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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003

OR

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)

(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:

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 ¨

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

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

As of June 30, 2003, 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 SmallCap Market, as reported in the Wall Street Journal, was $15,851,006 (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 15, 2004, was 6,279,317 shares of Class A Common Stock, and 3,968,842 shares of Class B Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s proxy statement to be used in connection with the 2004 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

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 nearly 1,800 radio stations nationwide, including radio stations owned by seven of the ten largest radio groups by revenue. Our market share in the ten largest U.S. radio markets (as defined by Arbitron) was an estimated 52% for 2003. 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 the Internet.

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.

Interep is an advertising sales and marketing company that is a preeminent leader in the radio industry. 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. We have already incorporated the Internet into our service offerings, and believe that Internet advertising presents growth opportunities similar to those present in

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the early days of radio advertising. Our intention is to enable our clients to exploit the strong overlap in demographic composition and usage patterns between radio listeners and Internet users.

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 advertising 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 almost 1,800 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 Infinity 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, Perfect Circle Media and Cybereps, Inc. We also provide online marketing research on a secure basis to clients and advertisers.

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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 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 is our proprietary electronic invoicing system, developed in conjunction with two software and technology companies. It is the radio industry’s first national spot radio web-based electronic invoicing and verification system. This system significantly reduces the time spent on “backroom” processing, provides greater accountability to advertisers, and expedites payments to radio stations. The system is currently in use by several major advertising agencies and national broadcasting groups. The RadioExchange roll out will continue with additional agencies and radio stations throughout 2004.

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 Chief Executive Officer, Ralph C. Guild, a recognized leader and innovator in the radio industry and George E. Pine, our President and Chief Operating Officer. 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 a publicly-owned company. We believe that our independence reduces perceived conflicts of interest in our sales efforts on behalf of our clients.

Strategic Investments.    We have made investments in Internet advertising. We will continue to consider strategic investments or acquisitions in our industry and in new media to improve our market share and to better leverage our marketing capabilities.

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

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that the contract term continues until canceled following 12 months’ prior notice. If the client terminates the contract without cause, the rep contracts generally provide 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, 2003, no station or station group, other than Infinity Broadcasting Corporation, 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 Media 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. While the pace of this activity significantly declined in recent years, it may again increase in light of recent Federal Communications Commission rule-making. 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.

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

• the number of stations and the inventory of air we represent;

• 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;

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• 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, 2003, we employed approximately 460 employees, substantially all of who were sales-related personnel. None of our employees are 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:

All executive officers are appointed for terms of one year.

Ralph C. Guild has been Chairman of the Board and Chief Executive Officer of Interep since 1986, and has served as a director of Interep since 1967. He has been employed by Interep or its predecessors since 1957 in various capacities. In November 1991, Mr. Guild became one of the first inductees into the Broadcasting Hall of Fame. Mr. Guild serves on the Boards of Trustees of the Museum of Television & Radio, the Center for Communications and the University of the Pacific. In April 1998, Mr. Guild received the Golden Mike Award from the Broadcasters Foundation for outstanding contributions to the radio industry. In March 2001, Mr. Guild received the International Radio & Television Society’s Golden Medal Award.

George E. Pine was appointed President and Chief Operating Officer of Interep in March 2003. He was President of our ABC Radio subsidiary from 1998 until becoming President of Interep. Before that, he served the Company in various sales management capacities since 1973, including President of Interep East. Mr. Pine is a Member of the Board of Trustees of both Ithaca College and the Webb School in Tennessee and serves as Chairman of their respective Development Committees. He is a member of the International Radio & Television Society.

Marc G. Guild has been President, Marketing Division, of Interep since November 1989, and has served as a director of Interep since 1989. He was our Executive Vice President of Network Sales/Operations from 1986 to 1989. Mr. Guild has been employed by Interep or its predecessors since 1972 in various capacities. As President of our Marketing Division, Mr. Guild plays a key role in our sales and marketing programs, the Interep Radio University and our research and technology divisions and also oversees our regional executives. Mr. Guild serves on the Board of Directors of the International Radio and Television Foundation. Marc Guild is the son of Ralph Guild.

