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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1O-Q

For the Transition Period from to

Commission File Number 000-24525

CUMULUS MEDIA INC.
(Exact name of registrant as specified in its charter)

(404) 949-0700
Registrant’s telephone number, including area code:

     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.      Yes [ X ]    No [   ]

     As of October 31, 2002, the registrant had outstanding 62,701,291 shares of common stock consisting of (i) 48,811,466 shares of Class A Common Stock; (ii) 13,244,954 shares of Class B Common Stock; and (iii) 644,871 shares of Class C Common Stock.

CUMULUS MEDIA INC.

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CUMULUS MEDIA INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for share and per share data)

See Accompanying Notes to Consolidated Financial Statements

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CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for share and per share data)

See Accompanying Notes to Consolidated Financial Statements

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CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

See Accompanying Notes to Consolidated Financial Statements

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Cumulus Media Inc. Notes to Consolidated Financial Statements (Unaudited)

1.  Interim Financial Data

     Interim Financial Data

     These consolidated financial statements should be read in conjunction with the consolidated financial statements of Cumulus Media Inc., referred to as the Company, and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of results of the interim periods have been made and such adjustments were of a normal and recurring nature. The results of operations and cash flows for the nine months ended September 30, 2002 are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 2002.

2.  Acquisitions and Dispositions:

     Pending Acquisitions

     As of September 30, 2002, the Company was a party to various agreements to acquire 20 stations across eight markets. The aggregate purchase price of those pending acquisitions is expected to be approximately $77.7 million, of which $74.7 million would be paid in cash and $3.0 million would be paid in shares of the Company’s common stock.

     Completed Acquisitions

     During the quarter ended September 30, 2002, the Company completed two acquisitions of three radio stations in two markets for $8.6 million in purchase price. Of the $8.6 million required to fund the acquisitions, $8.3 million was funded in cash, $0.1 million represented capitalizable acquisition costs and $0.2 million had been previously funded as escrow deposits on the pending acquisitions.

     During the quarter ended June 30, 2002, the Company completed two acquisitions of six radio stations in two markets for $5.2 million in purchase price. Of the $5.2 million required to fund the acquisitions, $4.0 million was funded in cash, $0.1 million represented capitalizable acquisition costs and $1.1 million had been previously funded as escrow deposits on the pending acquisitions.

     During the quarter ended March 31, 2002, the Company completed 5 acquisitions of 25 radio stations in 9 markets for $333.5 million in purchase price. Of the $333.5 million required to fund the acquisitions, $205.0 million was paid in the form of shares of Class A and Class B Common Stock (as described below), $4.1 million was provided in the form of warrants to purchase common stock (as described below), $119.4 million was funded in cash, $2.6 million represented capitalizable acquisition costs and $2.4 million had been previously funded as escrow deposits on the pending acquisitions. These aggregate acquisition amounts include the assets acquired pursuant to the transactions described below.

     Aurora Communications, LLC

     On March 28, 2002, the Company completed the acquisition of Aurora Communications, LLC (“Aurora”), which owned and operated 18 radio stations in Connecticut and New York. In acquiring Aurora, the Company issued to the former owners (1) 10,551,182 shares of common stock, consisting of 1,606,843 shares of Class A Common Stock and 8,944,339 shares of Class B Common Stock and, (2) warrants, exercisable until March 28, 2003, to purchase up to an aggregate of 833,333 shares of common stock at an exercise price of $12.00 per share, and paid $93.0 million in cash. The Company also paid approximately $1.0 million in capitalizable acquisition costs in connection with the acquisition. As a result of this acquisition, the Company increased its presence in the northeast region of the United States and provided itself with an entrée into the strategically vital metropolitan New York City markets.

     An affiliate of BA Capital Company, L.P. (“BA Capital”), one of our principal shareholders, owned a majority of the equity of Aurora, and received approximately 8.9 million shares of nonvoting Class B Common Stock of Cumulus in the acquisition. Those

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shares may be converted into shares of Class A Common Stock at the option of the holder subject to FCC regulations, and automatically convert into shares of Class A Common Stock upon their transfer to another party. BA Capital owned approximately 840,000 shares of Cumulus’ publicly traded Class A Common Stock, and approximately 2 million shares of Cumulus’ nonvoting Class B Common Stock prior to the consummation of the acquisition.

