Museum of Television & Radio, the Center for Communications and the University of the Pacific.

David Kennedybecame our Chief Executive Officer, President, Vice Chairman and a Director in February 2007. Prior to joining us, Mr. Kennedy served as President and Chief Executive Officer of Susquehanna Media Co. from December 2004 until May 2006, when the company’s operations were

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sold to Comcast and Cumulus Media Partners. From January 1995, until December 2004, Mr. Kennedy was the President and Chief Operating Officer of Susquehanna Radio Corp, a subsidiary of Susquehanna Media Co. He also served in various other capacities at Susquehanna Radio Corp, since 1973. He is a past chairman of the National Association of Broadcasters Joint Board of Directors, and has served as chairman or member of a number of NAB committees, including the Radio Board of Directors; Responsible Programming Industry Task Force; Financial Advisory Committee; Committee on Local Radio Audience Measurement (COLRAM); and Radio Audience Measurement Taskforce (RAMTF). Mr. Kennedy is also a past chairman of the Radio Advertising Bureau’s Board of Directors, as well as a member of its Executive Committee. He also currently serves on the Board of Directors of the John Bayliss Broadcast Foundation, the Library of American Broadcasting Foundation, York County Community Foundation, Inc. and the American Red Cross of York County. He is a member of the International Radio and Television Society and Broadcast Education Association.

William J. McEntee, Jr. has been our Senior Vice President and Chief Financial Officer since March 1997. Mr. McEntee serves in such positions pursuant to a Services Agreement between the Company and Media Financial Services, Inc. Mr. McEntee was Chief Financial Officer at Sudbrink Broadcasting in West Palm Beach, Florida, from 1971 through 1994. Mr. McEntee owned and managed WCEE-TV in Mt. Vernon, Illinois from 1994 until selling the station in 1996. Mr. McEntee currently owns WIOJ-AM in Jacksonville, Florida. He is a certified public accountant.

About Us

Interep National Radio Sales, Inc. is a New York corporation founded in 1953. Our principal executive offices are located at 100 Park Avenue, New York, New York 10017. Our telephone number is (212) 916-0700, and our Internet address iswww.interep.com.

Financial Information

Please refer to our financial statements in this Report commencing on page F-1 for information regarding our results of operations. Substantially all of our revenues are generated in, and our long-lived assets are located in, the United States.

Item 1A. RISK FACTORS

See “Certain Risk Factors That May Affect Our Results of Operations — Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 2. PROPERTIES

We lease approximately 162,000 square feet of office space in 17 cities throughout the United States. Our principal executive offices are located at 100 Park Avenue, New York, New York, where we occupy 58,000 square feet under a lease, which expires in March 2020. We believe that our office premises are adequate for our foreseeable needs.

Item 3. LITIGATION

We are involved in judicial and administrative proceedings from time to time concerning matters arising in connection with the conduct of our business. We believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our financial condition or operations.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We held our annual meeting of shareholders on November 7, 2006, for the purpose of electing two directors to our Board of Directors for a term of three years and ratifying the appointment of BDO Seidman LLP as our independent auditors for the 2006 fiscal year. Ralph C. Guild and Arnie Semsky were elected to serve on the Board of Directors until our annual meeting of shareholders in 2009. The terms of the other directors then in office, Marc G. Guild, Howard M. Brenner and John Palmer, will expire at future annual meetings.

Messrs. Guild and Semsky were elected as directors by a vote of 33,535,172 votes and 33,508,172 votes in favor of their election, respectively, and no votes and 27,000 votes against, respectively. The votes cast in favor of Messrs. Guild and Semsky represented 100.0% and 99.9% of the total number of votes cast, respectively. The proposal to ratify the appointment of BDO Seidman LLP as our independent auditors for the 2006 fiscal year was approved by a vote of 33,508,172 votes in favor of the proposal and no votes against and 27,000 abstentions. The votes cast in favor of the proposal represented 99.9% of the total number of votes cast.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Prior to February 9, 2005, our Class A Common Stock had been listed on the Nasdaq OTC Bulletin Board. On February 8, 2006, we filed with the U.S. Securities and Exchange Commission (“SEC”) a Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act of 1934 on Form 15. Our Class A Common Stock has been listed on Pink Sheets since February 9, 2006. The Class A Common Stock now trades under the symbol “IREP.PK.” The Class A Common Stock had traded under the symbol “IREP.OB.” On March 16, 2007, the last sale price of the Class A Common Stock was $0.40 per share. The following table sets forth the range of high and low closing prices for our Class A Common Stock through for the periods indicated. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Quarter	High		Low
First Quarter 2005	$	0.80	$	0.46
Second Quarter 2005	$	0.65	$	0.42
Third Quarter 2005	$	0.79	$	0.43
Fourth Quarter 2005	$	0.55	$	0.36
First Quarter 2006	$	0.60	$	0.15
Second Quarter 2006	$	0.85	$	0.18
Third Quarter 2006	$	0.63	$	0.41
Fourth Quarter 2006	$	0.50	$	0.28

As of March 16, 2007, there were approximately 220 holders of record of our Class A Common Stock.

Dividend Policy

We have not paid any dividends on our common stock in the past two years, and we do not intend to pay any cash dividends on our common stock in the foreseeable future. Moreover, the terms of the documents governing our indebtedness prohibit the payment of cash dividends on our common stock. See “Recent Sales of Unregistered Securities” below for a description of the dividend terms applicable to our Series A preferred stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” for additional information relating to our ability to declare dividends.

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Equity Compensation Plan Information

The following table sets forth the securities of Interep authorized for issuance under equity compensation plans and arrangements as of December 31, 2006.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders:
1999 Stock Incentive Plan	882,267	$	1.74	1,087,401
Equity compensation plans not approved by security holders:
Options granted pursuant to individual compensation arrangements (1)	3,291,118	$	2.07	0

(1) These shares are issuable pursuant to stock options that were awarded to employees of Interep at various times from 1988 through 1998 prior to the adoption of our 1999 Stock Incentive Plan. The terms of the awards are substantially similar to the awards granted under our 1999 Stock Incentive Plan. All of the stock options granted prior to the adoption of our 1999 Stock Incentive Plan are currently vested and will expire between the years 2007 and 2015.

Recent Sales of Unregistered Securities

We sold the following amounts of Class B Common Stock to our Stock Growth Plan on the following dates and at the following purchase prices per share and aggregate purchase prices. Each purchase price per share was determined based on the trailing 15 trading-day average of our Class A Common Stock. One share of Class B Common Stock is convertible into one share of Class A Common Stock:

Date	Shares of Class B Common Stock Sold	Price Per Share		Aggregate Purchase Price
March 31, 2004	238,759	$	2.28	$	544,000
June 30, 2004	365,223	$	1.47	$	537,000
September 30, 2004	410,402	$	0.71	$	290,000

There were no sales of unregistered Class B Common Stock in 2006 and 2005.

In connection with a consulting agreement, 33,333 shares of our Class A stock were issued to a consultant in the fourth quarter of 2004. The price per share was determined based upon the closing price of our Class A Common Stock on the date that the shares were to be paid as per the consulting agreement.

The issuances of these securities were intended to be exempt from registration under the Securities Act in reliance on Section 4(2) thereof or Regulation D thereunder, as transactions by an issuer not involving any public offering. The recipients of securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof and appropriate legends were affixed to the share certificates, warrants and options issued in such transactions. We believe that all recipients had adequate access, through their relationships with the registrant, to information about the registrant.

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Item 6. SELECTED FINANCIAL DATA

The following table contains selected consolidated financial information derived from our audited consolidated financial statements set forth elsewhere in this Form 10-K or in Forms 10-K previously filed with the SEC, and you should review the data in the table below in conjunction with those audited consolidated financial statements and the notes thereto. The following table summarizes certain consolidated financial data derived from our audited consolidated financial statements for the fiscal years ended December 31, 2006, 2005, 2004, 2003 and 2002.

	Amounts in thousands, except share data
	Year Ended December 31,
	2006			2005			2004			2003			2002
Statement of Operations Data:
Revenues
Commission	$	73,891		$	80,068		$	78,455		$	87,755		$	87,372
Contract termination		7,326			20,001			24,462			666			7,220
Total revenues		81,217			100,069			102,917			88,421			94,592
Operating expenses:
Selling, general and administrative expenses		80,683			73,003			78,828			79,148			70,163
Depreciation and amortization expense		11,667			20,050			19,783			33,989			23,651
Total operating expenses		92,350			93,053			98,611			113,137			93,814
Operating (loss) income		(11,133	)		7,016			4,306			(24,716	)		778
Interest expense, net		(10,515	)		(10,297	)		(10,563	)		(12,613	)		(10,469	)
Gain on sale of investment		7,965			—			—			—			—
Income (loss) on investments		93			377			84			—			(525	)
Other loss income		—			—			—			(528	)		—
Loss before income taxes and loss from cumulative change in accounting principle		(13,590	)		(2,904	)		(6,173	)		(37,857	)		(10,216	)
Income taxes		657			134			261			343			7,360
Loss before cumulative change in accounting principle		(14,247	)		(3,038	)		(6,434	)		(38,200	)		(17,576	)
Cumulative change in accounting principle (A)		—			—			(598	)		—			—
Net loss		(14,247	)		(3,038	)		(7,032	)		(38,200	)		(17,576	)
Preferred stock dividend		506			486			468			468			2,381
Net loss applicable to common shareholders	$	(14,753	)	$	(3,524	)	$	(7,500	)	$	(38,668	)	$	(19,957	)
Basic and diluted loss per common share:
Before cumulative change in accounting principle	$	(1.26	)	$	(0.27	)	$	(0.60	)	$	(3.73	)	$	(1.85	)
Cumulative change in accounting principle		—			—			(0.06	)		—			—
Preferred stock dividend		(0.05	)		(0.04	)		(0.04	)		(0.04	)		(0.25	)
Total	$	(1.31	)	$	(0.31	)	$	(0.70	)	$	(3.77	)	$	(2.10	)
Basic and diluted weighted average common shares outstanding		11,295,876			11,295,876			10,695,410			10,248,159			9,490,519

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	December 31,
	2006			2005			2004			2003			2002
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	10,426		$	6,928		$	4,937		$	7,661		$	18,114
Working capital		20,348			18,855			13,006			15,651			38,883
Total assets		73,456			88,959			91,010			108,241			149,966
Long-term debt (including current portion) (net of unamortized discount of $523 in 2002)		99,000			99,000			99,000			103,000			108,477
Capital deficit		(62,692	)		(48,478	)		(45,427	)		(39,782	)		(1,555	)

(A) Effective July 2004, we applied the principles of Emerging Issues Task Force No. 03-16Accounting for Investments in Limited Liability Companies. The effect of this change in accounting principle was a $0.6 million reduction in the carrying amount of our investment in a limited liability company. We are now required to account for this investment on the equity method of accounting.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is based upon and should be read in conjunction with the previous section, Selected Financial Data, and our Consolidated Financial Statements, including the notes thereto, which begin on page F-1.

Overview

We derive a substantial majority of our revenues from commissions on sales of national spot radio advertising airtime for the radio stations we represent. Generally, advertising agencies or media buying services retained by advertisers purchase national spot advertising time. We receive commissions from our client radio stations based on the national spot radio advertising billings of the station, net of agency commissions, generally 15%. We enter into written representation contracts with our clients, which include negotiated commission rates. Because commissions are based on the prices paid to radio stations for spots, our revenue base is essentially adjusted for inflation.

Our operating results generally depend on:

• changes in advertising expenditures;

• increases and decreases in the size of the total national spot radio advertising market;

• changes in our share of this market;

• acquisitions and terminations of representation contracts; and

• operating expense levels.

The effect of these factors on our financial condition and results of operations varies from period to period.

A number of factors influence the performance of the national spot radio advertising market, including, but not limited to, general economic conditions, consumer attitudes and spending patterns, the amount spent on advertising generally, the share of total advertising spent on radio and the share of total radio advertising represented by national spot radio.

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Our share of the national spot advertising market changes as a result of increases and decreases in the amount of national spot advertising broadcast by our clients. Moreover, our market share increases as we acquire representation contracts with new client stations and decreases if current client representation contracts are terminated. Thus, our ability to attract new clients and to retain existing clients affects our market share.

The value of representation contracts that have been acquired or terminated during the last few years has tended to increase due to a number of factors, including the consolidation of ownership in the radio broadcast industry following the passage of the Telecommunications Act of 1996. In the period following that legislation, we increased our representation contract acquisition activity and devoted a significant amount of our resources to these acquisitions. We base our decisions to acquire a representation contract on the market share opportunity presented and an analysis of the costs and net benefits to be derived. We continuously seek opportunities to acquire additional representation contracts on attractive terms, while maintaining our current clients. Our ability to acquire and maintain representation contracts has had, and will continue to have, a significant impact on our revenues and cash flows.

