**UNITED STATES****SECURITIESAND EXCHANGE COMMISSIONW****ashington,D.C. 20549**

**FORM 10-Q**
| **(Mark One)**                                           | ** ** | ** **                                                                                  |
|----------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|
| **x**                                                    | ** ** | **Quarterly Report Pursuant to Section 13 or  15(d) of The Securities Exchange**  |
| ** **                                               | ** ** | **Act of 1934.**                                                                            |
| ** **                                               |       |                                                                                        |
| **For the  quarterly period ended: March 31, 2006** |
| ** **                                               |       |                                                                                        |
| **OR**                                                   |
| ** **                                               |       | ** **                                                                                  |
| **o**                                                    |       | **Transition Report Pursuant to Section 13 or  15(d) of the Securities Exchange** |
| ** **                                               |       | **Act of 1934**                                                                             |

** **

**CommissionFile Number: 333-57201**

**Advanstar Communications Inc.**(Exact name of registrant as specified in its charter)
| **New York**                              | **59-2757389**       |
|-------------------------------------------|----------------------|
| (State or other  jurisdiction of          | (I.R.S. Employer     |
| incorporation or  organization)           | Identification  No.) |
|                                      |                 |
| **641  Lexington Avenue, New York, NY**   | **10022**            |
| (Address of  principal executive offices) | (Zip Code)           |

 

Registrant’s TelephoneNumber, Including Area Code:  **(212) 951-6600**

Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark ifthe registrant is a large accelerated filer, an accelerated filer or a nonaccelerated filer.

LargeAccelerated Filer o    Accelerated Filer o    Non-Accelerated Filer x

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

As of May 15, 2006, 1,000,000 shares of the registrant’s commonstock were outstanding.

 

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| **PART I**                                                  | ** **   | **Financial Information**                                                                                             |     |
|------------------------------------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------|----------|
| ** **                                                       | ** **   | ** **                                                                                                            |     |
| **Item 1.**                                                      | *** *** | ***Financial Statements:***                                                                                           | * * |
|                                                             |         |                                                                                                                  |     |
|                                                             |         | Condensed Consolidated Balance Sheets (unaudited) at  March 31, 2006 and  December 31, 2005                 |     |
|                                                             |         |                                                                                                                  |     |
|                                                             |         | Condensed Consolidated Statements of Operations  (unaudited) for the three months  ended March 31, 2006 and 2005 |     |
|                                                             |         |                                                                                                                  |     |
|                                                             |         | Condensed Consolidated Statements of Cash Flows  (unaudited) for the three months  ended March 31, 2006 and 2005 |     |
|                                                             |         |                                                                                                                  |     |
|                                                             |         | Notes to Condensed Consolidated Financial Statements  (unaudited)                                                     |     |
|                                                             |         |                                                                                                                  |     |
| **Item 2.**                                                      | ** **   | ***Management’s  Discussion and Analysis of Financial Condition and Results of  Operations***                    |     |
| *** ***                                                     |         |                                                                                                                  |     |
| **Item 3.**                                                      | ** **   | ***Quantitative  and Qualitative Disclosures About Market Risk***                                                     |     |
| *** ***                                                     |         |                                                                                                                  |     |
| **Item 4.**                                                      | ** **   | ***Controls and Procedures***                                                                                         |     |
| *** ***                                                     | *** *** | * *                                                                                                              | * * |
| **PART II     OTHER  INFORMATION** |         |
|                                                             |         |                                                                                                                  |     |
| **Item 6.**                                                      | ** **   | ***Exhibits***                                                                                                        |     |
| *** ***                                                     | *** *** | * *                                                                                                              | * * |
| **SIGNATURES**                                                   | ** **   |                                                                                                                  |     |

 

 

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**PART I FINANCIAL INFORMATION**