     The following table details the aggregate purchase price of the Aurora acquisition (dollars in thousands, except for share and per share data):

The fair value per share of the common stock issued in that acquisition was determined based on the average market price of the Company’s common stock over a two-day period before and after the terms of the acquisition were agreed to and announced. The fair value of the warrant was estimated using the Black-Scholes option pricing model.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in connection with the Aurora acquisition (dollars in thousands):

     All of the $220.2 million in acquired intangible assets was assigned to the broadcast licenses of the stations. Fair value of these intangibles was determined by management using a discounted cash flow approach. The $26.4 million residual purchase price consideration above the fair value of the tangible and intangible assets acquired was recorded as goodwill.

     DBBC, L.L.C.

     Also on March 28, 2002, the Company completed the acquisition of the broadcasting operations of DBBC, L.L.C. (“DBBC”), which owned and operated 3 radio stations in Nashville, Tennessee. In acquiring the broadcasting operations of DBBC, the Company issued to DBBC (1) 5,250,000 shares of the Company’s Class A Common Stock and, (2) warrants, exercisable until September 28, 2002, to purchase up to 250,000 shares of common stock at an exercise price of $12.00 per share and paid $21.0 million in cash. As a result of this transaction, the Company acquired three radio stations in Nashville, TN, Arbitron ranked metro #44. The DBBC acquisition increases the Company’s station portfolio and marks the Company’s entry into the top tier Arbitron rank 50+ markets.

     DBBC, LLC is principally controlled by Lewis W. Dickey, Jr., the Chairman, President and Chief Executive Officer of Cumulus, John W. Dickey, Executive Vice President of Cumulus, and their brothers David W. Dickey and Michael W. Dickey.

     The following table details the aggregate purchase price of the DBBC acquisition (dollars in thousands, except for share and per share data):

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     The fair value per share of the common stock issued in that acquisition was determined based on the average market price of the Company’s common stock over a two-day period before and after the terms of the acquisition were agreed to and announced. The fair value of the warrant was estimated using the Black-Scholes option pricing model.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in connection with the DBBC acquisition (dollars in thousands):

     All of the $76.7 million in acquired intangible assets was assigned to the broadcast licenses of the stations acquired. Fair value of these intangibles was determined by management using a discounted cash flow approach. The $45.7 million residual purchase price consideration above the fair value of the tangible and intangible assets acquired was recorded as goodwill.

     Completed Dispositions

     On August 15, 2002, the Company completed the sale of one station from its Flint, Michigan station cluster for total proceeds of $3.0 million in cash. In connection with the transaction, the Company recorded a $0.3 million gain on sale of assets that has been included in other income, net in the accompanying consolidated statement of operations.

     On April 23, 2002, following the receipt of regulatory approval of the license transfer, the Company completed the sale of its stations in Columbus, Georgia to Clear Channel Communications and certain of its subsidiaries (collectively referred to as “CCU”). The completion of this transaction marked the completion of the third and final phase of an asset exchange and sale transaction with CCU. As of the closing, the Company received $4.1 million in cash representing the remaining contractual purchase price due from CCU. Under the terms of the agreement, the Company had received approximately $12.0 million on October 2, 2000 as an advance on the total consideration to be received. In connection with the transaction, the Company recorded a gain on sale of $4.4 million that has been included in other income, net in the accompanying consolidated statement of operations.

     All of the Company’s acquisitions have been accounted for by the purchase method of accounting. As such, the accompanying consolidated balance sheets include the acquired assets and liabilities and the accompanying statements of operations include the results of operations of the acquired entities from their respective dates of acquisition. The accompanying consolidated statements of operations for the three and nine months ended September 30, 2002 include the results of operations of divested entities through the dates of disposition.

     The unaudited consolidated condensed pro forma results of operations data for the three and nine months ended September 30, 2002 and 2001, reflect adjustments as if all acquisitions and dispositions completed during 2001 and during the nine months ended September 30, 2002 occurred at January 1, 2001 and assuming that goodwill and intangibles with indefinite lives associated with acquisitions completed in 2002 were not amortized in 2001 in accordance with SFAS No. 142, follow (dollars in thousands, except per share data):

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     Escrow funds of approximately $3.3 million paid by the Company in connection with pending acquisitions have been classified as Other Assets at September 30, 2002 in the accompanying consolidated balance sheet.