We recognize revenues on a contract termination as of the effective date of the termination, except in the case of a material dispute. In that event, revenue is recognized when the dispute is resolved. When a contract is terminated, we write off in full the unamortized portion, if any, of the cost we originally incurred on our acquisition of the contract. When we enter into a representation contract with a new client, we amortize the contract acquisition cost in equal monthly installments over the life of the new contract. As a result, our operating income is affected, negatively or positively, by the acquisition or loss of client stations. We are unable to forecast any trends in contract buyout activity, or in the amount of revenues or expenses that will likely be associated with buyouts during a particular period. Generally, the amount of revenue resulting from the buyout of a representation contract depends on the length of the remaining term of the contract and the revenue generated under the contract during the 12-month “trailing period” preceding the date of termination. The amount recognized by us as contract termination revenue in any period is not, however, indicative of contract termination revenue that may be realized in any future period. Historically, the level of buyout activity has varied from period to period. Additionally, the length of the remaining terms, and the commission revenue generation, of the contracts which are terminated in any period vary to a considerable extent. Accordingly, while buyout activity and the size of buyout payments generally increased after 1996, their impact on our revenues and income is expected to be uncertain, due to the variables of contract length and commission generation.

Similar to radio representation, we sell advertising on behalf of Internet website clients. Revenues and expenses from this portion of our business are affected generally by the level of advertising on the Internet, and the portion of that advertising that we can direct to our clients’ websites, the prices obtained for advertising on the Internet and our ability to obtain contracts from high-traffic Internet websites and from Internet advertisers. See a further discussion of our Internet investments in “Liquidity and Capital Resources,” below.

In November 2005, we entered into the television representation business by organizing Azteca America Spot Television Sales, Inc. (“Azteca Television Sales”), a dedicated television representation company for the Azteca America network. As with radio representation, we sell advertising on behalf of our television clients.

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Our selling and corporate expense levels are dependent on management decisions regarding operating and staffing levels and inflation. Selling expenses represent all costs associated with our marketing, sales and sales support functions. Corporate expenses include items such as corporate management, corporate communications, financial services, advertising and promotion expenses and employee benefit plan contributions.

Our business generally follows the pattern of advertising expenditures. It is seasonal to the extent that radio advertising spending increases during the fourth calendar quarter in connection with the Christmas season and tends to be weaker during the first calendar quarter. Radio advertising also generally increases during the second and third quarters due to holiday-related advertising, school vacations and back-to-school sales. Additionally, radio tends to experience increases in the amount of advertising revenues as a result of special events such as political election campaigns. Furthermore, the level of advertising revenues of radio stations, and therefore our level of revenues, is susceptible to prevailing general and local economic conditions and the corresponding increases or decreases in the budgets of advertisers, as well as market conditions and trends affecting advertising expenditures in specific industries.

Results of Operations

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

Commission revenues.    Commission revenue for 2006 decreased $6.2 million, or 7.7%, to $73.9 million from $80.1 million in 2005. This decrease reflected the loss of revenues due to the termination of our Cumulus Broadcasting, Inc. and Radio One, Inc. representation contracts during 2005.

Contract termination revenue.    Contract termination revenue in 2006 decreased $12.7 million to $7.3 million from $20.0 million in 2005. This decrease was primarily attributable to the fact that the contract termination revenue recorded on termination of our Cumulus Broadcasting, Inc. and Radio One, Inc. representation contracts in 2005 was greater than the termination revenue recorded on the termination of our rep contract with the former Susquehanna stations after their acquisition by Cumulus Broadcasting in 2006. During 2006, approximately 56 stations terminated representation contracts with us, which had generated an aggregate of approximately $4.6 million of commission revenue during their 12-month trailing periods.

Selling expenses.    Selling expenses for 2006 increased to $70.1 million from $61.5 million during 2005. This increase of $8.6 million, or approximately 14.0%, was, in large part, due to severance costs associated with our voluntary early separation program, a one-time bonus paid to an executive of the Company’s interactive subsidiary, as required by the bonus provisions of his employment agreement relating to the sale of the Burst Media investment and the Azteca Television organizational costs offset in part by lower compensation costs in 2006 as compared to 2005. These severance costs will lower our compensation expense in the future.

General and administrative expenses.    General and administrative expenses of $10.6 million for 2006 decreased $1.0 million, or 8.2%, from $11.6 million for 2005, primarily due to lower compensation costs and other cost efficiency measures implemented in 2006 offset by the expenses previously capitalized in connection with a proposed, but unconsummated transaction with Oaktree Capital Management in 2006.

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Operating income before depreciation and amortization.    Operating income before depreciation and amortization decreased by $26.5 million, or 98.0%, in 2006 to $0.6 million from $27.1 million in 2005, for the reasons discussed above. Included in operating income before depreciation and amortization in 2006 was $7.3 million of non-recurring contract termination revenue as compared to contract termination revenue of $20.0 million in 2005. Operating (loss) income before depreciation and amortization is not a measure of performance calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) and should not be considered in isolation from or as a substitute for operating income (loss), net income (loss), cash flow or other GAAP measurements. We believe it is useful in evaluating our performance, in addition to the GAAP data presented, as it is commonly used by lenders and the investment community to evaluate the performance of companies in our industry.

Reconciliation of net loss to operating income before depreciation and amortization

	2006			2005
	(dollars in thousands)
Net loss	$	(14,247	)	$	(3,038	)
Add back:
Depreciation and amortization		11,667			20,050
Tax provision		657			134
Gain on sale of investment		(7,965	)		—
Net undistributed income of equity investee		(93	)		(377	)
Interest expense, net		10,515			10,297
Operating income before depreciation and amortization	$	534		$	27,066

Depreciation and amortization expense.    Depreciation and amortization expense decreased $8.4 million, or 41.8%, to $11.7 million in 2006, from $20.1 million in 2005. The amortization of costs associated with acquiring representation contracts is included in depreciation and amortization. This decrease was the result of the $3.3 million write-off of deferred representation contract costs related to the termination of the Cumulus representation contract, the $0.3 million write-off of deferred representation contract costs related to the termination of the Radio One representation contract, and the write-off of $0.9 million of deferred representation contract costs related to the sale of a station by CBS and lower contract acquisition cost amortization, which occurred in 2005, and lower contract acquisition cost amortization depreciation of fixed assets and other amortization in 2006. We acquired representation contracts with approximately 63 new radio stations in 2006. We estimate these contracts generated an aggregate of $1.1 million of commission revenues during their 12-month trailing periods prior to their acquisition.

Operating (loss) income.    In 2006, we had an operating loss of $11.1 million as compared to operating income of $7.0 million in 2005, for the reasons discussed above.

Gain on sale of investment.    On April 21, 2006, we sold our investment in Burst Media in conjunction with its initial public offering. We realized net proceeds of approximately $9.9 million on the sale. The carrying value of the investment at the time of sale was approximately $2.0 million.

Interest expense, net.    Interest expense, net, increased $0.2 million, or 2.1%, to $10.5 million for 2006 from $10.3 million for 2005. This increase primarily resulted from the discount taken in connection with the settlement with Katz Communications, Inc. of certain representation contract buyout receivables and payables described below.

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Income taxes.    Our current and deferred income taxes, and associated valuation allowances, are affected by events and transactions arising in the normal course of business as well as in connection with special and non-recurring items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual collections and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions affecting related income tax balances. The provision for income taxes in 2006 and 2005 was $0.7 million and $0.1 million and related principally to state income taxes. A valuation allowance of $5.7 million and $0.7 million was recorded in 2006 and 2005, respectively, to reflect uncertainties with regard to when we will realize our net deferred tax assets.

Preferred stock dividend.    We accrued $0.5 million for preferred stock dividends in 2006 and 2005. All dividends were paid in additional shares of preferred stock and not in cash.

Net loss applicable to common shareholders.    Our net loss applicable to common shareholders of approximately $14.8 million for 2006, a $11.3 million increase over the $3.5 million net loss applicable to common shareholders for 2005, was attributable to the reasons discussed above.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Commission revenues.    Commission revenue for 2005 increased $1.6 million, or 2.1%, to $80.1 million from $78.5 million in 2004. This increase reflected higher national spending for advertising at our client stations during the year offset by the loss of revenues due to the termination of our Cumulus Broadcasting, Inc. and Radio One, Inc. representation contracts.

Contract termination revenue.    Contract termination revenue in 2005 decreased $4.5 million to $20.0 million from $24.5 million in 2004. This decrease was primarily attributable to the fact that the contract termination revenue we recorded in August 2004 on the termination of our representation contract with Citadel Broadcasting was greater than that recorded on termination of our Cumulus Broadcasting, Inc. and Radio One, Inc. representation contracts in 2005. During 2005, approximately 408 stations terminated representation contracts with us, which had generated an aggregate of approximately $7.0 million of commission revenue during their 12-month trailing periods.

Selling expenses.    Selling expenses for 2005 decreased to $61.5 million from $63.7 million during 2004. This decrease of $2.2 million, or approximately 3.5%, was, in large part, due to the termination of certain special promotion programs that affected 2004, lower compensations costs in 2005 as compared to 2004 and general cost efficiency measures implemented in 2005, offset in part by the costs associated with additional severance programs implemented in 2005.

General and administrative expenses.    General and administrative expenses of $11.5 million for 2005 decreased $3.6 million, or 23.8%, from $15.1 million for 2004, primarily due to the non-recurrence of legal expenses relating to the Citadel litigation incurred in 2004 and lower compensation costs.

Operating income before depreciation and amortization.    Operating income before depreciation and amortization increased by $3.0 million, or 12.4%, in 2005 to $27.1 million from $24.1 million in 2004, for the reasons discussed above. Included in operating income before depreciation and amortization in 2005 was $20.0 million of non-recurring contract termination revenue as compared to contract termination revenue of $24.5 million in 2004.

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Reconciliation of net loss to operating income before depreciation and amortization

	2005			2004
	(dollars in thousands)
Net loss	$	(3,038	)	$	(7,032	)
Add back:
Depreciation and amortization		20,050			19,783
Cumulative change in accounting principle		—			598
Tax provision		134			261
Net undistributed income of equity investee		(377	)		(84	)
Interest expense, net		10,297			10,563
Operating income before depreciation and amortization	$	27,066		$	24,089

Depreciation and amortization expense.    Depreciation and amortization expense increased $0.3 million, or 1.3%, to $20.1 million in 2005, from $19.8 million in 2004. The amortization of costs associated with acquiring representation contracts is included in depreciation and amortization. This increase was substantially the result of the $3.3 million write-off of deferred representation contract costs related to the termination of the Cumulus representation contract, the $0.3 million write-off of deferred representation contract costs related to the termination of the Radio One representation contract, and the write-off of $0.9 million of deferred representation contract costs related to the sale of a station by CBS, which was offset by lower contract acquisition cost amortization, depreciation of fixed assets and other amortization. We acquired representation contracts with approximately 66 new radio stations in 2005. We estimate these contracts generated an aggregate of $0.7 million of commission revenues during their 12-month trailing periods prior to their acquisition.

Operating income.    In 2005, we had operating income of $7.0 million, as compared to $4.3 million in 2004, for the reasons discussed above.

Interest expense, net.    Interest expense, net, decreased $0.3 million, or 2.5%, to $10.3 million for 2005, from $10.6 million for 2004. This decrease primarily resulted from a lower balance on our revolving credit facility than in the prior year.

Income taxes.    Our current and deferred income taxes, and associated valuation allowances, are affected by events and transactions arising in the normal course of business as well as special and non-recurring items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual collections and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions impacting related income tax balances. The provision for income taxes in 2005 and 2004 was $0.1 million and $0.3 million and related principally to state income taxes. A valuation allowance of $0.7 million and $2.7 million was recorded in 2005 and 2004, to reflect uncertainties with regard to when we will realize our net deferred tax assets.

Preferred stock dividend.    We accrued $0.5 million for preferred stock dividends in 2005 and 2004. All dividends were paid in additional shares of preferred stock and not in cash.

Cumulative change in accounting principle.    Effective July 2004, we applied the principles of Emerging Issues Task Force (“EITF”) No. 03-16Accounting for Investments in Limited Liability

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Companies. The effect of this change in accounting principle was a $0.6 million reduction in the carrying amount of our investment in a limited liability company. We are now required to account for this investment on the equity method of accounting. Our portion of income for 2005 was $0.4 million and in 2004 was less than $0.1 million. There was no change in 2005. Prior to the change in accounting principle, we reduced the carrying value of our non-public investments primarily in the Internet advertising industry by $0.5 million. As part of the evaluation, we considered, among other factors, the business plans of these firms, the quality and effectiveness of their management teams, their liquidity and capital resource positions, and their business relationships with third parties.