**Advanstar Communications Inc.**

**CondensedConsolidated Balance Sheets****(Unaudited)**

 (In thousands, except share and per sharedata)

 
| ** **                                                                                                                                             | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                             | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| **ASSETS**                                                                                                                                             | ** ** | ** **         | ** ** | ** **            | ** ** |
| Current assets:                                                                                                                                        |       |               |       |                  |       |
| Cash and cash equivalents                                                                                                                              |       | $                  | 45,543     |                  | $          | 46,609 |   |
| Accounts receivable, net of allowance of $1,305 and  $1,076 at  March 31, 2006 and December 31, 2005                                         |       | 24,255             |       | 24,607                |       |
| Prepaid expenses                                                                                                                                       |       | 6,757              |       | 7,871                 |       |
| Other                                                                                                                                                  |       | 2,334              |       | 1,965                 |       |
| Total current assets                                                                                                                                   |       | 78,889             |       | 81,052                |       |
| Due from parent                                                                                                                                        |       | 2,299              |       | 2,232                 |       |
| Property, plant  and equipment, net                                                                                                                    |       | 20,662             |       | 21,306                |       |
| Intangible and other  assets:                                                                                                                          |       |               |       |                  |       |
| Goodwill                                                                                                                                               |       | 595,255            |       | 594,982               |       |
| Intangibles and other, net                                                                                                                             |       | 55,269             |       | 62,644                |       |
| Total intangible and other assets, net                                                                                                                 |       | 650,524            |       | 657,626               |       |
| Non-current  assets held for sale                                                                                                                      |       | 4,620              |       | 4,620                 |       |
|                                                                                                                                                   |       | $                  | 756,994    |                  | $          | 766,836 |   |
|                                                                                                                                                   |       |               |       |                  |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**                                                                                                         |       |               |       |                  |       |
|                                                                                                                                                   |       |               |       |                  |       |
| Current liabilities:                                                                                                                                   |       |               |       |                  |       |
| Current maturities of long-term debt                                                                                                                   |       | $                  | 201        |                  | $          | 201 |   |
| Accounts payable                                                                                                                                       |       | 17,564             |       | 12,342                |       |
| Accrued compensation                                                                                                                                   |       | 2,401              |       | 7,236                 |       |
| Other accrued expenses                                                                                                                                 |       | 34,951             |       | 30,758                |       |
| Deferred revenue                                                                                                                                       |       | 26,617             |       | 46,472                |       |
| Total current liabilities                                                                                                                              |       | 81,734             |       | 97,009                |       |
|                                                                                                                                                   |       |               |       |                  |       |
| Long-term debt,  net of current maturities                                                                                                             |       | 461,725            |       | 461,786               |       |
| Deferred income  taxes                                                                                                                                 |       | 33,449             |       | 31,500                |       |
| Other long-term  liabilities                                                                                                                           |       | 6,144              |       | 4,933                 |       |
|                                                                                                                                                   |       |               |       |                  |       |
| Commitments and  contingencies                                                                                                                         |       |               |       |                  |       |
|                                                                                                                                                   |       |               |       |                  |       |
| Stockholder’s equity:                                                                                                                             |       |               |       |                  |       |
| Common stock, $.01 par value, 3,500,000 shares  authorized; 1,000,000 shares  issued and outstanding at March 31, 2006 and December 31, 2005 |       | 10                 |       | 10                    |       |
| Capital in excess of par value                                                                                                                         |       | 434,431            |       | 447,367               |       |
| Accumulated deficit                                                                                                                                    |       | (269,106           | )          | (284,182              | )          |
| Accumulated other comprehensive income                                                                                                                 |       | 8,607              |       | 8,413                 |       |
| Total stockholder’s equity                                                                                                                        |       | 173,942            |       | 171,608               |       |
|                                                                                                                                                   |       | $                  | 756,994    |                  | $          | 766,836 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

2

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**Advanstar Communications Inc.**

