• As a result of a general deterioration in spending by advertisers due to recessionary economic conditions throughout the United States, we anticipate that our Maximum Consolidated Leverage Ratio calculation will exceed the level allowed under the terms of our credit agreement at March 31, 2009. Under the terms of the credit agreement, a failure to meet the required financial ratios could result in the acceleration of the maturity of our outstanding debt to currently repayable to our lenders. Consequently, the Report of Independent Registered Public Accounting Firm issued by our auditors contains an explanatory paragraph regarding the uncertainty in our ability to repay such debt and continue as a going concern if amounts owed under the credit agreement were accelerated to currently payable. Under the terms our credit agreement, any audit report containing such going concern language constitutes a default under the agreement. Accordingly, all debt outstanding under our credit agreement has been reclassified to currently payable in our consolidated financial statements. In addition, a valuation allowance has been recorded on substantially all of our deferred tax assets, as we are unable to conclude that it is more likely than not that the assets will be realized, given this uncertainty in our ability to continue as a going concern. We are currently in negotiations with our lenders to amend the terms of our credit agreement to increase the Maximum Consolidated Leverage Ratio and modify certain other covenants in order to regain compliance with the terms of the agreement.

• Based on deteriorating national economic conditions and volatility in the equity markets, we performed an impairment analysis on our indefinite-lived intangible assets and goodwill during the third quarter of 2008. Based primarily upon declining radio station transaction multiples, decreases in our common stock price, and changes in the cost of capital, we determined that the fair value of goodwill and FCC licenses for certain markets were less than the carrying values recorded in our financial statements. Based on preliminary valuations at that date, we recorded a pre-tax impairment charge of $66.6 million for FCC licenses and approximately $0.9 million for goodwill. We completed our analysis during the fourth quarter of 2008 and recorded no significant changes to our preliminary valuations. In addition, we performed our annual impairment test of indefinite-lived intangible assets and goodwill during the fourth quarter of 2008, which resulted in no additional impairment being recorded.

• On February 1, 2008, we disposed of four stations in Watertown, New York for approximately $6.3 million in cash. The Watertown transaction represents a continuation of our strategy to operate in broadcast markets ranked in size from 50 to 150 and follows the similar disposition of our Chico and Redding, California radio stations in late 2006. Additionally during the first quarter of 2008, we completed two transactions involving the disposition of non-strategic assets: the sale of WTMM-AM in Albany, New York; and the sale of WECK-AM in Buffalo, New York. The sale of these assets represent a continuation of our strategy to dispose of individual radio stations with weaker broadcast signals, as we have in the past with the sales of WYNG-FM in Evansville, Indiana, WGNA-AM in Albany, New York, and WRUN-AM in Utica, New York.

• As a result of lower long-term interest rates at the end of the year, we recorded an unrealized loss of approximately $6.5 million related to the interest rate swap agreements we have in place on the term loan portions of our credit agreement. In addition, we recorded a realized loss of approximately $2.2 million in 2008 related to lower short-term interest rates compared to our fixed interest rates.

• We have continued to develop our Interactive initiative in 2008, which focuses on generating revenues through our stations' websites. For the 2008 year, approximately 1.9% of Regent's net revenue was generated by Interactive revenue. Our integrated selling effort, which combines the sale of our Interactive products with sales of our traditional broadcasting spots, contributed to the 204%

increase in Interactive revenue in 2008 compared to 2007. We anticipate that our economic benefits from this revenue source will increase in 2009 and beyond. In addition, in 2009, we anticipate developing Interactive revenue from new sources that are not affiliated with our radio stations. While we do not anticipate that this revenue will be material in 2009, we expect that it will increase in future years.

• We are currently broadcasting 24 FM stations and two AM stations in digital, or high definition radio (HD Radio). We expended approximately $0.1 million in cash in 2008 on the conversion of one station to digital radio. The conversion to HD Radio will enable the stations to broadcast digital-quality sound and also provide additional services, such as on-demand traffic, weather and sports scores. Additionally, this new technology will enable each converted radio station to broadcast additional channels of programming for public, private or subscription services. The economic benefit, if any, to our stations that have converted to HD Radio currently cannot be measured. Any future economic benefit to our stations as a result of digital conversion is not known at this time.