Net loss applicable to common shareholders.    Our net loss applicable to common shareholders of approximately $3.5 million for 2005, a $4.0 million decrease over the $7.5 million net loss applicable to common shareholders for 2004, was attributable to the reasons discussed above.

Liquidity and Capital Resources

Cash provided from operations and financing transactions has primarily funded our cash requirements. As of December 31, 2006, we had cash and cash equivalents of $10.4 million and working capital of $20.3 million. Additionally, at December 31, 2006, we had available $10.0 million under our revolving credit facility.

Cash provided by operations during 2006 was $1.5 million, as compared to $8.7 million and $7.8 million for the years ended 2005 and 2004. These fluctuations were primarily attributable to contract terminations and changes in working capital components, including decreases in representation contract buyouts receivable of $10.1 million, primarily due to our agreement described below that accelerated and discounted certain buyout payments owed to us by Katz Communications and accounts payable and accrued expenses of $1.6 million and an increase in accounts receivable of $1.7 million.

Net cash provided by investing activities during 2006 was $9.4 million and primarily consisted of $9.9 million in proceeds from the sale of an investment, partially offset by capital expenditure of $0.5 million. Net cash used in investing activities during 2005 and 2004 was $2.4 million and $0.9 million, respectively, and was primarily the result of capital expenditures for computer equipment. The payments in 2005 include $1.8 million of leasehold improvements made to the New York Offices, which are being paid for by the landlord as part of our lease renewal. In addition, the payments made in 2005 and 2004 include $0.1 million and $0.5 million, respectively that were capitalized in 2003.

Cash used for financing activities of $7.4 million during 2006 consisted of $7.5 million of gross repayments on the credit facility offset by $7.5 million of gross borrowings and $7.4 million in payments on representation contract acquisitions. Cash used for financing activities of $4.3 million during 2005 consisted primarily of $6.1 million for the acquisition of representation contracts and, no net change in debt, resulting from the $27.3 million of gross repayments and $27.3 million of gross borrowings on our credit facility, offset by $1.8 million of reimbursement from the New York landlord for leasehold improvements. Cash used for financing activities of $9.6 million during 2004 consisted primarily of $7.0 million for the acquisition of representation contracts and a net $4 million reduction in debt, resulting from the $25.7 million of gross repayments and $21.7 million of gross borrowings on our credit facility, offset by $1.4 million received by us for Class B common stock issued to our Stock Growth Plan.

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In general, as we acquire new representation contracts, we use more cash and, as our contracts are terminated, we receive additional cash. For the reasons noted above in “Overview”, we are not able to predict the amount of cash we will require for contract acquisitions, or the cash we will receive on contract terminations, from period to period.

We do not have any written options on financial assets, nor do we have any special purpose entities. We have not guaranteed any obligations of our unconsolidated investments.

The Senior Subordinated Notes were issued under an indenture that limits our ability to engage in various activities. Among other things, we are generally not able to pay any dividends to our shareholders, other than dividends payable in shares of common stock; we can only incur additional indebtedness under limited circumstances, and certain types of mergers, asset sales and changes of control either are not permitted or permit the note holders to demand immediate redemption of their Senior Subordinated Notes. Management believes that we are in compliance with these covenants.

Our Senior Subordinated Notes are redeemable at our option. If certain events occurred which would be deemed to involve a change of control under the indenture, we would be required to offer to repurchase all of the Senior Subordinated Notes at a price equal to 101% of their aggregate principal, plus unpaid interest.

We have a $10 million senior secured revolving credit facility with Commerce Bank, N.A. that enables us to efficiently manage our cash, as we may borrow, repay and re-borrow funds as needed. The term of the credit facility expires on December 31, 2007. The credit facility is secured by a first priority lien on all of our and our subsidiaries’ property and assets, tangible and intangible. Interest is payable monthly on the borrowings at rates based on either a prime rate or LIBOR, plus a premium of 1% for prime rate borrowings, and 4% for LIBOR borrowings. In addition to covenants similar to those in the indenture governing the Notes, the credit facility requires, among other things, that we (i) maintain certain 12-month trailing Operating EBITDA levels (“Operating EBITDA”, defined in the Loan and Security Agreement for any period as: (a) Net Income (Loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by the Borrower and any of its Subsidiaries plus (c) all interest expense deducted in determining such Net Income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) Contract Termination Revenue, but plus Contract Termination Revenue received in cash and (i) less Contract Acquisition Payments, in each case for such period, in each case in connection with Borrower and its Subsidiaries, on a consolidated basis); (ii) have a certain minimum accounts receivable balance as of the end of each quarter; (iii) have not less than $200 million of representation contract value (as defined) as of the end of each quarter; and (iv) have not less than $2 million of cash and cash equivalents as of the end of each quarter. Management believes that we are in compliance with these covenants. We incurred approximately $0.5 million in legal and other costs directly related to the revolving credit facility and an additional $0.2 million of such costs related to an amendment of the revolving credit facility in July 2005, which are being amortized as interest expense over the life of the extended facility. Substantially all of our subsidiaries, jointly, severally and unconditionally guarantee the credit facility. At December 31, 2006, we had $10.0 million available under our credit facility.

The Amendment was entered into on July 21, 2005. The principal change effected by the Amendment was to extend the term of our revolving credit facility from September 25, 2006 through

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December 31, 2007. The Amendment also revised certain of the financial covenants to more appropriately reflect our current business operations. It also revised the definition of “Operating EBITDA” as for any period: (a) Net Income (Loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by the Borrower and any of its Subsidiaries plus (c) all interest expense deducted in determining such Net Income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) Contract Termination Revenue, but plus Contract Termination Revenue received in cash and (i) less Contract Acquisition Payments, in each case for such period, in each case in connection with Borrower and its Subsidiaries, on a consolidated basis.

We believe that the liquidity resulting from the transactions described above, together with anticipated cash from continuing operations, should be sufficient to fund our operations and anticipated needs for required representation contract acquisition payments, and to make the required 10% annual interest payments on the Senior Subordinated Notes, as well as the monthly interest payments under our senior secured revolving loan facility, for at least the next 12 months. We may not, however, generate sufficient cash flow for these purposes or to repay the notes at maturity.

Our ability to fund our operations and required contract acquisition payments and to make scheduled principal and interest payments will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may also need to refinance all or a portion of the Senior Subordinated Notes on or prior to maturity. There can be no assurance that we will be able to effect any such refinancing on commercially reasonable terms, if at all.

In June 2006, we agreed with Katz Communications, Inc. to accelerate the payment of certain representation contract buyout receivables, net of certain representation contract buyout payables. This lump sum payment was discounted approximately $0.4 million.

During 2006, 2005 and 2004, we implemented various cost efficiency measures, including the termination of several employees. Our liquidity and cash flows will be positively affected by these reductions. It is anticipated that our operations over the long term will further benefit from these terminations as well as the other material cost efficiency measures such as lease renegotiations and reductions in consulting, which were implemented in 2006, 2005 and 2004.

Certain Risk Factors That May Affect Our Results of Operations

The following factors are some, but not all, of the variables that may have an impact on our results of operations:

• Changes in the ownership of our radio station clients, in the demand for radio advertising, in our expenses, in the types of services offered by our competitors, and in general economic factors may adversely affect our ability to generate the same levels of revenue and operating results.

• Advertising tends to be seasonal in nature as advertisers typically spend less on radio advertising during the first calendar quarter.

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• The termination of a representation contract will increase our results of operations for the fiscal quarter in which the termination occurs due to the termination payments that are usually required to be paid, but will negatively affect our results in later quarters due to the loss of commission revenues. Hence, our results of operations on a quarterly basis are not predictable and are subject to significant fluctuations.

• We depend heavily on the services of David E. Kennedy, our new Chief Executive Officer, and Ralph C. Guild, our Chairman of the Board and former Chief Executive Officer, and our inability to retain or replace them could adversely affect our business.

• We rely on a limited number of clients for a significant portion of our revenues.

• Our significant indebtedness may burden our operations, which could make us more vulnerable to general adverse economic and industry conditions, make it more difficult to obtain additional financing when needed, reduce our cash flow from operations to make payments of principal and interest and make it more difficult to react to changes in our business and industry.

• We may need additional financing for our future capital needs, which may not be available on favorable terms, if at all.

• Competition could harm our business. Our only significant competitor is Katz Radio Group, Inc., which is a subsidiary of a major radio station group that has significantly greater financial and other resources than do we. In addition, radio must compete for a share of advertisers’ total advertising budgets with other advertising media such as television, cable, print, outdoor advertising and the Internet.

Critical Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Interep and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

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

Allowance for doubtful accounts

We provide an allowance for doubtful accounts equal to our estimated uncollectible accounts receivable. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. We write off uncollectible accounts after we have exhausted all avenues of collection.

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Revenue Recognition

We are a national representation firm serving radio broadcast clients and certain internet service providers throughout the United States. Commission revenues are derived from sales of advertising time for radio stations under representation contracts. Commissions and fees are recognized in the month the advertisement is broadcast. In connection with our unwired network business, we collect fees for unwired network radio advertising and, after deducting our commissions, remit the fees to the respective radio stations. In instances when we are not legally obligated to pay a station or service provider until the corresponding receivable is paid, fees payable to stations have been offset against the related receivable from advertising agencies in the accompanying consolidated balance sheets. We record all commission revenues on a net basis. Commissions are recognized based on the standard broadcast calendar that ends on the last Sunday in each reporting period. The broadcast calendar for the calendar year ended December 31, 2006 was 53 weeks, while the broadcast calendar for the years ended December 31, 2005, and 2004 each had 52 weeks.

Representation Contract Termination Revenue and Contract Acquisition Costs

Our station representation contracts have stated initial terms, and thereafter usually renew automatically from year to year unless either party provides written notice of termination at least twelve months prior to the next automatic renewal date. In accordance with industry practice, in lieu of termination, an arrangement is normally made for the purchase of such contracts by a successor representative firm. The purchase price paid by the successor representation firm is generally based upon historic commission income projected over the remaining contract period plus two months. Income earned from the sale of station representation contracts (contract termination revenue) is recognized on the effective date of the buyout agreement. Costs of obtaining station representation contracts are deferred and amortized over the life of the new contract. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. Amounts which are to be amortized during the next year are included as current assets in the accompanying consolidated balance sheets. We review the realizability of these deferred costs on a quarterly basis. From time to time, we have paid inducements to extend the life of contracts with our radio groups. These inducement payments are recorded as deferred costs and expensed in the period benefited.

In 2006, we recorded approximately $7.3 million of contract termination revenue primarily related to the termination of our rep contract with the former Susquehanna stations after their acquisition by Cumulus Broadcasting. In 2005, we recorded approximately $20 million of contract termination revenue primarily related to Cumulus Broadcasting and Radio One’s termination of their representation contracts with us. In 2004, we recorded approximately $24.5 million of contract termination revenue substantially all of which was attributable to the Citadel representation contract termination in 2003.

Cash and Cash Equivalents

We consider cash in banks and investments with an original maturity of three months or less to be cash equivalents.

Fixed Assets, net

Furniture, fixtures and equipment are recorded at cost and are depreciated over three to ten-year lives, and leasehold improvements are amortized over the shorter of the lives of the leases or assets, all on a straight-line basis. The costs of such computer software is amortized on a straight-line basis over three years.

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Statement of Position 98-1 “Accounting For The Costs Of Computer Software Developed Or Obtained For Internal Use” (SOP 98-1) provides guidance on accounting for the costs of computer software developed or obtained for internal use. The costs for such computer software will be amortized on a straight-line basis over three years.

Long-Lived Assets

We assess the impairment of our long-lived assets in accordance with SFAS No. 144, which requires testing when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We reevaluate intangible assets each reporting period to determine whether events and circumstances warrant a revision in their remaining life. SFAS No. 144, which also applies to other long-lived assets such as plant, property and equipment, as well as groups of assets, provides examples of indicators of potential impairment such as: a significant decrease in market price of the asset; a significant adverse change in the extent or manner in which the asset is used; a significant adverse change in legal factors or the business climate; an adverse action or assessment by a regulator; excess cost accumulation for the acquisition or construction of the asset; current period operating cash flow losses combined with a similar history or a projection of future losses; and a more likely than not expectation that the asset will be sold. If any indicators were present, we would test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed the carrying amount (i.e. the asset is not recoverable), we would perform the next step which is to determine the fair value of the asset and record an impairment, if any.

Stock Growth Plan

We maintain a Stock Growth Plan (“SGP”) for eligible employees. Cash contributions made by us to the SGP are recorded as compensation expense. Shares of our stock owned by the SGP are treated as outstanding common stock.

Stock-Based Compensation

Effective January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment (“SFAS No. 123R”), using the modified prospective application transition method. SFAS No. 123R revises SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). Under the modified prospective method, we have recorded compensation cost for the unvested portion of previously issued awards that remain outstanding at the initial date of adoption (using the amounts previously measured under SFAS No. 123 for pro forma disclosure purposes). Since we have chosen the modified prospective application transition method, the financial statements for the prior interim period have not been restated.