**CondensedConsolidated Statements of Operations (Unaudited)**

(In thousands)
| ** **                                                                                         | ** ** | **For the**                 | ** ** |
|----------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                         | ** ** | **Three Months Ended** | ** ** |
| ** **                                                                                         | ** ** | **March 31,**               | ** ** |
| ** **                                                                                         | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| Revenue                                                                                            |       | $                                | 106,578    |   | $ | 90,570 |   |
| Operating expenses:                                                                                |       |                             |       |   |   |
| Cost of production (excluding depreciation)                                                        |       | 22,139                           |       | 16,226 |   |
| Selling, editorial and circulation (excluding  depreciation)                                       |       | 31,477                           |       | 27,998 |   |
| Cost of segment operations (excluding depreciation)                                                |       | 2,370                            |       | 3,174 |   |
| General and administrative (excluding depreciation)                                                |       | 8,926                            |       | 11,546 |   |
| Restructuring charge                                                                               |       | 2,405                            |       | — |   |
| Amortization of intangibles                                                                        |       | 6,700                            |       | 7,668 |   |
| Depreciation                                                                                       |       | 1,962                            |       | 2,290 |   |
| Total operating expenses                                                                           |       | 75,979                           |       | 68,902 |   |
|                                                                                               |       |                             |       |   |   |
| Operating income                                                                                   |       | 30,599                           |       | 21,668 |   |
|                                                                                               |       |                             |       |   |   |
| Other income (expense):                                                                            |       |                             |       |   |   |
| Interest expense                                                                                   |       | (13,772                          | )          | (17,670 | ) |
| Interest income                                                                                    |       | 475                              |       | 177 |   |
| Other (expense) income, net                                                                        |       | (153                             | )          | 15 |   |
| Income from  continuing operations before income taxes and cumulative effect of accounting  change |       | 17,149                           |       | 4,190 |   |
| Provision for  income taxes                                                                   |       | 1,999                            |       | 1,795 |   |
| Income from continuing  operations before cumulative effect of accounting change                   |       | 15,150                           |       | 2,395 |   |
| Loss from  operations of discontinued businesses, net of taxes (see Note 4)                        |       | (74                              | )          | (868 | ) |
| Income before  cumulative effect of accounting change                                              |       | 15,076                           |       | 1,527 |   |
| Cumulative  effect of accounting change (see Note 10)                                              |       | —                           |       | 4,618 |   |
| Net income                                                                                         |       | $                                | 15,076     |   | $ | 6,145 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

3

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**AdvanstarCommunications Inc.Condensed Consolidated Statements of Cash Flows (Unaudited)**(In thousands)

 
| ** **                                                                  | ** ** | **For the**                 | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
| ** **                                                                  | ** ** | **March 31,**               | ** ** |
| ** **                                                                  | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| Operating activities:                                                       |       |                             |       |   |   |
| Net income                                                                  |       | $                                | 15,076     |   | $ | 6,145 |   |
| Adjustments to  reconcile net income to net cash from operating activities: |       |                             |       |   |   |
| Cumulative effect of accounting change                                      |       | —                           |       | (4,618 | ) |
| Depreciation and amortization                                               |       | 8,662                            |       | 11,620 |   |
| Gain on derivative financial instruments                                    |       | —                           |       | (26 | ) |
| Loss on asset disposal                                                      |       | 176                              |       | — |   |
| Losses of minority interest holders                                         |       | —                           |       | 646 |   |
| Non-cash interest expense                                                   |       | 644                              |       | 817 |   |
| Deferred income taxes                                                       |       | 1,949                            |       | 3,000 |   |
| Provision for bad debts                                                     |       | 738                              |       | 123 |   |
| Changes in operating assets and liabilities                                 |       | (13,404                          | )          | (13,663 | ) |
|                                                                        |       |                             |       |   |   |
| Net cash provided by operating activities                              |       | 13,841                           |       | 4,044 |   |
|                                                                        |       |                             |       |   |   |
| Investing activities:                                                       |       |                             |       |   |   |
| Additions to property, plant and equipment                                  |       | (1,877                           | )          | (1,525 | ) |
| Acquisitions of intangible assets and other                                 |       | (9                               | )          | — |   |
|                                                                        |       |                             |       |   |   |
| Net cash used in investing activities                                       |       | (1,886                           | )          | (1,525 | ) |
|                                                                        |       |                             |       |   |   |
| Financing activities:                                                       |       |                             |       |   |   |
| Payments of long-term debt                                                  |       | (25                              | )          | (4,888 | ) |
| Dividend paid to stockholder                                                |       | (12,936                          | )          | — |   |
|                                                                        |       |                             |       |   |   |
| Net cash used in financing activities                                       |       | (12,961                          | )          | (4,888 | ) |
|                                                                        |       |                             |       |   |   |
| Effect of  exchange rate changes on cash                                    |       | (60                              | )          | 251 |   |
|                                                                        |       |                             |       |   |   |
| Net decrease in  cash and cash equivalents                                  |       | (1,066                           | )          | (2,118 | ) |
|                                                                        |       |                             |       |   |   |
| Cash and cash  equivalents, beginning of period                             |       | 46,609                           |       | 41,223 |   |
|                                                                        |       |                             |       |   |   |
| Cash and cash  equivalents, end of period                                   |       | $                                | 45,543     |   | $ | 39,105 |   |