• On August 11, 2008, we received a notice from The Nasdaq Stock Market ("Nasdaq") indicating that we had failed to comply with the minimum bid price requirement for continued listing set forth in Nasdaq Marketplace Rule 4450(a)(5) because the bid price of our common stock closed under $1.00 per share for 30 consecutive business days. In accordance with Nasdaq Marketplace Rule 4450(e)(2), we were provided 180 calendar days, or until February 9, 2009, to regain compliance with the aforementioned rules. To regain compliance, the closing bid price of our common stock is required to remain at or above $1.00 per share for a minimum of 10 consecutive business days prior to the compliance deadline. Nasdaq's notice further stated that in the event that we did not regain compliance with the bid price rule by February 9, 2009, our common stock could be delisted from The Nasdaq Global Market. Since the initial notice date, we have received subsequent notifications from Nasdaq that it has suspended enforcement of the bid price and market value of publicly held shares requirements through July 20, 2009. The effect of this suspension of enforcement will postpone Regent's compliance deadline until November 10, 2009, unless additional extensions are granted by Nasdaq. In addition, Nasdaq Marketplace Rule 4450(a)(2) also require that companies must maintain a market value of at least $5 million for their publicly held shares. We currently do not meet such requirements, but have not received notice from Nasdaq of this deficiency due to the current suspension of the market value requirement. If we do not satisfy this requirement following the expiration of the Nasdaq suspension of enforcement, we expect that we would have 90 days to regain compliance following receipt of a delisting notice from Nasdaq.

Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. We continually evaluate our accounting estimates, the most significant of which include establishing allowances for doubtful accounts, allocating the purchase price of acquisitions, evaluating the realizability of our deferred tax assets, determining the recoverability of our long-lived assets, evaluating our goodwill and indefinite-lived intangible assets for impairment, and determining the fair value of our derivative financial instruments. The basis for our estimates are historical experience and various assumptions that are believed to be reasonable under the circumstances, given the available information at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue recognition - We recognize revenue from the sale of commercial broadcast time to advertisers when the commercials are broadcast, subject to meeting certain conditions such as pervasive evidence that an arrangement exists, the price is fixed and determinable, and collection is reasonably assured. These criteria are generally met at the time an advertisement is broadcast, and the revenue is recorded net of advertising agency commissions.
Allowance for Doubtful Accounts - We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We routinely review customer account activity in order to assess the adequacy of the allowances provided for potential losses. Based on historical information, we believe that our allowance is adequate. However, changes in general economic, business and market conditions could affect the ability of our customers to make their required payments; therefore, the allowance for doubtful accounts is reviewed monthly and changes to the allowance are updated as new information is received. A one percent change to our allowance as a percent of our outstanding accounts receivable balance at December 31, 2008 would cause a change in net income of approximately $0.1 million, net of tax.
Goodwill and Indefinite-Lived Intangible Assets - Our FCC licenses qualify as indefinite-lived intangible assets, and represent a significant portion of the assets on our balance sheet. We utilize the greenfield methodology for valuation of our FCC licenses, which allocates a start-up value to each station and employs a discounted cash flow methodology and accepted appraisal techniques. To test goodwill, we utilize a market multiple approach at the reporting unit level. Local economic conditions in each of our markets could impact whether an FCC license or goodwill is impaired, as a decrease or increase in market revenue could negatively or positively impact discounted cash flows. Other factors such as interest rates, the performance of the S&P 500, cash flow multiples, as well as capital expenditures, can affect the discounted cash flow analysis. In the event that there are no representative asset purchases or sale transactions to substantiate the fair value analysis utilized in the application of Statement of Financial Accounting Standards No. 142, we may defer to the fair value implied by Regent's market capitalization to establish the fair value. To the extent that the carrying value exceeds the fair value of the assets, an impairment loss will be recorded in operating income or loss. A 1% to 5% decrease in expected cumulative cash flows with no further changes in assumptions would have resulted in approximately $1.5 million to $7.3 million of additional pre-tax impairment expense in 2008. A 1% increase in our weighted average cost of capital with no further changes in assumptions would have resulted in approximately $13.0 million of additional pre-tax impairment expense in 2008.
Allocation of Acquisition Purchase Price and Valuation of Acquired Intangible Assets - We believe the determination of the fair value of our acquired intangible assets is a critical accounting policy as their value is significant relative to our total assets. We apply various common valuation methods to determine the value of tangible assets, FCC licenses, and other intangible assets. The critical assumptions we use in the valuation of our intangible assets include assumptions about market growth, cash flow growth, multiples of cash flow, and other economic factors.
Determining the Recoverability of Long-Lived Assets - Our long-lived assets to be held and used (fixed assets and definite-lived intangible assets) are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to