SFAS No. 123R requires us to estimate forfeitures in calculating the expense relating to stock-based compensation as opposed to recognizing these forfeitures and the corresponding reduction in expense as they occur. In addition, SFAS No. 123R requires the Company to reflect the tax savings resulting from tax deductions in excess of compensation expense reflected in its financial statements as a cash inflow from financing activities in its statement of cash flows rather than as an operating cash flow as in prior periods.

Prior to January 1, 2006 as permitted under generally accepted accounting principles, we accounted for our employee stock-based compensation plan using the intrinsic value method, as

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prescribed by APB No. 25 Accounting for Stock Issued to Employees and interpretations thereof (collectively “APB 25”) versus the fair value method allowed by SFAS No. 123. We implemented the disclosure provision of SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. This statement amended the disclosure provisions of SFAS No. 123, to require prominent disclosure of the effect on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation and amended APB Opinion No. 28, Interim Financial Reporting, to require disclosure of those effects in interim financial information. Accordingly, no compensation cost has been recognized in the accompanying Consolidated Statements of Operations for years ended December 31, 2005 and 2004 in respect of stock options granted during that period.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 159 to have a material impact on our financial position or results of operations.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 108, “Considering the Effects on Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB 108”). SAB 108 requires registrants to quantify errors using both the income statement method (i.e. iron curtain method) and the rollover method and requires adjustment if either method indicates a material error. If a correction in the current year relating to prior year errors is material to the current year, then the prior year financial information needs to be corrected. A correction to the prior year results that are not material to those years, would not require a “restatement process” where prior financials would be amended. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have a material effect on our financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) to clarify the definition of fair value, establish a framework for measuring fair value and expand the disclosures on fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 will be effective for fiscal years beginning after November 15, 2007. We do not expect implementation of the standard will have a material effect on our results of operations or financial position.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” (“FIN 48”), which will become effective for the company on January 1, 2007. This standard clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. A

23

company can only recognize the tax position in the financial statements if the position is more-likely-than-not to be upheld on audit based only on the technical merits of the tax position. This accounting standard also provides guidance on thresholds, measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial-statement comparability among different companies. We do not expect implementation of the standard will have a material effect on its results of operations or financial position.

Restructuring and Severance Charges

In 2006, we continued to offer an early retirement program, which was accepted by 43 people, including five executives, to reduce compensation costs on a going forward basis. We accrued $7,274 in 2006 for the 43 terminations, and $3,078 in 2005 for 18 terminations. In accordance with SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities,we recorded this liability at fair value as of the time the liability was incurred. See Note 1 to the Consolidated Financial Statements for further discussion.

Loss per Share

Basic loss per share for each of the respective years has been computed by dividing the net loss applicable to common shareholders by the weighted average number of common shares outstanding during the year which was 11,295,876, 11,295,876, and 10,695,410 for the years ended December 31, 2006, 2005, and 2004, respectively. Diluted loss per share would reflect the potential dilution that could occur if the outstanding options to purchase common stock were exercised. For the years ended December 31, 2006, 2005, and 2004, the exercise of outstanding options would have an antidilutive effect and therefore have been excluded from the calculation. Shares issuable under options that have not been included in the fully diluted loss per share calculation because of their antidilutive effect were 4,173,385, 4,508,885, and 5,166,155 at December 31, 2006, 2005 and 2004.

Income Taxes

Deferred taxes are provided for temporary differences arising from the differences between financial statement and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to amounts considered more likely than not to be realized.

Segment Reporting

Statement of Financial Accounting Standards No. 131,Disclosure about Segments of an Enterprise and Related Information requires us to report segment financial information consistent with the presentation made to the Company’s management for decision making purposes. We are managed as one segment and all revenues are derived solely from representation operations and related activities. Our management decisions are based on operating cash flow (defined as operating income before depreciation and amortization), general and administrative expenses, and adjusted EBITDA (operating income excluding contract termination revenue and depreciation and amortization expense).

Critical Accounting Estimates for Share-Based Payments

In December 2004, the FASB issued SFAS No. 123R, which revised SFAS No. 123 and supersedes APB 25. In March 2005, the Securities and Exchange Commission (“SEC”) issued SAB

24

107, which provides interpretive guidance on SFAS No. 123R. Accounting and reporting under SFAS No. 123R is generally similar to the SFAS No. 123 approach. We adopted SFAS 123R on January 1, 2006, under the modified prospective method. For additional information related to No. SFAS 123R, see the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

Contractual Obligations and Other Commercial Commitments

	Payments Due by Period
	Total		2007		2008-2009		2010-2011		2012-Thereafter
	(Dollars in Millions)
Long term debt	$	99.0	$	—	$	99.0	$	—	$	—
Operating leases		41.0		4.8		7.9		5.7		22.6
Interest expense		19.8		9.9		9.9		—		—
Annual fees for accounting services		12.7		3.5		7.5		1.7		—
Representation contract buyouts		2.5		1.8		0.5		0.2		—
Total	$	175.0	$	20.0	$	124.8	$	7.6	$	22.6

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates that may adversely affect our results of operations and financial condition. We seek to minimize the risks from these interest rate fluctuations through our regular operating and financing activities. Our policy is not to use financial instruments for trading or other speculative purposes. We are not currently a party to any financial instruments.

Because our obligation under the senior secured revolving credit facility bears interest at a variable rate, we are sensitive to changes in prevailing interest rates. A one-point fluctuation in market rates would not have had a material impact on 2007 earnings.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial information required by this item appears in the pages marked F-1 through F-25 at the end of this Report and is incorporated herein by reference as if fully set forth herein.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

(a)    Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and

25

procedures (as defined in Rules 13a-15(e) and 15d-15(c) under that Act) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2006.

(b)    Changes in Internal Controls

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth quarter of 2006 covered by Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our control over financial reporting.

Item 9B. OTHER INFORMATION

There was no information required to be disclosed in a Current Report on Form 8-K during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that was not reported.

26

PART III

Items 10 Through 14 Inclusive.

Not Applicable.

27

PART IV

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

(A) Documents Filed as Part of this Report

Financial Statements and Supplementary Data.    The following Financial Statements of the Company are filed with this Form 10-K:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Capital Deficit for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statement Schedules.    The following financial statement schedule is filed as part of this Annual Report on Form 10-K:
Schedule II—Valuation and Qualifying Accounts	F-25

Exhibits.    The following Exhibits are filed as part of this Report:

Exhibit No.	Description
3.1(5)	Restated Certificate of Incorporation of Interep
3.2(8)	Certificate of Amendment of the Restated Certificate of Incorporation
3.3(5)	By-Laws of Interep
3.4(13)	Certificate of Correction
4.1(1)	A/B Exchange Registration Rights Agreement, dated July 2, 1998, among Interep, the Guarantors, BancBoston Securities Inc., Loenbaum & Company Incorporated and SPP Hambro & Co., LLC
4.2(1)	Indenture, dated July 2, 1998, between Interep, the Guarantors and Summit Bank
4.3(1)	Form of 10% Senior Subordinated Note (Included in Exhibit 4.2)
4.4(3)	Supplemental Indenture, dated as of March 22, 1999, among American Radio Sales, Inc., Interep, the Guarantors and Summit Bank as Trustee
4.5(6)	Form of Registration Rights Agreement among the Interep Employee Stock Ownership Plan, the Interep Stock Growth Plan and Interep
4.6(8)	Form of Warrant used in connection with issuance of Series A preferred stock and warrants
4.7(10)	Warrant to purchase 225,000 shares of Class A Common Stock of Interep, dated as of November 7, 2002
10.1(1)	Agreement of Lease, dated December 31, 1992, between The Prudential Insurance Company of America and Interep
10.2(2)	Lease, dated January 1, 1990, between Ralph C. Guild, doing business as The Tuxedo Park Executive Conference Center and Interep, as amended by Amendment of Lease, dated December 3, 1998, between Ralph Guild 1990 Trust No. 1 (successor in interest to The Tuxedo Park Executive Conference Center) and Interep
10.3(1)*	Agreement, dated June 29, 1998, between Interep and Ralph C. Guild
10.4(7)*	Amended and Restated Services Agreement, dated as of January 2, 2001, between Interep and Media Financial Services, Inc.
10.5(3)*	Fifth Amended and Restated Employment Agreement, dated as of March 1, 1999, between Interep and Ralph C. Guild

28

Exhibit No.	Description
10.6(7)*	Amended and Restated Employment Agreement, dated as of April 1, 2000, between Interep and Marc G. Guild
10.7(1)*	Non-Qualified Stock Option granted to Ralph C. Guild on December 31, 1988
10.8(1)*	Amendment and Extension of Option, dated January 1, 1991, between Interep and Ralph C. Guild
10.9(1)*	Non-Qualified Stock Option granted to Ralph C. Guild on January 1, 1991
10.10(1)*	Non-Qualified Stock Option granted to Ralph C. Guild on December 31, 1995
10.11(1)*	Non-Qualified Stock Option granted to Marc G. Guild on January 1, 1991
10.12(1)*	Non-Qualified Stock Option granted to Ralph C. Guild on June 29, 1997
10.13(1)*	Non-Qualified Stock Option granted to Marc G. Guild on June 29, 1997
10.14(1)*	Non-Qualified Stock Option granted to William J. McEntee, Jr. on June 29, 1997
10.15(1)*	Supplemental Income Agreement, dated December 31, 1986, between Interep and Ralph C. Guild
10.16(1)*	Agreement, dated June 18, 1993, between Interep and Ralph C. Guild
10.17(2)*	Non-Qualified Stock Option Granted to Ralph C. Guild on July 10, 1998
10.18(2)*	Non-Qualified Stock Option Granted to Marc G. Guild July 10, 1998
10.19(2)*	Non-Qualified Stock Option Granted to William J. McEntee, Jr. July 10, 1998
10.20(3)*	Non-Qualified Stock Option Granted to Ralph C. Guild, December 16, 1998.
10.21(3)*	Non-Qualified Stock Option Granted to Leslie D. Goldberg, December 16, 1998
10.22(7)*	Non-Qualified Stock Option Granted to Ralph C. Guild on April 25, 2000
10.23(7)*	Non-Qualified Stock Option Granted to Marc G. Guild on April 25, 2000
10.24(7)*	Non-Qualified Stock Option Granted to William J. McEntee on April 25, 2000
10.25(4)*	Form of Indemnification Agreement for directors and officers
10.26(5)*	1999 Stock Incentive Plan
10.27(6)*	Form of Stock Option Agreement
10.28(5)	Lease Agreement, dated as of June 30, 1999 between Bronxville Family Partnership, L.P. and Interep
10.29(6)*	Agreement, dated as of November 30, 1999 between Interep and Ralph C. Guild
10.30(6)*	Agreement, dated as of November 30, 1999 between Interep and Ralph C. Guild
10.31(5)*	Agreement, dated as of November 30, 1999 between Interep and Marc G. Guild
10.32(10)	Credit Agreement, dated as of November 7, 2002, among Interep, certain of its subsidiaries, Upper Columbia Capital Company, L.L.C. and Guggenheim Investment Management, LLC
10.33(8)	Form of Stock Purchase Agreement used in connection with issuance of Series A preferred stock and warrants
10.34(8)	Form of Registration Rights Agreement used in connection with issuance of Series A preferred stock and warrants
10.35(10)	Security Agreement, dated as of November 7, 2002, among Interep, certain of its subsidiaries and Guggenheim Investment Management, LLC
10.36(10)	Guarantee of certain subsidiaries of Interep in favor of Upper Columbia Capital Company, L.L.C. and Guggenheim Investment Management, LLC
10.37(10)	Senior Secured Note of Interep payable to Upper Columbia Capital Company, L.L.C., dated as of November 7, 2002
10.38(10)	Trademark Security Agreement, dated as of November 7, 2002, among Interep, certain of its subsidiaries and Guggenheim Investment Management, LLC
10.39(10)	Pledge Agreement, dated as of November 7, 2002, among Interep, certain of its subsidiaries and Guggenheim Investment Management, LLC
10.40(11)	Agreement, dated as of March 19, 2003, between Interep and George E. Pine
10.41(12)	Loan and Security Agreement, dated as of September 25, 2003, among Interep, each of the entities listed as a guarantor on the signature pages thereto and Commerce Bank, N.A.
10.42(12)	Revolving Note, dated September 25, 2003, payable to the order of Commerce Bank, N.A.