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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 Interep 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 is www.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 2.    PROPERTIES

We lease approximately 170,000 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 66,000 square feet under a lease, which expires in March 2005. We are currently in negotiations to renew our current New York lease. 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.

On October 23, 2003, one of our subsidiaries instituted an arbitration proceeding in Las Vegas, Nevada against Citadel Broadcasting Corporation in connection with Citadel’s termination of its representation contract with us. We are seeking monetary damages from Citadel for, among other things, unpaid commissions to which we are contractually entitled and other damages arising from Citadel’s breach of the representation contract and certain other contracts to which Citadel is a party. We commenced the arbitration proceeding pursuant to the commercial arbitration rules of the American Arbitration Association. On November 20, 2003, Citadel served its answer and several counterclaims. Arbitrators have been selected and the parties are proceeding with the arbitration. We believe that we have factual and legal defenses to the counterclaims and we intend to pursue our claims and defend the counterclaims vigorously.

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

None.

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PART II

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

Our Class A Common Stock has been listed on the Nasdaq OTC Bulletin Board since August 18, 2003. From February 10, 2003 through August 15, 2003, our Class A Common Stock had been listed on the Nasdaq SmallCap Market. Prior to February 10, 2003, our Class A Common Stock was listed on the Nasdaq National Market. The Class A Common Stock trades under the symbol “IREP.OB.” On March 15, 2004, the last sale price of the Class A Common Stock on the Nasdaq OTC Bulletin Board was $2.25 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.

As of March 15, 2004, there were approximately 146 holders of record of our Class A Common Stock. We believe that there are over 1,000 beneficial owners 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, 2003.

Recent Sales of Unregistered Securities

Interep sold the following amounts of Class B Common Stock to its 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 20 trading-day average of Interep’s Class A Common Stock. One share of Class B Common Stock is convertible into one share of Class A Common Stock:

There were no sales of unregistered Class B Common Stock in 2003.

In May and June 2002, we sold an aggregate of 110,000 units consisting of one share of Series A Convertible Preferred Stock (“Series A Preferred Stock”) and 6.25 warrants to acquire the same number of shares of our Class A Common stock (“Warrants”) for an aggregate purchase price of $11 million, less related costs. The proceeds were added to our working capital. We also issued warrants to acquire 5,000 shares of our Class A Common stock to a placement agent in connection with the sale of 10,000 units.

The Series A Preferred Stock has a face amount of $100 per share and a liquidation preference in such amount in priority over our Class A Common Stock and Class B Common Stock. Each share of

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the Series A Preferred Stock may be converted at the option of the holder at any time into 25 shares of our Class A Common Stock at an initial conversion price of $4.00 per share (subject to anti-dilution adjustment). If the market price of our Class A Common Stock is $8.00 or more for 30 consecutive trading days, the Series A Preferred Stock will automatically be converted into shares of our Class A Common Stock at the then applicable conversion price. The Series A Preferred Stock bears a 4% annual cumulative dividend that we can pay in cash or in kind (in additional shares of the Series A Preferred Stock) at our discretion. In June 2003, we paid the 4% dividend in kind, which amounted to 4,036.67 units. We expect to continue to pay such dividends in kind for the foreseeable future. Holders of shares of the Series A Preferred Stock vote, on an “as converted basis”, together with the holders of our Class A and Class B Common Stock, on all matters and would vote alone as a class if changes to the rights or status of the Series A Preferred Stock were proposed by us.

Each warrant is immediately exercisable for one share of our Class A Common Stock at a strike price of $4.00 per share (subject to anti-dilution adjustment). The Warrants expire on the fifth anniversary of their date of issuance.

In connection with our term loan facility that we entered into on November 7, 2002, we issued a warrant to an affiliate of the lender to purchase 225,000 shares of our Class A Common Stock for nominal consideration. In addition, 50,000 shares of our Class A Common Stock were issued to an advisor in connection with the term loan.

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 tables summarize certain consolidated financial data derived from our audited consolidated financial statements for the fiscal years ended December 31, 2003, 2002, 2001, 2000 and 1999, respectively.

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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 by us 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 standard agency commissions. 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:

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. In this regard, we, like other media businesses, were adversely affected by a slowing economy generally, and the events of September 11, 2001, in particular, which we believe contributed to a decrease in the amount spent on advertising in 2002.