result from the use and eventual disposal of the asset. If we were to determine that the carrying amount of an asset was not recoverable, we would record an impairment loss for the difference between the carrying amount and the fair value of the asset. We determine the fair value of our long-lived assets based upon the market value of similar assets, if available, or independent appraisals, if necessary. Long-lived assets to be disposed of and/or held for sale are reported at the lower of carrying amount or fair value, less cost to sell. We determine the fair value of these assets in the same manner as described for assets held and used.
Deferred Tax Assets - At December 31, 2008, we had current and non-current net deferred tax assets of approximately $80.9 million before valuation allowance, the primary components of which are our intangible assets and net operating loss carryforwards. As a result of our anticipated failure to meet the required financial covenants in our credit agreement, the potential acceleration of the maturity of our debt creates uncertainty in our ability to continue as a going concern. Consequently, during the fourth quarter of 2008, we recorded a valuation allowance against substantially all of our net deferred tax assets due to our inability to conclude that it is more likely than not that the deferred tax assets will be realized. If it were determined that we would be able to utilize a portion of the net operating loss carryforwards that are currently reduced by a valuation allowance, an adjustment to the valuation allowance would be recorded as a reduction to income tax expense.
Derivative Financial Instruments - We are a party to five interest rate swap agreements, which effectively convert approximately $155.2 million of our borrowings from a variable interest rate to a fixed rate of interest. Hedge accounting was not applied to these interest rate swap agreements. Consequently, revaluation gains and losses associated with changes in the fair value measurement of the swaps are recorded as a component of operating loss in the Consolidated Statements of Operations and Comprehensive Loss. Fair value for derivative interest rate swap agreements is obtained from counterparties to the agreements and corroborated through estimates using internal discounted cash flow calculations based upon forward interest-rate yield curves, and considering the risk of non-performance by the parties to the contract. At December 31, 2008 and 2007, the Company had liabilities of approximately $11.0 million and $4.4 million, respectively, related to the swap agreements. Effect of Recently Issued Accounting Pronouncements In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141(R), "Business Combinations," ("SFAS 141R"). SFAS 141R requires an acquirer to recognize all of the fair values of acquired assets, including goodwill, and assumed liabilities, with limited exceptions, even in instances where the acquirer has not acquired 100% of its target. SFAS 141R also requires that contingent consideration be measured at fair value at that acquisition date and included on that basis in the purchase price consideration. Under SFAS 141R, transaction costs would be expensed as incurred. SFAS 141R amends Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," to require the acquiring entity to recognize changes in the amount of its deferred tax benefits that are recognizable due to a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, based upon the circumstances. SFAS 141R is effective for fiscal years beginning after December 15, 2008. Adoption is prospective and early adoption is not permitted. We will apply this statement prospectively to business combinations that occur subsequent to January 1, 2009, except for the accounting for valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions. During the third quarter of 2008, we expensed all acquisition-related costs for potential business combinations that were not consummated prior to the adoption of SFAS 141R.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51," ("SFAS 160"). SFAS 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under SFAS 160, noncontrolling interests are considered equity and would be reported as an element of consolidated equity, net income will encompass the total income of all consolidated subsidiaries and separate disclosure on the face of the income statement of the attribution of that income between the controlling and noncontrolling interests, and increases and decreases in the noncontrolling ownership interest amount will be accounted for as equity transactions. SFAS 160 is effective for the first annual reporting period beginning on or after December 15, 2008, and earlier application is prohibited. We will adopt SFAS 160 effective as of January 1, 2009, and do not anticipate a material impact on our financial position and results of operations.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," ("SFAS 161"). SFAS 161 requires entities to provide enhanced disclosures regarding: how and why an entity uses derivative instruments; how derivative instruments and related hedge items are accounted for under Statement 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with earlier application allowed. The Company will adopt SFAS 161 effective as of January 1, 2009, and will provide the appropriate required disclosures at that time.
In June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP 03-6-1"). FSP 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in Financial Accounting Standards No. 128, "Earnings per Share." Under the guidance in FSP 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP 03-6-1 is effective on January 1, 2009 and prior-period earnings per share data will be adjusted retrospectively. We are currently evaluating the impact, if any, that the adoption of FSP 03-6-1 will have on our financial statements.
RESULTS OF OPERATIONS
The key factors that have affected our business over the last three years are discussed and analyzed in the following paragraphs. This commentary should be read in conjunction with our consolidated financial statements and the related footnotes included herein.
Our financial results are seasonal. As is typical in the radio broadcasting industry, we expect our first calendar quarter to produce the lowest revenues for the year, and the fourth calendar quarter to produce the highest revenues for the year. Our operating results in any period may be affected by advertising and promotion expenses that do not necessarily produce commensurate revenues until the impact of the advertising and promotion is realized in future periods.