29

Exhibit No.	Description
10.43(12)	Guaranty, dated September 25, 2003, granted by the entities listed therein as guarantors in favor of Commerce Bank, N.A.
10.44(12)	Pledge Agreement, dated September 25, 2003, among Interep, the other entities listed therein as pledgors and Commerce Bank, N.A.
10.45(13)	Trademark Security Agreement, dated September 25, 2003, between Interep and Commerce Bank, N.A.
10.46(15)	Amendment, dated as of June 20, 2005, to the Fifth Amended and Restated Employment Agreement, between Interep and Ralph C. Guild
10.47(16)	First Amendment, dated as of July 21, 2005 to the Loan and Security Agreement, dated as of September 25, 2003, among Commerce Bank, N.A., Interep National Radio Sales, Inc. and its subsidiaries named therein.
10.48(18)	Termination Agreement, dated September 28, 2006, between Interep National Radio Sales, Inc., and Marc G. Guild
10.49(18)	Termination Agreement, dated October 19, 2006, between Interep National Radio Sales, Inc., and George E. Pine
21.1(17)	Subsidiaries of Interep
23.1	Consent of BDO Seidman, LLP (filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Rule 15d-14(a) (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rule 15d-14(a) (filed herewith)
32.1	Certification of Chief Executive Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished herewith)**
32.2	Certification of Chief Financial Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished herewith)**

* Management or compensatory contract required to be filed pursuant to Item 14(c) of the requirements for Form 10-K reports.

** The information furnished in Exhibit 32.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

(1) Incorporated by reference to Interep’s registration statement on Form S-4 (Registration No. 333-60575), filed with the Commission on August 4, 1998.

(2) Incorporated by reference to Interep’s registration statement on Form S-4/A-2 (Registration No. 333-60575), filed with the Commission on January 26, 1999.

(3) Incorporated by reference to Interep’s Annual Report on Form 10-K for its fiscal year ended December 31, 1998, filed with the Commission on March 31, 1999 (File No. 000-28395).

(4) Incorporated by reference to Interep’s registration statement on Form S-1 (Registration No. 333-88265), filed with the Commission on October 10, 1999.

(5) Incorporated by reference to Interep’s registration statement on Form S-1/A-1 (Registration No. 333-88265), filed with the Commission on November 8, 1999.

30

(6) Incorporated by reference to Interep’s registration statement on Form S-1/A-4 (Registration No. 333-88265), filed with the Commission on December 8, 1999.

(7) Incorporated by reference to Interep’s Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Commission on April 2, 2001 (File No. 000-28395).

(8) Incorporated by reference to Interep’s Quarterly Report on Form 10-Q for its quarter ended March 31, 2002, filed with the Commission on May 15, 2002 (File No. 000-28395).

(9) Incorporated by reference to Interep’s Current Report on Form 8-K date June 20, 2002, filed with the Commission on June 26, 2002 (File No. 000-28395).

(10) Incorporated by reference to Interep’s Quarterly Report on Form 10-Q for its quarter ended September 30, 2002, filed with the Commission on November 13, 2002 (File No. 000-28395).

(11) Incorporated by reference to Interep’s Annual Report on Form 10-K for its fiscal year ended December 31, 2002, filed with the Commission on April 1, 2003 (File No. 000-28395).

(12) Incorporated by reference to Interep’s Current Report on Form 8-K dated September 25, 2003, filed with the Commission on September 30, 2003 (File No. 000-28395).

(13) Incorporated by reference to Interep’s Quarterly Report on Form 10-Q for its quarter ended June 30, 2004, filed with the Commission on August 13, 2004 (File No. 000-28395).

(14) Incorporated by reference to Interep’s Annual Report on Form 10-K for its fiscal year ended December 31, 2003, filed with the Commission on March 29, 2004 (File No. 000-28395).

(15) Incorporated by reference to Interep’s Current Report on Form 8-K dated June 20, 2005, filed with the Commission on June 22, 2005 (File No. 000-28395).

(16) Incorporated by reference to Interep’s Current Report on Form 8-K dated July 21, 2005, filed with the Commission on July 27, 2005 (File No. 000-28395).

(17) Incorporated by reference to Interep’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005, filed with the Commission on March 31, 2006 (File No. 000-28395).

(18) Incorporated by reference to Quarterly Report on Form 10-Q for its quarter ended September 30, 2006, filed with the Commission on November 14, 2006 (File No. 000-28395).

(B) Reports on Form 8-K

We filed the following current reports on Form 8-K during our fourth fiscal quarter:

Date of Report	Items Reported	Financial Statements Filed
September 28, 2006	Items 1.01 and 5.02	No
October 10, 2006	Item 5.02	No

31

INTEREP NATIONAL RADIO SALES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Capital Deficit for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statement Schedule for the Years Ended December 31, 2006, 2005 and 2004:
Schedule II—Valuation and Qualifying Accounts	F-25

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors

Interep National Radio Sales, Inc.

New York, New York

We have audited the accompanying consolidated balance sheets of Interep National Radio Sales, Inc. (a New York corporation) and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, capital deficit, and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Interep National Radio Sales, Inc. and subsidiaries at December 31, 2006 and 2005 and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note 1 to the Consolidated Financial Statements, effective January 1, 2006 the Company adopted Statements of Financial Accounting Standards No. 123(R),Share-Based Payment.

West Palm Beach, Florida March 29, 2007 /s/ BDO Seidman, LLP

F-2

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share information)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	10,426		$	6,928
Receivables, less allowance for doubtful accounts of $580 and $623		22,631			20,905
Representation contract buyouts receivable		7,054			12,054
Current portion of deferred representation contract costs		8,654			11,082
Prepaid expenses and other currents assets		1,257			1,616
Total current assets		50,022			52,585
Fixed assets, net		3,170			3,594
Deferred representation contract costs		16,649			21,799
Representation contract buyouts receivable		47			5,123
Investments and other assets		3,568			5,858
	$	73,456		$	88,959
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	17,669		$	19,287
Accrued interest		4,950			4,950
Representation contract buyouts payable		1,758			5,135
Accrued employee related liabilities		5,297			4,358
Total current liabilities		29,674			33,730
Long-term debt		99,000			99,000
Representation contract buyouts payable		697			1,063
Other noncurrent liabilities		6,777			3,644
Total liabilities		136,148			137,437
Commitments and Contingencies
Capital deficit:
4% Series A cumulative convertible preferred stock, $0.01 par value—400,000 shares authorized, 128,276 and 123,342 shares issued and outstanding (aggregate liquidation preference—$12,828)		1			1
Class A common stock, $.01 par value—20,000,000 shares authorized, 7,347,262 and 7,022,446 shares issued and outstanding		74			70
Class B common stock, $.01 par value—10,000,000 shares authorized, 3,948,614 and 4,273,430 shares issued and outstanding, convertible into Class A common stock		39			43
Additional paid-in-capital		52,545			52,512
Accumulated deficit		(115,351	)		(101,104	)
Total capital deficit		(62,692	)		(48,478	)
	$	73,456		$	88,959

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

F-3

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

	For the Year Ended December 31,
	2006			2005			2004
Revenues:
Commission	$	73,891		$	80,068		$	78,455
Contract termination		7,326			20,001			24,462
Total revenues		81,217			100,069			102,917
Operating expenses:
Selling		70,092			61,462			63,690
General and administrative		10,591			11,541			15,138
Depreciation and amortization		11,667			20,050			19,783
Total operating expenses		92,350			93,053			98,611
Operating (loss) income		(11,133	)		7,016			4,306
Interest expense, net		(10,515	)		(10,297	)		(10,563	)
Gain on sale of investment		7,965			—			—
Net undistributed income of equity investee		93			377			84
Loss before income taxes and loss from cumulative change in accounting principle		(13,590	)		(2,904	)		(6,173	)
Income taxes		657			134			261
Loss before cumulative change in accounting principle		(14,247	)		(3,038	)		(6,434	)
Cumulative change in accounting principle		—			—			(598	)
Net loss		(14,247	)		(3,038	)		(7,032	)
Preferred stock dividend		506			486			468
Net loss applicable to common shareholders	$	(14,753	)	$	(3,524	)	$	(7,500	)
Basic and diluted loss per common share:
Before cumulative effect of change in accounting principle	$	(1.26	)	$	(0.27	)	$	(0.60	)
Cumulative effect of change in accounting principle		—			—			(0.06	)
Preferred stock dividend		(0.05	)		(0.04	)		(0.04	)
Total	$	(1.31	)	$	(0.31	)	$	(0.70	)

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

F-4

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED STATEMENTS OF CAPITAL DEFICIT

(in thousands except share information)

	Series A Cumulative Convertible Preferred Stock			Class A Common Stock			Class B Common Stock					Additional Paid-in Capital			Accumulated Deficit			Total
	Shares	Amount		Shares	Amount		Shares		Amount
Balance, January 1, 2004	114,037	$	1	6,189,460	$	62	4,058,699		$	40		$	51,149		$	(91,034	)	$	(39,782	)
Net loss	—		—	—		—	—			—			—			(7,032	)		(7,032	)
Conversion of common stock	—		—	446,428		4	(446,428	)		(4	)		—			—			—
Issuance to Stock Growth Plan	—		—	—		—	1,014,384			10			1,362			—			1,372
Issuance of 33,333 shares	—		—	33,333		1	—			—			26			—			27
Preferred dividend	—		—	—		—	—			—			(468	)		—			(468	)
Issuance of preferred stock dividend	4,561		—	—		—	—			—			456			—			456
Balance, December 31, 2004	118,598	$	1	6,669,221	$	67	4,626,655		$	46		$	52,525		$	(98,066	)	$	(45,427	)
Net loss	—		—	—		—	—			—			—			(3,038	)		(3,038	)
Conversion of common stock	—		—	353,225		3	(353,225	)		(3	)		—			—			—
Preferred dividend	—		—	—		—	—			—			(486	)		—			(486	)
Issuance of preferred stock dividend	4,744		—	—		—	—			—			473			—			473
Balance, December 31, 2005	123,342	$	1	7,022,446	$	70	4,273,430		$	43		$	52,512		$	(101,104	)	$	(48,478	)
Net loss	—		—	—		—	—			—			—			(14,247	)		(14,247	)
Conversion of common stock	—		—	324,816		4	(324,816	)		(4	)		—			—			—
Non-cash stock based compensation	—		—	—		—	—			—			46			—			46
Preferred dividend	—		—	—		—	—			—			(506	)		—			(506	)
Issuance of preferred stock dividend	4,934		—	—		—	—			—			493			—			493
Balance, December 31, 2006	128,276	$	1	7,347,262	$	74	3,948,614		$	39		$	52,545		$	(115,351	)	$	(62,692	)

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

F-5

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Year Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net loss	$	(14,247	)	$	(3,038	)	$	(7,032	)
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization		11,667			20,050			19,783
Amortization of renewal payments		1,182			241			207
Gain on sale of investment		(7,965	)		—			—
Net undistributed income of equity investee		(93	)		(377	)		(84	)
Cumulative change in accounting principle		—			—			598
Non-cash compensation expense		46			—			—
Non-cash consulting expense		—			—			27
Changes in assets and liabilities:
Receivables		(1,726	)		3,136			3,544
Representation contract buyouts receivable		10,076			(11,854	)		(4,855	)
Prepaid expenses and other current assets		359			(332	)		(177	)
Other noncurrent assets		(246	)		(380	)		(1,191	)
Accounts payable and accrued expenses		(1,631	)		1,062			(1,795	)
Accrued employee related liabilities		939			678			367
Other noncurrent liabilities		3,133			(454	)		(1,587	)
Net cash provided by operating activities		1,494			8,732			7,805
Cash flows from investing activities:
Additions to fixed assets		(547	)		(2,442	)		(918	)
Proceeds from sale of investment		9,947			—			—
Increase in other investments		—			—			(5	)
Net cash provided by (used in) investing activities		9,400			(2,442	)		(923	)
Cash flows from financing activities:
Representation contract payments		(7,396	)		(6,104	)		(6,978	)
Gross borrowings on credit facility		7,549			27,330			21,650
Gross repayments on credit facility		(7,549	)		(27,330	)		(25,650	)
Reimbursement by landlord for leasehold improvements		—			1,805			—
Issuance of common stock		—			—			1,372
Net cash used in financing activities		(7,396	)		(4,299	)		(9,606	)
Net increase (decrease) in cash and cash equivalents		3,498			1,991			(2,724	)
Cash and cash equivalents, beginning of year		6,928			4,937			7,661
Cash and cash equivalents, end of year	$	10,426		$	6,928		$	4,937
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	9,961		$	9,991		$	10,206
Income taxes, net		348			134			261
Non-cash investing and financing activities:
Station representation contracts acquired	$	3,654		$	4,135		$	2,935
Preferred stock dividend		506			486			468
Issuance of warrants and common stock		—			—			27

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

F-6

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands except share information)

1. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Interep National Radio Sales, Inc. (“Interep”), together with its subsidiaries (collectively, the “Company” or “we”). All significant intercompany transactions and balances have been eliminated.

Use of Estimates

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

Allowance for doubtful accounts

We provide an allowance for doubtful accounts equal to our estimated uncollectible accounts receivable. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. We write off uncollectible accounts after we have exhausted all avenues of collection.