     At September 30, 2002 the Company operated five stations under local marketing agreements (“LMA”), pending FCC approval of our acquisition of those stations. The consolidated statements of operations for the three and nine months ended September 30, 2002 include the revenue and broadcast operating expenses of these radio stations and any related fees associated with the LMA from the effective date of the LMA through the earlier of the acquisition date or September 30, 2002.

3.  Adoption of New Accounting Pronouncements

     SFAS No. 141 and 142

     In June 2001, the FASB issued SFAS No. 141, Business Combinations, (SFAS No. 141) and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 141 requires that the purchase method of accounting be used for all business combinations. SFAS No. 141 specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported separately from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).

     The Company adopted the provisions of SFAS No. 141 as of July 1, 2001, and SFAS No. 142 as of January 1, 2002.

     In connection with the transitional goodwill impairment evaluation required to be completed by SFAS No. 142, the Company completed its assessment during the second quarter of 2002 and has determined that there is no indication that a goodwill impairment exists.

     The Company completed its evaluation of existing intangible assets with indefinite lives, consisting entirely of radio station broadcast licenses, during the first quarter of 2002. Accordingly, the carrying amount of each radio market’s broadcast licenses was compared with its fair value. Fair value was determined with the assistance of an outside professional services firm using a discounted cash flows approach. The fair values of several broadcast markets were determined to be below their carrying amounts and, as a result, impairment existed. Consequently, the Company recognized an impairment charge to write-off intangible assets in the amount of $41.7 million, net of an income tax benefit of $15.5 million. The impairment loss is recognized in the Consolidated Statements of Operations under the caption “Cumulative effect of a change in accounting principle, net of tax.”

     In connection with the elimination of amortization of broadcast licenses upon the adoption of SFAS No. 142, the reversal of the Company’s deferred tax liabilities relating to those intangible assets is no longer assured within the Company’s net operating loss carry-forward period. As a result, the Company determined it was necessary to establish a valuation allowance against its deferred tax assets and recorded a $57.9 million non-cash charge to income tax expense for the three months ended March 31, 2002. The Company has also recorded additional deferred tax expense of $14.8 million to establish a valuation allowance against net operating loss carry-forwards generated during the nine months ended September 30, 2002, resulting from amortization of goodwill and broadcast licenses that is deductible for tax purposes, but is no longer amortized in the financial statements.

     The following unaudited pro forma summary presents the Company’s estimate of the effect of the adoption of SFAS No. 142 as of

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the beginning of the periods presented. The pro forma results for the three and nine months ended September 30, 2001, which have been adjusted for the exclusion of amortization of goodwill and indefinite-lived intangible assets net of related tax effect, do not include any adjustments for the write-down of broadcast licenses recorded by the Company during the three months ended March 31, 2002 (dollars in thousands, except per share data).

     The following tables summarize the September 30, 2002 gross carrying amounts and accumulated amortization of amortized and unamortized intangible assets, amortization expense for the nine months ended September 30, 2002 and the estimated amortization expense for the 5 succeeding fiscal years (dollars in thousands):

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     A summary of changes in the carrying amount of goodwill for the nine months ended September 30, 2002 follows (dollars in thousands):

     SFAS No. 144

     In August, 2001, the FASB issued SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. SFAS No. 144 requires companies to separately report discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company adopted the provisions of SFAS No. 144 on January 1, 2002. The adoption of this statement did not have any impact of the Company’s consolidated financial statements.

     SFAS No. 145

     On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. SFAS No. 145 will be effective for fiscal years beginning after May 15, 2002, with early adoption related to the provisions of the rescission of SFAS No. 4 encouraged. The Company elected to early adopt SFAS No. 145 during the quarter ended March 31, 2002. Accordingly, the loss on extinguishment of debt relating to the retirement of the Company’s existing credit facility has been reflected as a component of the Company’s loss from continuing operations.