2008 Compared to 2007
Results of continuing operations for the year ended December 31, 2008 compared to December 31, 2007 were impacted by several factors. Of primary significance was a general deterioration in spending by advertisers due to recessionary economic conditions throughout the United States, especially during the fourth quarter of 2008, but for certain advertiser categories, throughout the entire 2008 year. The impact of these poor economic conditions was offset partially by strong political revenues in 2008 compared to 2007 in certain of our markets.
Net Broadcast Revenues
The radio industry overall experienced a 9% decrease in revenues in 2008 compared to 2007, according to the Radio Advertising Bureau ("RAB"). The RAB further indicated that in 2008, local revenues decreased 10% and national revenues decreased 12%. In 2008, our net broadcast revenue was derived from approximately 86% local revenue and 14% national revenue.
Net broadcast revenues for Regent decreased 1.6%, to approximately $96.3 million in 2008 from approximately $97.9 million in 2007. The table below provides a summary of the net broadcast revenue variance for the comparable twelve-month periods (in thousands):

Net broadcast revenue variance:

                                               (Decrease)
                                             increase in net
                                                broadcast            %
                                                 revenue          Change
           Local revenue                    $          (1,248 )      (1.6 )%
           National revenue                            (1,588 )     (13.8 )%
           Political revenue                            1,320       224.1 %
           Barter revenue                                 (33 )      (0.9 )%
           Other                                          (23 )      (1.0 )%

           Net broadcast revenue variance   $          (1,572 )      (1.6 )%

Local revenue - The decrease of 1.6% in local revenue in 2008 compared to 2007 was due primarily to the effects on advertising spending of deteriorating economic conditions throughout the United States, which primarily affected us during the fourth quarter of 2008. Despite an economic downturn in most of the local economies in which we operated, certain of our markets experienced increases in local direct and agency advertising revenues, primarily our Bloomington, Illinois and Utica, New York markets. Bloomington benefited from strong agricultural advertising spending, while Utica benefited from strong sales initiatives for local direct and agency business. The overall declines in local direct and agency revenues were partially offset by increases in Interactive revenue and non-traditional event revenue. Interactive revenue increased by approximately $1.2 million in 2008, as we continued to develop our Interactive initiative during the year. Non-traditional revenues increased due to strong attendance at our Taste of Country event in our Buffalo, New York market and our Countryfest event in our Albany, New York market. Our Utica, New York market experienced higher non-traditional revenue in 2008 due to stronger attendance at several non-traditional revenue events over the prior year, in addition to rolling out a new non-traditional revenue event during the year.

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