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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. While the pace of that activity significantly declined in recent years, it may again increase in light of recent Federal Communications Commission rule-making. 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 place advertising with Internet companies. 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.

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.

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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, 2003 Compared to Year Ended December 31, 2002

Commission revenues.    Commission revenue for 2003 increased $0.4 million, or 0.4% to $87.8 million from $87.4 million in 2002. Reasons for this relatively small improvement included the slow down in advertising in the first half of 2003 attributable to the war in Iraq and related uncertainties and the cancellation by Citadel Broadcasting Company of its representation contract with us and the general softness in national radio advertising during the fourth quarter.

Contract termination revenue.    Contract termination revenue in 2003 decreased $6.5 million to $0.7 million from $7.2 million in 2002. This 90.8% decrease was primarily attributable to the higher level of contract termination revenue in 2002 due to in large part to the settlement of certain litigations we had with Katz Media, Inc. and Entravision Communications Corporation. During 2003, approximately 234 stations terminated representation contracts with us, which had generated an aggregate of approximately $6.4 million of commission revenue during their 12-month trailing periods. We did not recognize contract termination revenue in connection with Citadel’s cancellation of its representation contract with us due to a dispute. See “Item 3. Litigation,” above.

Selling expenses.    Selling expenses for 2003 increased to $64.8 million from $58.1 million during 2002. This increase of $6.7 million, or approximately 11.5%, was primarily due to $2.7 million of termination benefits recorded in 2003 in connection with an early retirement program we initiated to reduce ongoing operating expenses, a $1.0 million loss on the sublease of excess space and $0.4 million in costs related to the formation of a new rep company. In addition, we recorded a non-cash compensation credit on stock option incentives of $1.3 million in 2002 resulting from the stock option repricing, but made no such adjustment in 2003.

General and administrative expenses.    General and administrative expenses of $14.4 million for 2003 increased $2.3 million, or 19.2%, from $12.1 million for 2002 primarily due to unusual and non-recurring legal and consulting costs in connection with abandoned acquisition transactions, the Citadel litigation and other one-time charges, including initial Sarbanes-Oxley compliance costs.

Operating income before depreciation and amortization.    Operating income before depreciation and amortization decreased by $15.1 million, or 62.0%, in 2003 to $9.3 million from $24.4 million in 2002, for the reasons discussed above. Included in operating income before depreciation and amortization in 2002 was $7.2 million of non-recurring contract termination revenue and $1.3 million of non-cash option repricing, as compared to contract termination revenue of $0.7 million in 2003. Operating income before depreciation and amortization is not a measure of performance calculated in

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accordance with 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. Moreover, the maintenance of certain levels of operating income before depreciation and amortization is required under the covenants of our revolving credit facility.

Reconciliation of operating income before depreciation and amortization to GAAP Loss Data

Depreciation and amortization expense.    Depreciation and amortization expense increased $10.3 million, or 43.7%, to $34.0 million in 2003, from $23.7 million in 2002. The amortization of costs associated with acquiring representation contracts is included in depreciation and amortization. The increase consisted of the $11.6 million write-off of deferred representation contract costs related to the termination of the Citadel representation contract, which was partially offset by a $1.2 million reduction in depreciation and amortization. We acquired representation contracts with approximately 94 new radio stations in 2003. We believe these contracts generated an aggregate of $1.0 million of commission revenues during their 12-month trailing periods prior to their acquisition.

Operating (loss) income.    In 2003, there was an operating loss of $24.7 million as compared to operating income of $0.8 million in 2002, a decrease of $25.5 million, for the reasons discussed above.

Interest expense, net.    Interest expense, net, increased $2.1 million, or 20.5%, to $12.6 million for 2003, from $10.5 million for 2002. This increase primarily resulted from our replacement, in September 2003, of a term loan facility obtained in November 2002 with a new revolving credit facility. The cancellation of our term loan facility required the write-off of $1.2 million of unamortized deferred debt financing costs and $0.4 million of unamortized discount related to warrants issued in connection with the term loan facility and certain interest expense. See “Other expense,” below.

Loss on investments.    In 2002, the loss on investments included the writedown of $0.5 million in the cost basis of non-public investments primarily in the Internet advertising industry.