4.  LONG-TERM DEBT

     The Company’s long-term debt consists of the following at September 30, 2002 and December 31, 2001 (dollars in thousands):

     On September 24, 2002, the Company and its lenders under its credit facility entered into Amendment No. 1 and Waiver to the Credit Agreement dated as of March 28, 2002 (“Amendment No. 1”). Amendment No. 1 modified the terms of the credit agreement to allow the Company to exclude cash dividend payments, up to a limit of $4.5 million per quarter, associated with the 13 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009 (the “Preferred Stock”) from the calculation of the interest expense coverage ratio. This term modification was made effective for the fiscal quarter ended June 30, 2002 and continues through the fiscal quarter ended June 30, 2003. In September 2002, the Company determined that it was in technical default of the interest expense

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coverage ratio under its credit facility as of June 30, 2002, as a result of the early funding to its transfer agent of the second quarter Series A Preferred Stock cash dividend payment of $4.6 million. The Company funded its transfer agent on June 28, 2002 and dividends were distributed to shareholders of record on July 1, 2002. Amendment No. 1 granted the Company a waiver under its credit facility for any default arising from any non-compliance with the interest expense coverage ratio that may have occurred during the fiscal quarter ended June 30, 2002 or beyond in the absence of the amendment.

     On March 28, 2002, the Company completed the arrangement and syndication of a $400.0 million credit facility (the “Credit Facility). Prior to the closing of the Credit Facility, the Company funded its acquisitions through, among other sources, a $225.0 million senior credit facility (the “Old Credit Facility”). Proceeds of the Credit Facility were used to refinance amounts outstanding under the Old Credit Facility and to finance the cash portions of the purchase price for the Aurora and DBBC acquisitions (see Note 2).

     The Credit Facility provides for aggregate principal borrowings of $400.0 million as of September 30, 2002 and consists of a seven-year revolving commitment of $112.5 million, a seven-year term loan facility of $112.5 million and an eight-year term loan facility of $175.0 million. The amount available under the seven-year revolving commitment will be automatically reduced by 7.5% of the initial aggregate principal amount ($112.5 million) in fiscal year 2004, 13.75% in fiscal year 2005, 18.75% in fiscal 2006, 20.0% in fiscal year 2007, 31.25% in fiscal year 2008 and 8.75% in fiscal year 2009. Upon closing of the Credit Facility, the Company drew down the seven-year term loan facility of $112.5 million and the eight-year term loan facility of $175.0 million in their entirety. As of September 30, 2002 $287.5 million was outstanding under the Credit Facility, none of which were borrowings under the revolving commitment.

     The Company’s obligations under the Credit Facility are collateralized by substantially all of its assets in which a security interest may lawfully be granted (including FCC licenses held by its subsidiaries), including, without limitation, intellectual property, real property, and all of the capital stock of the Company’s direct and indirect domestic subsidiaries, except the capital stock of Broadcast Software International, Inc. (“BSI”) and 65% of the capital stock of any first-tier foreign subsidiary. The obligations under the Credit Facility are also guaranteed by each of the direct and indirect domestic subsidiaries, except BSI and are required to be guaranteed by any additional subsidiaries acquired by the Company.

     Both the revolving commitment and the term loan borrowings under the Credit Facility bear interest, at the Company’s option, at a rate equal to the Alternate Base Rate (as defined under the terms of our Credit Facility, 4.75% as of September 30, 2002) plus a margin ranging between 0.50% to 2.0%, or the Adjusted LIBO Rate (as defined under the terms of the credit facility, 1.813% as of September 30, 2002) plus a margin ranging between 1.50% to 3.0% (in each case dependent upon the leverage ratio of the Company). At September 30, 2002 the Company’s effective interest rate on loan amounts outstanding under the Credit Facility was 4.813%.

     A commitment fee calculated at a rate ranging from 0.50% to 0.75% per annum (depending upon the Company’s utilization rate) of the average daily amount available under the revolving lines of credit is payable quarterly in arrears, and fees in respect of letters of credit issued under the Credit Facility equal to the interest rate margin then applicable to Eurodollar Rate loans under the seven-year revolving credit facility are payable quarterly in arrears. In addition, a fronting fee of 0.25% is payable quarterly to the issuing bank.

     The seven-year term loan borrowings are repayable in quarterly installments beginning on June 30, 2003. The scheduled annual amortization is $4.2 million for fiscal 2003, $14.1 million for fiscal 2004, $21.1 million for fiscal 2005, $22.5 million for each of fiscal 2006, 2007 and 2008 and $5.6 million for fiscal 2009. The eight-year term loan is also repayable in quarterly installments beginning on June 30, 2003. The scheduled annual amortization is $1.3 million in fiscal 2003, $1.8 million in each of fiscal years 2004, 2005, 2006, 2007, 2008, $123.6 million in fiscal 2009 and $41.1 million in fiscal 2010. The amount available under the seven-year revolving commitment will be automatically reduced in quarterly installments as described above and in the Credit Facility agreement. Certain mandatory prepayments of the term loan facilities and reductions in the availability of the revolving commitment are required to be made including: (i) 100% of the net proceeds from the incurrence of certain indebtedness; and (ii) 100% of the net proceeds from certain asset sales.