 

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

4

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**AdvanstarCommunications Inc.Notes to Condensed Consolidated Financial Statements (Unaudited)**

**1.****                          Basis ofPresentation**

Theaccompanying unaudited condensed consolidated financial statements have beenprepared by Advanstar Communications Inc. (“Communications,” or the “Company”)in accordance with the instructions to Form 10-Q and, therefore, donot include all the information and footnotes required by generally acceptedaccounting principles for complete financial statements. Management believesthat all adjustments, consisting solely of normal recurring items, considerednecessary for a fair statement of financial position and results of operations,have been included. These condensed consolidated financial statements, however,should be read in conjunction with the audited financial statements and therelated notes included in the Company’s annual report on Form 10-Kfor the year ended December 31, 2005, filed with the Securities andExchange Commission on March 30, 2006. The results of operations for thethree months ended March 31, 2006 are not necessarily indicative of theoperating results that may be expected for the entire year ending December 31,2006.

**2.**                          Summary of Significant Interim Accounting Policies

**Interimincome tax expense**

The Company determinesits quarterly income tax provision based upon an estimated annual effectiveincome tax rate and discrete items as they occur. In determining the effectiveincome tax rate applicable to interim periods, the Company excludes taxjurisdictions where no tax expense or benefit is expected for the entire year.

**3.**                          Goodwill and OtherIntangible Assets

Thechanges in the carrying amount of goodwill by operating segment are as follows(in thousands):

 

|                                                               | ** ** | **Fashion &** | ** ** | **Life**     | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|--------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                                                    | ** ** | **Licensing**          | ** ** | **Sciences** | ** ** | **Powersports** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
| Balance as of  December 31, 2005                         |       | $                      | 188,837    |         | $          | 316,554         |       | $          | 79,674     |       | $          | 9,917 |   | $ | 594,982 |   |
| Goodwill  acquired or completion of purchase price allocation |       | (13                    | )          | —       |       | 41              |       | —     |       | 28         |       |
| Foreign currency  translation                                 |       | —                 |       | —       |       | —          |       | 245        |       | 245        |       |
| Balance as of  March 31, 2006                            |       | $                      | 188,824    |         | $          | 316,554         |       | $          | 79,715     |       | $          | 10,162 |   | $ | 595,255 |   |

 

5

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Trade exhibitor and advertiser lists are amortized on adouble-declining balance method over six years and five years, respectively,subscriber lists and other intangible assets are amortized on a straight-linebasis over three to ten years, and trademarks and trade names are amortized ona straight-line basis over twenty years. These intangible assets consist of thefollowing (in thousands):