Other expense.    Other expense in 2003 included a $0.5 million pre-payment penalty related to the early payoff of the term loan facility.

Benefit for 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

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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 2003 was $0.3 million as compared to $7.4 million in 2002. A valuation allowance of $14.8 million and $6.6 million was recorded in 2003 and 2002, 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 2003 compared to $0.2 million in 2002. As the preferred stock was issued in May and June 2002, only a partial year was accrued in 2002. 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 $38.7 million for 2003, a $20.9 million increase over the $17.8 million net loss applicable to common shareholders for 2002, was attributable to the reasons discussed above.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Commission revenues.    Commission revenue for 2002 increased approximately 7.7% to $87.4 million from $81.1 million for 2001. This $6.3 million increase was the result of a partial recovery in radio advertising generally, particularly in the fourth quarter of 2002, from the levels in 2001 that were depressed by, among other factors, the events of September 11, 2001. The increase can also be attributed to the inclusion of a full year of commission revenue from our Internet representation operations in 2002, aggregating $1.8 million. For the first nine months of 2001, our share of the Internet loss was reported on the equity basis, under the caption “Other expense, net”.

Contract termination revenue.    Contract termination revenue in 2002 decreased $14.2 million to $7.2 million from $21.4 million in 2001. This 66.3% decrease was primarily attributable to the higher level of contract termination revenue experienced in 2001 due in large part to the settlement in May 2001 of our dispute with Clear Channel about the amount due us on the termination in 1999 of our representation contract. Excluding this settlement, contract termination revenue decreased $1.7 million, or 19%, from 2001. During 2002, approximately 119 stations terminated representation contracts with us, which had generated an aggregate of approximately $3.8 million of commission revenue during their 12-month trailing periods.

Selling expenses.    Selling expenses for 2002 decreased to $58.1 million from $65.6 million during 2001. This decrease of $7.5 million, or approximately 11.4%, was primarily due to the non-recurrence in 2002 of $3.5 million in restructuring charges incurred in 2001, the related reduction of salaries in 2002 and $1.3 million in non-cash compensation credits on stock option incentives, offset in part by the inclusion of the operating expenses of our Internet representation business. There was a net change of $2.0 million from the prior year expense of $0.7 million related to non-cash compensation credits on stock option incentives. In 2001, we implemented a strategic restructuring program in response to difficult economic conditions and to further support our competitive position. The restructuring charges were primarily comprised of termination benefits for approximately 53 employees. We believe the restructuring effort contributed to our improved operating performance.

General and administrative expenses.    General and administrative expenses were virtually unchanged from year to year.

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Operating income before depreciation and amortization.    Operating income before depreciation and amortization decreased by $0.4 million, or 1.7%, in 2002 to $24.4 million from $24.8 million in 2001, for the reasons discussed above. Included in operating income before depreciation and amortization in 2001 was $21.4 million of non-recurring contract termination revenue which was offset by $0.7 million non-cash option repricing expense as compared to $7.2 million of non-recurring contract termination revenue and $1.3 million of non-cash option repricing, in 2002.

Reconciliation of operating income before depreciation and amortization to GAAP Loss Data

Depreciation and amortization expense.    Depreciation and amortization expense decreased $13.0 million, or 35.5%, to $23.7 million for 2002, from $36.7 million in 2001. The amortization of costs associated with acquiring representation contracts is included in depreciation and amortization. The decrease of $13.0 million was primarily due to the write-off in 2001 of $6.6 million of the unamortized costs from the termination and settlement of the Clear Channel representation contract initially acquired in 1996. As is our practice, we wrote off this balance of deferred costs in 2001 on the settlement of the termination of the Clear Channel contract. We acquired representation contracts with approximately 93 new radio stations in 2002. We believe these contracts generated an aggregate of $1.2 million of commission revenues during their 12-month trailing periods prior to their acquisition. Also, in 2001, we recorded an impairment of $2.4 million pertaining to our goodwill in Cybereps, Inc. created as a result of our consolidation in October 2001.

Operating income (loss).    In 2002, there was operating income of $0.8 million as compared with an operating loss of $11.8 million in 2001, for the reasons discussed above.