Revenue Recognition

We are a national representation firm serving radio broadcast clients and certain internet service providers throughout the United States. Commission revenues are derived from sales of advertising time for radio stations under representation contracts. Commissions and fees are recognized in the month the advertisement is broadcast. In connection with our unwired network business, we collect fees for unwired network radio advertising and, after deducting our commissions, remit the fees to the respective radio stations. In instances when we are not legally obligated to pay a station or service provider until the corresponding receivable is paid, fees payable to stations have been offset against the related receivable from advertising agencies in the accompanying consolidated balance sheets. We record all commission revenues on a net basis. Commissions are recognized based on the standard broadcast calendar that ends on the last Sunday in each reporting period. The broadcast calendar for the calendar year ended December 31, 2006 was 53 weeks, while the broadcast calendar for the years ended December 31, 2005, and 2004 each had 52 weeks.

Representation Contract Termination Revenue and Contract Acquisition Costs

Our station representation contracts have stated initial terms, and thereafter usually renew automatically from year to year unless either party provides written notice of termination at least twelve months prior to the next automatic renewal date. In accordance with industry practice, in lieu of termination, an arrangement is normally made for the purchase of such contracts by a successor

F-7

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

representative firm. The purchase price paid by the successor representation firm is generally based upon historic commission income projected over the remaining contract period plus two months. Income earned from the sale of station representation contracts (contract termination revenue) is recognized on the effective date of the buyout agreement. Costs of obtaining station representation contracts are deferred and amortized over the life of the new contract. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. Amounts which are to be amortized during the next year are included as current assets in the accompanying consolidated balance sheets. We review the realizability of these deferred costs on a quarterly basis. From time to time, we have paid inducements to extend the life of contracts with our radio groups. These inducement payments are recorded as deferred costs and expensed in the period benefited. Estimated overall amortization for the five years following December 31, 2006 is as follows: 2007–$8,700; 2008–$6,300; 2009–$4,700; 2010–$3,300 and 2011–$1,700.

In 2006, we recorded approximately $7,300 of contract termination revenue primarily related to the termination of our rep contract with the former Susquehanna stations after their acquisition by Cumulus Broadcasting. In 2005, we recorded approximately $20,000 of contract termination revenue primarily related to Cumulus Broadcasting and Radio One’s termination of their representation contracts with us. In 2004, we recorded approximately $24,500 of contract termination revenue substantially all of which was attributable to the Citadel representation contract termination in 2003.

Cash and Cash Equivalents

We consider cash in banks and investments with an original maturity of three months or less to be cash equivalents.

Fixed Assets, net

Furniture, fixtures and equipment are recorded at cost and are depreciated over three to ten-year lives, and leasehold improvements are amortized over the shorter of the lives of the leases or assets, all on a straight-line basis. The cost of such computer software is amortized on a straight-line basis over three years.

Depreciation and Amortization Expense

A summary of annual depreciation and amortization expense is as follows:

	2006		2005		2004
Depreciation of fixed assets	$	971	$	1,827	$	2,314
Amortization of contract acquisition costs		10,049		17,514		16,282
Amortization of other assets		647		709		1,187
	$	11,667	$	20,050	$	19,783

In 2005, the amortization of contract acquisition costs included the writeoff of approximately $3,600 of deferred contract acquisition costs related Cumulus Broadcasting and Radio One’s termination of their representation contracts with us.

F-8

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

Long-Lived Assets

We assess the impairment of our long-lived assets in accordance with SFAS No. 144, which requires testing when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We reevaluate intangible assets each reporting period to determine whether events and circumstances warrant a revision in their remaining life. SFAS No. 144, which also applies to other long-lived assets such as plant, property and equipment, as well as groups of assets, provides examples of indicators of potential impairment such as: a significant decrease in market price of the asset; a significant adverse change in the extent or manner in which the asset is used; a significant adverse change in legal factors or the business climate; an adverse action or assessment by a regulator; excess cost accumulation for the acquisition or construction of the asset; current period operating cash flow losses combined with a similar history or a projection of future losses; and a more likely than not expectation that the asset will be sold. If any indicators were present, we would test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed the carrying amount (i.e. the asset is not recoverable), we would perform the next step which is to determine the fair value of the asset and record an impairment, if any.

Stock Growth Plan

We maintain a Stock Growth Plan (“SGP”) for eligible employees. Cash contributions made by us to the SGP are recorded as compensation expense. Shares of our stock owned by the SGP are treated as outstanding common stock.

Stock-Based Compensation

Effective January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment (“SFAS No. 123R”), using the modified prospective application transition method. SFAS No. 123R revises SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). Under the modified prospective method, we have recorded compensation cost for the unvested portion of previously issued awards that remain outstanding at the initial date of adoption (using the amounts previously measured under SFAS No. 123 for pro forma disclosure purposes). Since we have chosen the modified prospective application transition method, the financial statements for the prior interim period have not been restated.

SFAS No. 123R requires us to estimate forfeitures in calculating the expense relating to stock-based compensation as opposed to recognizing these forfeitures and the corresponding reduction in expense as they occur. In addition, SFAS No. 123R requires the Company to reflect the tax savings resulting from tax deductions in excess of compensation expense reflected in its financial statements as a cash inflow from financing activities in its statement of cash flows rather than as an operating cash flow as in prior periods.

Prior to January 1, 2006 as permitted under generally accepted accounting principles, we accounted for our employee stock-based compensation plan using the intrinsic value method, as

F-9

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

prescribed by APB No. 25 Accounting for Stock Issued to Employees and interpretations thereof (collectively “APB 25”) versus the fair value method allowed by SFAS No. 123. We implemented the disclosure provision of SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. This statement amended the disclosure provisions of SFAS No. 123, to require prominent disclosure of the effect on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation and amended APB Opinion No. 28, Interim Financial Reporting, to require disclosure of those effects in interim financial information. Accordingly, no compensation cost has been recognized in the accompanying Consolidated Statements of Operations for years ended December 31, 2005 and 2004 in respect of stock options granted during that period. Had compensation cost for these options been determined consistent with SFAS No. 123 and SFAS No. 148, our net loss applicable to common shareholders, basic and diluted loss per share would have been as follows:

	2005			2004
Net loss applicable to common shareholders, as reported	$	(3,524	)	$	(7,500	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(761	)		(807	)
Pro forma net loss	$	(4,285	)	$	(8,307	)
Loss per share:
Basic and diluted—as reported	$	(0.31	)	$	(0.70	)
Basic and diluted—pro forma	$	(0.38	)	$	(0.78	)

Pro forma information regarding net income and earnings per share, as presented in Note 1, is required by SFAS No. 123, as amended by SFAS No. 148, and has been determined as if we had accounted for our employee stock options under the fair value method of SFAS No. 123 as of its effective date. The weighted averaged fair value for options was estimated at the dates of grants using the Black-Scholes option-pricing model to be $0.33 for 2005 and $1.43 for 2004, with the following weighted average assumptions: risk free interest rate of 3.25% for 2005 and 2004; expected volatility factors of 94% and 107% for 2005 and 2004, expected dividend yield of 0% for 2005 and 2004; and estimated option lives of 5 years for 2005 and 2004.

Consistent with prior years, the fair value of each stock option granted during the year ended December 31, 2006 was estimated at the date of grant using a Black-Scholes option pricing model based on the assumptions of expected volatility of 280%, expected dividend yield of 0%, expected term of 5 years and a risk-free interest rate of 7.00%. The expected volatility is based on our consideration of the historical volatility of our stock based on our historical stock prices. The expected term of an option is based on our historical review of employee exercise behavior based on the employee class (executive or non-executive) and based on our consideration of the remaining contractual term if limited exercise activity existed for a certain employee class. The risk-free interest rate is the constant maturity interest rate for U.S. Treasury instruments with terms consistent with the expected lives of the awards.

F-10

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

A summary of stock option activity as of December 31, 2006 and changes during the year ended December 31, 2006 is presented below (in thousands except share and per share amounts):

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options Outstanding at January 1, 2006	4,508,885		$	2.00	—	$	2
Granted	20,000			0.36	—		2
Exercised	—			—	—		—
Cancelled	(355,500	)		1.86	—		—
Options Outstanding at December 31, 2006	4,173,385		$	2.00	6.0	$	4
Exercisable at December 31, 2006	4,128,383		$	2.01	6.0	$	3

The weighted average grant-date fair value of stock options granted during the year ended December 31, 2006 was $0.25.

During the year ended December 31, 2006, we expensed $46 as non-cash stock-based compensation. As of December 31, 2006, we had $17 of total unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a weighted average period of 0.6 years.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 159 to have a material impact on our financial position or results of operations.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 108, “Considering the Effects on Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB 108”). SAB 108 requires registrants to quantify errors using both the income statement method (i.e. iron curtain method) and the rollover method and requires adjustment if either method indicates a material error. If a correction in the current year relating to prior year errors is material to the current year, then the prior year financial information needs to be corrected. A correction to the prior year results that are not material to those years, would not require a “restatement process” where prior financials would be amended. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have a material effect on our financial position or results of operations.

F-11

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) to clarify the definition of fair value, establish a framework for measuring fair value and expand the disclosures on fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 will be effective for fiscal years beginning after November 15, 2007. We do not expect implementation of the standard will have a material effect on our results of operations or financial position.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” (“FIN 48”), which will become effective for the company on January 1, 2007. This standard clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. A company can only recognize the tax position in the financial statements if the position is more-likely-than-not to be upheld on audit based only on the technical merits of the tax position. This accounting standard also provides guidance on thresholds, measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial-statement comparability among different companies. We do not expect implementation of the standard will have a material effect on its results of operations or financial position.

Restructuring and Severance Charges

In 2006, we continued to offer an early retirement program, which was accepted by 43 people, including five executives, to reduce compensation costs on a going forward basis. We accrued $7,274 in 2006 for the 43 terminations, and $3,078 in 2005 for 18 terminations. In accordance with SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities,we recorded this liability at fair value as of the time the liability was incurred. We paid approximately $3,294 and $2,611 of termination benefits during the years ended December 31, 2006 and 2005, and have accreted approximately $203 and $156 of interest expense in 2006 and 2005. At December 31, 2006 and 2005, the accompanying consolidated balance sheets include accruals relating to the restructuring program of $5,888 and $1,705, of which $2,778 and $1,705 are included in accrued employee related liabilities and $3,110 is included in other noncurrent liabilities in 2006.

Loss per Share

Basic loss per share for each of the respective years has been computed by dividing the net loss applicable to common shareholders by the weighted average number of common shares outstanding during the year which was 11,295,876, 11,295,876, and 10,695,410 for the years ended December 31,

F-12

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

2006, 2005, and 2004, respectively. Diluted loss per share would reflect the potential dilution that could occur if the outstanding options to purchase common stock were exercised. For the years ended December 31, 2006, 2005, and 2004, the exercise of outstanding options would have an antidilutive effect and therefore have been excluded from the calculation. Shares issuable under options that have not been included in the fully diluted loss per share calculation because of their antidilutive effect were 4,173,385, 4,508,885, and 5,166,155 at December 31, 2006, 2005 and 2004.

Leasehold Improvements

In the fourth quarter of 2004, we renewed the lease on our New York City office space for an additional 15 years. As part of the lease, the landlord is to reimburse us for leasehold improvements made to the property. We substantially completed these improvements in the third quarter of 2005. The reimbursement of $1,800, almost all of which has been received from the landlord at December 31, 2005, is capitalized as leasehold improvements and will be amortized over the remaining term of the lease. We recognize rent expense on a straight-line basis over the term of the lease, taking into account scheduled rent increases, rent abatement and leasehold improvement allowances, such as the one described above.

Income Taxes

Deferred taxes are provided for temporary differences arising from the differences between financial statement and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to amounts considered more likely than not to be realized.

Reclassification

Certain reclassifications have been made to prior period financial statements to conform to current periods presentation.

2. Investments

Effective July 2004, we applied the principles of Emerging Issues Task Force (“EITF”) No. 03-16Accounting for Investments in Limited Liability Companies. The effect of this cumulative change in accounting principle is a $598 reduction of our investment in a limited liability company. Beginning July 2004, we began to use the equity method to account for this investment and recognized $93 of income in 2006, $377 in 2005 and $84 in 2004. Prior to 2004, we accounted for our investments using the cost method of accounting, as we do not have the ability to exercise significant influence over operating and financial policies. The total carrying value of these investments was approximately $1,900 in 2005, representing a range of ownership from 8% to 16% of the affiliated companies.

On April 21, 2006, we sold our investment in Burst Media in conjunction with its initial public offering. We realized net proceeds of approximately $9,947 on the sale. The carrying value of the investment at the time of sale was approximately $1,982. A one-time bonus payment of $1,737 was paid to an executive of the Company’s interactive subsidiary, as required by the bonus provisions of his employment agreement, and included in selling expenses.