     Under the terms of the Credit Facility, the Company is subject to certain restrictive financial and operating covenants, including but not limited to maximum leverage covenants, minimum interest and fixed charge coverage covenants, limitations on asset dispositions and the payment of dividends. The failure to comply with the covenants would result in an event of default, which in turn would permit acceleration of debt under those instruments. At September 30, 2002, the Company was in compliance with such financial and operating covenants as modified by Amendment No. 1.

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     The terms of the Credit Facility contain events of default after expiration of applicable grace periods, including failure to make payments on the Credit Facility, breach of covenants, breach of representations and warranties, invalidity of the agreement governing the Credit Facility and related documents, cross default under other agreements or conditions relating to indebtedness of Cumulus or the Company’s restricted subsidiaries, certain events of liquidation, moratorium, insolvency, bankruptcy or similar events, enforcement of security, certain litigation or other proceedings, and certain events relating to changes in control. Upon the occurrence of an event of default under the terms of the credit facility, the majority of the lenders are able to declare all amounts under our Credit Facility to be due and payable and take certain other actions, including enforcement of rights in respect of the collateral. The majority of the banks extending credit under each term loan facility and the majority of the banks under each revolving credit facility may terminate such term loan facility and such revolving credit facility, respectively, upon an event of default.

     As of September 30, 2002, the Company had outstanding $160.0 million in aggregate principal of its 10 3/8% Senior Subordinated Notes (“the Notes”) which have a maturity date of July 1, 2008. The Notes are general unsecured obligations of the Company, are guaranteed by specified subsidiaries of the Company and are subordinated in right of payment to all existing and future senior debt of the Company (including obligations under our Credit Facility). Interest on the Notes is payable semi-annually in arrears.

     The Indenture relating to the Notes (“the Indenture”) and the Certificate of Designations governing the Series A Preferred Stock (“the Certificate of Designations”) limit the amount we may borrow without regard to the other limitations on incurrence of indebtedness contained therein under credit facilities to $546.3 million. As of September 30, 2002, we were restricted by the 7.0 to 1 debt ratio included in the Indenture and the Certificates of Designation. Under the Indenture and Certificate of Designations, as of September 30, 2002, we would be permitted to incur approximately $97.1 million of additional indebtedness under the Credit Facility without regard to the commitment restrictions of the Credit Facility and without regard to the maximum basket included in the Indenture referred to above.

5.  GUARANTORS’ FINANCIAL INFORMATION

     Certain of the Company’s direct and indirect subsidiaries (all such subsidiaries are directly or indirectly wholly owned by the Company) provide full and unconditional guarantees for the Company’s senior subordinated notes on a joint and several basis.

     There are no significant restrictions on the ability of the guarantor subsidiaries to pay dividends or make loans to the Company.

     The following tables provide consolidated condensed financial information pertaining to the Company’s subsidiary guarantors. The Company has not presented separate financial statements for the subsidiary guarantors and non-guarantors because management does not believe that such information is material to investors (dollars in thousands).

6.  RESTRUCTURING

     During June 2000 the Company implemented two separate Board-approved restructuring programs. In connection with the programs, the Company recorded a charge of approximately $9.3 million for the three and six months ended June 30, 2000, related to the (i) the consolidation of the Company’s administrative offices from Milwaukee, WI and Chicago, IL to Atlanta, GA, and (ii) the termination of several internet service projects and internet infrastructure development projects.

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     During 2002, the Company successfully negotiated and executed sublease agreements for a majority of the vacated corporate office space in Milwaukee and Chicago. As a result, during the three months ended September 30, 2002, the Company reversed $0.9 million of the remaining liability related to lease obligations which is equal to the expected amount to be received under the various sublease agreements. The $0.9 million liability reversal has been presented in the Consolidated Statements of Operations as restructuring and other charges, consistent with the presentation of the original restructuring charge.

7.  EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted loss per common share for the three and nine month periods ended September 30, 2002 and 2001 (in thousands, except per share data).