Interest expense, net.    Interest expense, net, increased $1.1 million, or 11.2%, to $10.5 million for 2002, from $9.4 million for 2001. This increase primarily resulted from a decrease in interest income received on cash balances as well as interest expense on our $10 million term loan facility entered into on November 7, 2002.

Loss on investments.    In 2002 and 2001, the loss on investments included writedowns of $0.5 million and $1.9 million, respectively, in the cost basis of privately held investments primarily in the Internet advertising industry. In 2001, the loss on investments includes our share of losses incurred by Cybereps prior to the consolidation of its operations in October 2001.

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Benefit for income taxes.    The provision for income taxes in 2002 was $7.4 million as compared to a benefit for income taxes of $4.5 million in 2001, as a result of a valuation allowance of $6.6 million that we recorded in 2002 to reflect uncertainties with regard to when in the future we will realize our net deferred tax assets.

Net loss applicable to common shareholders.    Our net loss applicable to common shareholders of approximately $17.8 million for 2002, a $2.1 million decrease from the $19.9 million net loss applicable to common shareholders for 2001, was due 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, 2003, we had cash and cash equivalents of $7.7 million and working capital of $15.7 million. Additionally, at December 31, 2003, we had available approximately $6.0 million under our revolving credit facility.

Cash provided by operations during 2003 was $9.8 million, as compared to $8.5 million and $11.2 million for the years ended 2002 and 2001, respectively. These fluctuations were primarily attributable to contract terminations and changes in working capital components.

Net cash used in investing activities during 2003 and 2002 was $2.3 million and $0.5 million, respectively, and was primarily the result of capital expenditures for computer equipment. Net cash provided by investing activities during 2001 amounted to $9.3 million, primarily from the proceeds of temporary cash investments that were classified as marketable securities offset in part by capital expenditures. Capital expenditures totaled $0.7 million for 2001, respectively, primarily for office and computer equipment.

In 2002, 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. There can be no assurance that circumstances affecting these investments, their businesses and the markets in which they operate will not change in a manner which would lead to a conclusion in a future period that an additional impairment had occurred.

Cash used for financing activities of $18.0 million during 2003 consisted primarily of $11.6 million for the acquisition of representation contracts and the $6 million reduction in debt, consisting of the repayment of $10 million for the term loan facility offset by the borrowing of $4 million on the new senior secured revolving credit facility, net of $0.5 million of related financing costs. Cash used for financing activities of $1.3 million during 2002 consisted primarily of $23.5 million for acquisitions of representation contracts, offset by $10.2 million of net proceeds from the issuance of Series A convertible preferred stock, $2.3 million of proceeds from the issuance of Class B common stock to our Stock Growth Plan and $9.6 million from a term loan facility, net of financing cost. Cash used for financing activities of $32.6 million during 2001 consisted primarily of $35.5 million for acquisitions of representation contracts, offset by $2.9 million of proceeds from the issuance of Class B common stock 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 not able to pay any cash dividends to our shareholders and 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 require immediate redemption of their Senior Subordinated Notes.

Our Senior Subordinated Notes are redeemable by us. 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.

On September 25, 2003, we entered into a $10 million senior secured revolving credit facility with Commerce Bank, N.A. to replace our $10 million senior secured term loan facility with an institutional lender. The revolving credit facility enables us to more efficiently manage our cash as we may borrow, repay and re-borrow funds as needed. The revolving credit facility has an initial term of three years. The credit facility is secured by a first priority lien on all of our and our subsidiaries’ property and assets, tangible and intangible. The facility provides for interest to be paid 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” is defined in the Loan and Security Agreement as, for any period: (a) our consolidated net income (loss), plus (b) all taxes on income plus state and local franchise and corporation taxes paid by us and any of our 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); (ii) have certain minimum accounts receivable as of the end of each quarter; (iii) have not less than $200 million of representation contract value 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. We have incurred approximately $0.5 million in legal and other costs directly related to the revolving credit facility, which will be amortized into interest over the life of the facility. The remaining $1.2 million of unamortized financing costs related to the term loan facility that was replaced by the revolving credit facility were written off to interest expense in the third quarter of 2003. The remaining $0.4 million of unamortized discount related to the warrants issued in conjunction with the term loan facility was also written off to interest expense during the third quarter of 2003. Substantially all of our subsidiaries are guarantors of the revolving credit facility. Each guarantee is full, unconditional and joint and several with the other guarantees. At December 31, 2003, we had $4 million outstanding on the senior secured credit facility.