F-13

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

3. Fixed Assets

Fixed assets are comprised of the following:

	December 31,
	2006		2005
Furniture and equipment	$	20,179	$	19,775
Computer software		4,598		4,455
Leasehold improvements		6,987		6,987
		31,764		31,217
Less—Accumulated depreciation and amortization		28,594		27,623
Fixed assets, net	$	3,170	$	3,594

4. Employee Stock Plans

Stock Growth Plan

On January 1, 1995, we established the Stock Growth Plan, a qualified stock bonus plan through which certain qualified employee compensation is allocated to the plan. Participation in the Stock Growth Plan is mandatory and non-contributory for all eligible employees. Stock Growth Plan participants are at all times fully vested in their accounts without regard to age or years of service. We make regular quarterly cash contributions to the Stock Growth Plan. For the years ended December 31, 2006, 2005, and 2004, we recorded compensation expense of $2,338, $2,337, and $2,299, in relation to these contributions. Our contributions to the Stock Growth Plan were used to purchase shares of Interep Class B common stock from us in 2004. In 2006 and 2005, no stock was purchased and the funds are in either the Stock Growth Plan or have been transferred to employee 401(K) Plan accounts. No accrual was required as of December 31, 2006 and 2005.

During 2004, the Company issued 1,014,384 shares of Class B common stock to the Interep Stock Growth Plan for net cash proceeds of approximately $1,372. The shares were issued at the estimated current fair market value on the date of issuance, determined based on the trailing 15-day trading average of the Company’s Class A common stock. During 2004, the Stock Growth Plan purchased 14,247 shares of Class A common stock, on the open market at a weighted average fair value of $1.45. As of December 31, 2006 and 2005, the Stock Growth Plan owned 3,302,849 and 3,690,544 Class B common shares, and 529,230 and 576,764 of Class A common shares, representing approximately 33.9% and 37.8% of the Company’s total shares outstanding, before consideration of common stock equivalents. Shares owned by the Stock Growth Plan are recorded as outstanding stock of the Company. Distributions to participants are made in the shares of the Company’s Class B common stock allocated to their plan accounts upon termination of employment.

Stock Options

As discussed in Note 1, Effective January 1, 2006, we adopted SFAS No. 123(R), using the modified prospective application transition method. Under the modified prospective method, we have

F-14

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

recorded compensation cost for the unvested portion of previously issued awards that remain outstanding at the initial date of adoption (using the amounts previously measured under SFAS No. 123 for pro forma disclosure purposes). Since we have chosen the modified prospective application transition method, the financial statements for the prior periods have not been restated.

SFAS No. 123R requires us to estimate forfeitures in calculating the expense relating to stock-based compensation as opposed to recognizing these forfeitures and the corresponding reduction in expense as they occur. In addition, SFAS No. 123R requires the Company to reflect the tax savings resulting from tax deductions in excess of compensation expense reflected in its financial statements as a cash inflow from financing activities in its statement of cash flows rather than as an operating cash flow as in prior periods.

In 1999, we adopted the 1999 Stock Incentive Plan. The plan provides for the granting of options and appreciation rights of the Company’s Class A and Class B common stock. The option price per share may not be less than the fair market value of the Class A and Class B common stock on the date the option is granted. The aggregate number of shares may not exceed 666,667 for any participant during any three consecutive 12-month periods, and the maximum term of an option may not exceed ten years. Options primarily vest in three equal annual installments. Under the terms of the plan, we are authorized to grant options to purchase up to a total of 2,000,000 shares of Class A and Class B common stock.

A summary of the stock options outstanding during the years ended December 31, 2006, 2005, and 2004 is set forth below:

	Number of Shares		Weighted Average Exercise Price
Outstanding at January 1, 2004	5,121,405		$	3.56
Granted during 2004	95,000			1.81
Forfeited during 2004	(50,250	)		2.81
Outstanding at December 31, 2004	5,166,155		$	3.53
Granted during 2005	275,000			0.50
Expired during 2005	(915,320	)		3.01
Forfeited during 2005	(16,950	)		2.81
Outstanding at December 31, 2005	4,508,885		$	2.00
Granted during 2006	20,000			0.36
Forfeited during 2006	(355,500	)		1.86
Outstanding at December 31, 2006	4,173,385		$	2.01

F-15

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

The following table summarizes information regarding the stock options outstanding at December 31, 2006, either pursuant to the terms of the Plan or pursuant to the terms of the option grant, if granted prior to the adoption of the Plan:

Number of options outstanding	Number of options     exercisable	Exercise Price	Remaining Contractual Life
208,959	208,959	3.80	1.5 Years
731,360	731,360	4.02	1.5 Years
417,920	417,920	4.20	2 Years
397,267	397,267	2.81	3.5 Years
10,000	10,000	3.32	5.5 Years
40,000	40,000	1.73	6.3 Years
20,000	13,332	2.25	7.2 Years
25,000	16,666	2.09	7.7 Years
45,000	15,000	0.46	8.2 Years
200,000	200,000	0.51	8.2 Years
2,057,879	2,057,879	0.69	9 Years
20,000	20,000	0.36	9 Years
4,173,385	4,128,383

On January 2, 2006, we granted 20,000 options to an executive at an exercise price of $0.36, which was the fair market value at the date of grant. These options were fully vested on the date of grant. The weighted averaged fair value for options was estimated at the dates of grant using a Black-Scholes option-pricing model to be $0.25 for the year ended December 31, 2006, with the following weighted average assumptions: risk free interest rate of 7.0%; expected volatility factor of 280%, which is based upon historical volatility; expected dividend yield of 0%; and estimated option lives of 5 years. See Note 1 above for additional information on Stock-based employee compensation.

On March 29, 2005, we granted, for Board-related service, 15,000 options to each of five Directors and Officers at an exercise price of $0.46, which was the fair market value per share of our Class A Common Stock at the date of grant as quoted on the OTC Bulletin Board. On April 27, 2005, we granted 200,000 options to an executive at an exercise price of $0.51, which was 110% of the fair market value on the date of grant. On January 5, 2004, we granted 50,000 options to an executive at an exercise price of $1.50, which was the fair market value at the date of grant. On March 12, 2004, we granted 20,000 options, 10,000 each to two employees, at an exercise price of $2.25, which was the fair market value at the date of grant. On April 15, 2004, we granted 25,000 options to an executive at an exercise price of $2.09, which was the fair market value at the date of grant. These options vest over a three-year period, except for the 200,000 options which were granted on April 27, 2005. Those options vested on the date of grant.

On April 27, 2005, we reduced the exercise price of certain stock options held by one of our executives. The original exercise prices and number of shares were as follows: 626,880 shares at $3.80 per share; 1,253,759 shares at $4.02 per share; 52,240 shares at $4.20 per share and 125,000 at $2.81

F-16

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

per share. The price per share was reduced to $0.69 per share, which represented 150% of the $0.46 per share closing price of our Class A Common Stock on April 27, 2005. The termination date of these options was changed to December 31, 2015. In accordance with generally accepted accounting principles, we have adopted variable plan accounting for these options from the date of the repricing. At December 31, 2005, the price of the stock had dropped below the repriced level; accordingly, no compensation expense was required as of such date.

In prior years, we repriced 775,300 options with an exercise price of $8.77 to an exercise price of $2.81, which represented the fair market value on the date of the repricing. In accordance with generally accepted accounting principles, we adopted variable plan accounting for these options from the date of the repricing and reduced compensation expense of $1,251 in 2002. The price of the stock dropped below the repriced levels after trading at prices higher than the repriced levels. No compensation expense was required in 2006 and 2005.

On January 5, 2004, we granted 50,000 options to an executive at an exercise price of $1.50, which was the fair market value at the date of grant. On March 12, 2004, we granted 20,000 options, 10,000 each to two employees, at an exercise price of $2.25, which was the fair market value at the date of grant. On April 15, 2004, we granted 25,000 options to an executive at an exercise price of $2.09, which was the fair market value at the date of grant. All the options vest over a three-year period.

5. Employee Benefit Plans

Managers’ Incentive Compensation Plans

We maintain various managers’ incentive compensation plans for substantially all managerial employees. The plans provide for incentives to be earned based on attainment of threshold operating profit and market share goals established each year, as defined. We provided approximately $1,851, $1,688, and $1,998 for such compensation during 2006, 2005, and 2004.

401(k) Plan

We have a defined contribution plan, the 401(k) Plan, which covers substantially all employees who have completed ninety days of service with us. Under the terms of the 401(k) Plan, we may contribute a matching contribution percentage determined by, and at the discretion of, the Board of Directors but not in excess of the maximum amount deductible for federal income tax purposes. Company contributions vest to the employees at 20% per year over a five-year period. We contributed $682, $684, and $728 in 2006, 2005, and 2004.

Deferred Compensation Plans

Certain of our subsidiaries maintain deferred compensation plans which cover employees selected at the discretion of management. Participants are entitled to deferred compensation and other benefits under these plans. In 2006, 2005, and 2004, we provided compensation expense of $160, $197, and $67 related to these plans.

F-17

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

We have agreements with several of our employees to provide supplemental income benefits. The benefits under these plans were fully vested as of December 31, 2006. We provided $98, $114 and $129 in 2006, 2005, and 2004 for these plans, which principally represented interest on the vested benefits. Amounts due under these plans and agreements are $1,649 as of December 31, 2006 and are recorded as accrued expenses $372 and other noncurrent liabilities of $1,277 on our consolidated balance sheets; however, they remain subject to further appreciation/depreciation upon changes in value (as defined).

Other

We have life insurance policies on certain of our executives for which Interep is the beneficiary. Proceeds from these policies will be used to partially fund certain of the retirement benefits under these supplemental agreements. Such policies had cash surrender values of $2,705 and $2,515 as of December 31, 2006 and 2005, and offsetting loans of $1,276 and $1,129, which are included in Investments and Other Assets on the accompanying consolidated balance sheets.

6. Income Taxes

Interep and its subsidiaries file a consolidated federal tax return. However, for state tax purposes, separate tax returns are filed in various jurisdictions where losses on certain subsidiaries are not available to offset income on other subsidiaries, and tax benefits on such losses may not be realized. As a result, the consolidated tax provisions are determined considering this tax reporting structure and may not fluctuate directly with consolidated pretax income. We have recorded a valuation allowance to reflect uncertainties with regard to when in the future we will realize our net deferred tax assets.

Components of income taxes are as follows:

	Year ended December 31,
	2006			2005			2004
Current:
Federal	$	50		$	—		$	—
State		607			134			261
Deferred:
Federal		(5,713	)		(668	)		(2,736	)
Valuation Allowance		5,713			668			2,736
Total Income Taxes	$	657		$	134		$	261

F-18

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

A reconciliation of the U.S. federal statutory tax rate to the effective tax rate on the loss before income taxes for the periods ended December 31, 2006, 2005, and 2004, is as follows:

	2006			2005			2004
Benefit computed at the federal statutory rate of 34%	$	(4,827	)	$	(1,033	)	$	(2,391	)
State and local taxes, net of federal income tax benefit		(609	)		(130	)		(302	)
Change in valuation allowance and other adjustments		5,713			668			2,736
Nondeductible travel and entertainment expense		139			60			135
Nondeductible insurance premiums		(5	)		(74	)		(29	)
Other		246			643			112
Total	$	657		$	134		$	261

Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities at December 31, 2006 and 2005, are as follows:

	December 31,
	2006			2005
Deferred tax assets:
Depreciation and amortization	$	3,832		$	4,338
Accruals not currently deductible for tax purposes		2,977			1,470
Consolidated net operating loss carryforward		34,292			34,976
Other		1,749			2,534
		42,850			43,318
Deferred tax liabilities:
Buyout receivable		(2,422	)		(5,890	)
Unamortized representation contracts		(5,794	)		(8,069	)
Other		(77	)		(515	)
Net deferred tax asset		34,557			28,844
Valuation allowance		(34,557	)		(28,844	)
Net deferred tax asset (liability)	$	—		$	—

As of December 31, 2006 and 2005, we had an accrued federal and state income tax liability of $475 and $166 on our consolidated balance sheets. We have a tax net operating loss of $85,730 as of December 31, 2006 that expires 2018 through 2026.

7. Long-Term Debt

Long-term debt at December 31, 2006 and 2005 was comprised of $99,000 in 10.0% Senior Subordinated Notes due July 1, 2008 (the “Notes”). At December 31, 2006 and 2005, there were no advances outstanding under the $10,000 senior secured revolving credit facility, maturing in December 2007. In 2004, the senior secured revolving credit facility was to mature in September 2006, but was amended in July 2005.

F-19

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

The Notes are general unsecured obligations of the Company, and the indenture for the Notes provides, among other things, restrictions on incurring additional indebtedness, payment of dividends, repurchase of equity interests (as defined), creation of liens (as defined), transactions with affiliates (as defined), sales of assets or certain mergers and consolidations. Management believes that we are in compliance with these covenants. The Notes bear interest at the rate of 10.0% per annum, payable semiannually on January 1 and July 1. The Notes are subject to redemption at the option of the Company, in whole or in part. All of our subsidiaries are guarantors of the Notes. Each guarantee is full, unconditional and joint and several with the other guarantees. We have no other assets or operations separate from our investment in the subsidiaries.

We capitalized $4,689 of costs incurred in the offering of the Notes which is being amortized over the ten year life of the Notes. At December 31, 2006, the remaining balance is $702.

We have a $10,000 senior secured revolving credit facility with Commerce Bank, N.A. that enables us to efficiently manage our cash, as we may borrow, repay and re-borrow funds as needed. The term of the credit facility expires on December 31, 2007. The credit facility is secured by a first priority lien on all of our and our subsidiaries’ property and assets, tangible and intangible. Interest is payable monthly on the borrowings at rates based on either a prime rate or LIBOR, plus a premium of 1% for prime rate borrowings, and 4% for LIBOR borrowings. In addition to covenants similar to those in the indenture governing the Notes, the credit facility requires, among other things, that we (i) maintain certain 12-month trailing Operating EBITDA levels (“Operating EBITDA”, defined in the Loan and Security Agreement for any period as: (a) Net Income (Loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by the Borrower and any of its Subsidiaries plus (c) all interest expense deducted in determining such Net Income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) Contract Termination Revenue, but plus Contract Termination Revenue received in cash and (i) less Contract Acquisition Payments, in each case for such period, in each case in connection with Borrower and its Subsidiaries, on a consolidated basis); (ii) have a certain minimum accounts receivable balance as of the end of each quarter; (iii) have not less than $200,000 of representation contract value (as defined) as of the end of each quarter; and (iv) have not less than $2,000 of cash and cash equivalents as of the end of each quarter. Management believes that we are in compliance with these covenants. We incurred approximately $500 in legal and other costs directly related to the revolving credit facility and an additional $200 of such costs related to an amendment of the revolving credit facility in July 2005, which are being amortized as interest expense over the life of the extended facility. Substantially all of our subsidiaries, jointly, severally and unconditionally guarantee the credit facility. At December 31, 2006, we had $10,000 available under our credit facility.

The Amendment was entered into on July 21, 2005. The principal change effected by the Amendment was to extend the term of our revolving credit facility from September 25, 2006 through December 31, 2007. The Amendment also revised certain of the financial covenants to more appropriately reflect our current business operations. It also revised the definition of “Operating

F-20

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

EBITDA” as for any period: (a) Net Income (Loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by the Borrower and any of its Subsidiaries plus (c) all interest expense deducted in determining such Net Income, plus (d) all depreciation and amortization expense and other non-cash charges (including, without limitation, non-cash charges resulting from the repricing of employee stock options), plus (e) severance costs expensed but not yet paid in cash, less (f) extraordinary gains, plus (g) extraordinary losses, less (h) Contract Termination Revenue, but plus Contract Termination Revenue received in cash and (i) less Contract Acquisition Payments, in each case for such period, in each case in connection with Borrower and its Subsidiaries, on a consolidated basis.

8. Capital Deficit

In May 2002, we amended our certificate of incorporation for the purpose of establishing a series of preferred stock referred to as the Series A Convertible Preferred Stock (the “Series A Stock”), with the authorization to issue up to 400,000 shares. The Series A Stock has a face value of $100 per share and a liquidation preference in such amount in priority over our Class A and Class B common stock. Each share of the Series A Stock may be converted at the option of the holder at any time into 25 shares of Class A common stock at an initial conversion price of $4.00 per share (subject to anti-dilution adjustments). If the market price of our Class A common stock is $8.00 or more for 30 consecutive trading days, the Series A Stock will automatically be converted into shares of Class A common stock at the then applicable conversion price. The Series A Stock bears a 4% annual cumulative dividend that may be paid in cash or in kind (in additional shares of the Series A Stock) at our discretion. We expect to pay such dividends in kind for the foreseeable future. Holders of shares of the Series A Stock vote on most matters on an “as converted” basis, together with the holders of Class A and Class B common stock. During 2002, we completed a series of private placements to issue 110,000 units for an aggregate purchase price of $11,000. Each unit consists of one share of Series A Stock and 6.25 warrants to acquire an equal number of shares of Class A common stock. The warrants are exercisable at any time from the date of grant and expire five years from the date of grant. We allocated the net proceeds of approximately $10,230 from the sale of Series A Stock between the convertible preferred stock and the warrants, both of which are classified in additional paid in capital. We incurred approximately $770 in legal and other costs directly related to the private placements. A stock dividend for the Series A Stock in the amount of 4,934 and 4,744 shares was paid as of May 1, 2006 and 2005, respectively.

Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder or automatically under certain circumstances. Each share of the Class B common stock is entitled to 10 votes per share in all matters presented to the shareholders, except for certain amendments to the Restated Certificate of Incorporation, certain “going private” transactions and as otherwise required by applicable law. The shares of Class A common stock are entitled to one vote per share on all matters.

During 2006 and 2005, primarily in connection with employee terminations, 324,816 and 353,225 shares of Class B common stock were converted into Class A common stock.

F-21

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

9. Related Party Transactions

Since 1997, we have had an agreement with Media Financial Services, Inc., an affiliate of one of our executives, whereby Media Financial Services provides financial and accounting services to us. The fee for these services amounted to approximately $3,400, $3,500, and $3,500 in 2006, 2005 and 2004.

10. Commitments and Contingencies

At December 31, 2006, we were committed under operating leases, principally for office space, which expire at various dates through 2020. Certain leases are subject to rent reviews and require payment of expenses under escalation clauses. Rent expense was $5,375, $5,454, and $5,390 in 2006, 2005 and 2004. The noncash portion of rent expense that relates to the effect of free rent and abatements was $336, $157, and $456 for 2006, 2005 and 2004. Future minimum rental commitments under noncancellable operating leases are as follows:

2007	$	4,790
2008		4,303
2009		3,558
2010		2,852
2011		2,863
Thereafter		22,608

As of December 31, 2006, the total minimum sublease rentals to be received in the future under noncancellable operating subleases were $1,425.

Representation contract buyouts payable are due over the next five years, as follows:

2007	$	1,757
2008		347
2009		201
2010		150
2011		—

We have employment agreements with certain of our officers and employees for terms ranging from two to five years with annual compensation aggregating approximately $4,067. These agreements include escalation clauses (as defined) and provide for certain additional bonus and incentive compensation.

We are involved in various legal actions from time to time arising in the normal course of business. In the opinion of management, there are no matters outstanding that would have a material adverse effect on the consolidated financial position or results of our operations.

We maintain some of our cash in bank deposit accounts, money market funds and certificates of deposits, which at December 31, 2006 exceeded federally insured limits by approximately $9,757. These accounts are maintained in high credit quality financial institutions in order to reduce the risk of potential losses. We have not experienced any losses in these accounts.

F-22

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

11. Supplemental Information

Interest expense is shown net of interest income of $351, $41, and $36 in 2006, 2005, and 2004.

Revenues from CBS were approximately 29%, 28% and 28% of our total revenues in 2006, 2005 and 2004. CBS also represented approximately 21% and 22% of our trade account receivable in 2006 and 2005. Revenues from Entercom were approximately 11% of our total revenues in 2006. Entercom also represented approximately 14% of our trade account receivable in 2006.

12. Fair Value of Financial Instruments

The estimated fair values of other financial instruments subject to fair value disclosures were determined based on broker quotes or quoted market prices. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

	December 31,
	2006				2005
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Long-term debt	$	99,000	$	84,645	$	99,000	$	84,150

We also have a $10,000 senior secured credit facility, none of which was outstanding at December 31, 2006 and 2005.

The fair value of cash and cash equivalents, accounts receivables and accounts payables approximate the carrying amount due to the short maturity of those instruments.

13. Liquidity

We believe that the anticipated cash from continuing operations and the availability from our $10,000 senior secured credit facility, should be sufficient to fund our operations and anticipated needs for required representation contract acquisition payments, and to make the required 10% annual interest payments on the Senior Subordinated Notes, as well as the monthly interest payments under our senior secured revolving loan facility, for at least the next 12 months. We may not, however, generate sufficient cash flow for these purposes or to repay the notes at maturity.

Our ability to fund our operations and required contract acquisition payments and to make scheduled principal and interest payments will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may also need to refinance all or a portion of the Senior Subordinated Notes on or prior to maturity. There can be no assurance that we will be able to effect any such refinancing on commercially reasonable terms, if at all.

F-23

INTEREP NATIONAL RADIO SALES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands except share information)

At December 31, 2006, $5,888 of restructuring and severance charges remained in accrued liabilities related to the termination of five executives and 38 other employees during 2006. These payments will continue into 2013. Our liquidity and cash flows will be impacted by these headcount reductions. It is anticipated that our operations over the long term will further benefit from these terminations as well as other material cost efficiency measures implemented since 2004.

14. Quarterly Financial Information (Unaudited)

2006 Quarter Ended	March 31			June 30			September 30			December 31		2006 Year
Commission revenues	$	15,135		$	18,900		$	17,855		$	22,001	$	73,891
Contract termination revenue		110			270			598			6,348		7,326
Total Revenues		15,245			19,170			18,453			28,349		81,217
Operating expenses		21,785			23,463			25,292			21,810		92,350
Operating (loss) income	$	(6,540	)	$	(4,293	)	$	(6,839	)	$	6,539	$	(11,133	)
Net (loss) income applicable to common shareholders	$	(9,193	)	$	515		$	(9,464	)	$	3,389	$	(14,753	)
Basic and diluted (loss) income per share	$	(0.81	)	$	0.05		$	(0.84	)	$	0.30	$	(1.31	)

2005 Quarter Ended	March 31			June 30		September 30		December 31			2005 Year
Commission revenues	$	17,447		$	21,718	$	20,135	$	20,768		$	80,068
Contract termination revenue		226			13,189		5,943		643			20,001
Total Revenues		17,673			34,907		26,078		21,411			100,069
Operating expenses		20,711			26,359		22,939		23,044			93,053
Operating (loss) income	$	(3,038	)	$	8,548	$	3,139	$	(1,633	)	$	7,016
Net (loss) income applicable to common shareholders	$	(5,749	)	$	5,891	$	479	$	(4,145	)	$	(3,524	)
Basic and diluted (loss) income per share	$	(0.51	)	$	0.52	$	0.04	$	(0.37	)	$	(0.31	)

F-24

Schedule II

INTEREP NATIONAL RADIO SALES, INC.

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

	Balance at beginning of year		Additions charged (credited) to costs and expenses	Deductions		Balance at end of year
December 31, 2004
Allowance for Doubtful Accounts	$	808	70	(108	)	$	770
Valuation Allowance on Deferred Tax Assets	$	25,440	2,736	—		$	28,176
December 31, 2005
Allowance for Doubtful Accounts	$	770	100	(247	)	$	623
Valuation Allowance on Deferred Tax Assets	$	28,176	668	—		$	28,844
December 31, 2006
Allowance for Doubtful Accounts	$	623	294	(337	)	$	580
Valuation Allowance on Deferred Tax Assets	$	28,844	5,713	—		$	34,557

F-25

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 in the City of New York, State of New York.

April 2, 2007

INTEREP NATIONAL RADIO SALES, INC.
By:	/s/    DAVID E. KENNEDY
	David E. Kennedy
	President and Chief Executive Officer (principal executive officer)

Each person whose signature appears below hereby appoints David E. Kennedy and William J. McEntee, Jr., and both of them, either of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

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

/s/    DAVID E. KENNEDY         David E. Kennedy	Chief Executive Officer, President, Vice Chairman of the Board and Director	April 2, 2007
/s/    WILLIAM J. MCENTEE, JR.         William J. McEntee, Jr.	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	April 2, 2007
/s/    RALPH C. GUILD         Ralph C. Guild	Chairman of the Board and Director	April 2, 2007
/s/    MARC G. GUILD         Marc G. Guild	Director	April 2, 2007
/s/    HOWARD M. BRENNER         Howard M. Brenner	Director	April 2, 2007
/s/    JOHN PALMER         John Palmer	Director	April 2, 2007
/s/    ARNIE SEMSKY         Arnie Semsky	Director	April 2, 2007

Exhibit Index

Exhibit Number		Description
23.1		Consent of BDO Seidman, LLP
31.1		Certification of Chief Executive Officer pursuant to Rule 15d-14(a)
31.2		Certification of Chief Financial Officer pursuant to Rule 15d-14(a)
32.1		Certification of Chief Executive Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b))
32.2	��	Certification of Chief Financial Officer pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b))