On November 7, 2002, we entered into an agreement with an institutional lender to provide us with a $10 million term loan facility. The loan had a five-year term, was secured by an interest in

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substantially all of our assets and required that interest at a rate of 8.125% be paid quarterly. In connection with the loan, we issued a warrant to an affiliate of the lender to purchase 225,000 shares of our Class A common stock for nominal consideration. These warrants were valued at $0.5 million using a Black-Scholes model and were recorded as a discount to the term loan facility, which was being amortized as interest expense based on an effective interest rate method over the life of the loan. In addition, 50,000 shares of our Class A common stock were issued to an advisor in connection with the term loan. These shares were recorded at fair value at the time of issuance, which was $0.1 million, and was recorded as deferred loan cost, which was being amortized on a straight-line basis over the term of the loan. This obligation was repaid with the proceeds from our revolving credit facility and the commitment was terminated.

During 2002, we completed a series of private placements to issue 110,000 units for an aggregate purchase price of $11 million, less related costs. Each unit consists of one share of Series A and 6.25 warrants to acquire the same number of shares of our Class A common stock. The warrants are exercisable at any time from the date of grant and expire at various times in 2007. We also issued warrants to acquire 5,000 shares of our Class A common stock to a placement agent in connection with the sale of 10,000 units. We incurred approximately $0.8 million in legal and other costs directly related to the private placements.

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.

Certain 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:

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New Accounting Pronouncements

The FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, in January 2003. This interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the interpretation. The interpretation applied immediately to variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. Significant changes to this interpretation were proposed by FASB in October 2003, including delaying the effective date to the beginning of the first reporting period ending after December 15, 2003. We do not currently own an interest in any variable interest entities. The adoption of this statement did not have a material effect on these financial statements.

Critical Accounting Policies

Principles of Consolidation

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

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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.

Revenue Recognition

We are a national representation (“rep”) firm serving radio broadcast clients 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 its unwired network business, we collect fees for unwired network radio advertising and, after deducting its commissions, remits the fees to the respective radio stations. 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 years ended December 31, 2003, 2001, and 2000 each had 52 weeks.

Representation Contract Termination Revenue and Contract Acquisition Costs

Our station representation contracts usually renew automatically from year to year after their stated initial terms unless either party provides written notice of termination generally 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 the historic commission income projected over the remaining contract period, plus two months. The two-month period represents compensation for advertising spots sold but not yet run. Income earned from the loss of station representation contracts (contract termination revenue) is recognized in full 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.

Cash and Cash Equivalents and Marketable Securities

We consider cash in banks and investments with an original maturity of three months or less to be cash equivalents. Marketable securities consist of investments in debt securities with original maturities of less than twelve months.

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.

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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

In January 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets. We currently do not have any goodwill on its books, therefore the adoption of this statement did not have a significant impact on our financial position and results of operations.

In January 2002, we adopted SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121.

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 these 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. Based on the Company’s analysis, no impairment was recorded as of December 31, 2003.

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

We have elected to continue to account for our employee stock-based compensation plan using the intrinsic value method, as 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 Accounting for Stock-Based Compensation. Accordingly, deferred compensation is only recorded if the current price of the underlying stock exceeds the exercise price on the date of grant. The Company records and measures deferred compensation for stock options granted to non-employees at their fair value. Deferred compensation is expensed on a straight-line basis over the period the services are provided. See Notes 1 and 6 to Consolidated Financial Statements for further discussion of our accounting for its stock-based compensation plans.

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Restructuring and Severance Charges

A strategic restructuring program was undertaken in 2001 in response to difficult economic conditions and to further ensure our competitive position. The restructuring charges are primarily comprised of employee termination benefits. The restructuring program has resulted in the termination of approximately 53 employees. During 2003, we offered an early retirement program, which was accepted by 17 people, including four executives, to reduce compensation costs on a going forward basis. This resulted in termination benefits to be paid over an extended period of time, which were recorded during 2003 at net present value. SFAS No. 146 required that we record this new 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 10,248,159, 9,490,519, and 8,715,129 for the years ended December 31, 2003, 2002, and 2001, 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, 2003, 2002, and 2001, the exercise of outstanding options would have an antidilutive effect and therefore have been excluded from the calculation.

Income Taxes

Income taxes are recognized during the year in which transactions enter into the determination of financial statement income, with deferred taxes being provided for temporary differences between amounts of assets and liabilities recorded for tax and financial reporting purposes.

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).

Contractual Obligations and Other Commercial Commitments

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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 2003 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

On June 20, 2002, we dismissed Arthur Andersen LLP as our independent auditors. The reports of Arthur Andersen LLP on our financial statements for the fiscal year ended December 31, 2001 did not contain an adverse opinion, disclaimer of opinion or qualification or modification as to uncertainty, audit scope or accounting principles. During the fiscal year ended December 31, 2001 and during the subsequent interim periods, we had no disagreements with Arthur Andersen LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures. In addition, there were no reportable events (as defined in Item 304 (a) (1) (v) of Regulation S-K) during these periods.

We provided Arthur Andersen LLP with a copy of this disclosure regarding their dismissal prior to filing our Interim Report on Form 8-K that reported their dismissal. We requested that Arthur Andersen LLP furnish us a letter addressed to the Securities and Exchange Commission stating whether Arthur Andersen LLP agreed with such disclosures and, if not, stating the respects in which it did not agree. Arthur Andersen LLP’s letter, dated June 20, 2002, confirming its agreement with such statements is attached as Exhibit 16.1 and is incorporated in this Report by reference.

We have engaged Ernst & Young LLP to act as our independent auditors as successor to Arthur Andersen LLP. During our 2001 and 2000 fiscal years and the subsequent interim period through June 20, 2002, we did not consult with Ernst & Young LLP regarding (i) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or (ii) any matter that was either the subject of disagreement on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures or a reportable event (as defined in Item 304 (a) (1) (v) of Regulation S-K).

The Audit Committee of our Board of Directors considered, approved and recommended to our Board of Directors the dismissal of Arthur Andersen LLP, and the appointment of Ernst & Young LLP, as our independent auditors. These actions were ratified and approved by our Board of Directors.

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Item 9A    CONTROLS AND PROCEDURES

(a)    Evaluation of Disclosure Controls and Procedures

An evaluation as of the end of the period covered by this annual report was carried out under the supervision and with the participation of our management, including the Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934). Based upon that evaluation, our Chairman and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective.

(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 the fiscal period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, the our control over financial reporting.

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PART III

Items 10 Through 14 Inclusive.

The information required by Item 10 (Directors and Executive Officers of the Registrant) (other than information as to our executive officers, which is set forth in Part I under the caption “Executive Officers”), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management), Item 13 (Certain Relationships and Related Transactions) and Item 14 (Principal accounting fees and services) is incorporated by reference to our definitive proxy statement for the 2004 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission on or about April 29, 2004.

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PART IV

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

(A)    Documents Filed as Part of this Report

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

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

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(B)    Reports on Form 8-K

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

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INTEREP NATIONAL RADIO SALES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT AUDITORS

Board of Directors

Interep National Radio Sales:

We have audited the accompanying consolidated balance sheets of Interep National Radio Sales, Inc. (a New York corporation) and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, shareholders’ (deficit) equity, 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. The consolidated financial statements of Interep National Radio Sales, Inc. and subsidiaries as of and for the year ended December 31, 2001, were audited by other auditors who have ceased operations and whose report dated March 14, 2002, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 provides 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, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States. 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.

/s/    ERNST & YOUNG LLP

New York, New York

February 26, 2004

F-2

THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR ANDERSEN LLP PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM 10-K.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Interep National Radio Sales, Inc.:

We have audited the accompanying consolidated balance sheets of Interep National Radio Sales, Inc. (a New York corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements and the schedule referred to below 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial position of Interep National Radio Sales, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to consolidated financial statements is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

/s/    ARTHUR ANDERSEN LLP

New York, New York

March 14, 2002

F-3

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share information)

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

F-4

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

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

F-5

INTEREP NATIONAL RADIO SALES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

(in thousands except share information)