 

|                                         | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| Trade exhibitor  lists                  |       | $                  | 132,989    |                  | $          | 132,936 |   |
| Advertiser lists                        |       | 29,680             |       | 29,680                |       |
| Subscriber lists                        |       | 6,023              |       | 6,023                 |       |
| Trade names and  trademarks             |       | 19,211             |       | 19,211                |       |
| Other intangible  assets                |       | 20,072             |       | 20,275                |       |
| Deferred  financing costs               |       | 18,668             |       | 18,668                |       |
|                                    |       | 226,643            |       | 226,793               |       |
| Accumulated  amortization               |       | (171,374           | )          | (164,149              | )          |
|                                    |       |               |       |                  |       |
| Total intangible  and other assets, net |       | $                  | 55,269     |                  | $          | 62,644 |   |

 

Estimated amortizationexpense of identified intangible and other assets for the remaining nine monthsof 2006 and for the next five years is as follows (in thousands):

 

| 2006 |   | $     | 14,439 |   |
|------|--------|-------|--------|--------|
| 2007 |   | 8,372 |   |
| 2008 |   | 5,454 |   |
| 2009 |   | 1,919 |   |
| 2010 |   | 1,570 |   |
| 2011 |   | 1,092 |   |

 

**4.**                          Acquisitions and Divestitures

**Acquisitions**

All acquisitions havebeen accounted for using the purchase method of accounting and, accordingly,the assets acquired and liabilities assumed have been recorded at their fairvalues as of the dates of the acquisitions. The excess of the purchase priceover the fair value of the assets acquired and liabilities assumed has beenrecorded as goodwill. Results of operations for these acquisitions have beenincluded in the accompanying condensed consolidated financial statements sincetheir respective dates of acquisition. All acquisitions (collectively, the “AcquiredBusinesses”) have been consummated to expand the Company’s show and publicationpresence within its existing market sector and to maximize marketing andcustomer service infrastructure and expertise.

6

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On September 12,2005, the Company purchased an off-road consumer event business from PetersenEvents Corporation (“Off-Road Expo”) for $2.2 million in cash. In addition, theCompany may pay additional contingent cash consideration to the formershareholders based on the 2006 operating revenue from the acquired business. Anycontingent consideration paid will be recorded as goodwill when earned by theformer shareholder.

On August 23, 2005,the Company purchased a fashion industry tradeshow business and relatedproducts from the owner of POOL Tradeshow (‘‘POOL’’) for $3.0 million in cash. Inaddition, the Company may pay additional contingent cash consideration to theformer owner based on the 2007 and 2008 operating results from the acquired businessand the owner’s continued employment with the Company. Any contingentconsideration paid will be recorded as compensation expense when earned by theformer owner.

On August 19, 2005,the Company purchased Project Global Tradeshow, Inc. (‘‘Project”), aproducer of tradeshows serving the premium contemporary sector of the fashionindustry, for $9.9 million in cash, subject to a working capital adjustment,which will be completed in 2006. The Company does not believe the finalallocation of purchase price will be materially different from preliminaryestimates. In addition, the Company may pay additional contingent cashconsideration to the former shareholders based on the 2007 and 2008 operatingresults of the acquired business and their continued employment with theCompany. Any contingent consideration paid will be recorded as compensationexpense when earned by the former shareholders.

In the second quarter of2005, the Company completed two other acquisitions of consumer tradeshowbusinesses with an aggregate purchase price of $0.5 million in cash.

In 2004, the Companypurchased a portfolio of pharmaceutical industry conferences and magazines (“IVT”)for which it is required to pay additional contingent cash consideration during2006 to the former shareholders based on 2004 and 2005 operating results of theacquired business and their continued employment with the Company which wasrecorded as compensation expense when earned by the former shareholders in2005.

TheCompany has recognized contingent consideration for the Acquired Businesses ascompensation expense in the condensed consolidated statements of operations asfollows (in thousands):

 

|                               | ** ** | **Three Months Ended** | ** ** |
|-------------------------------|------------|----------------------------------|------------|
| ** **                    | ** ** | **March 31,**               | ** ** |
| ** **                    | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| IVT contingent  consideration |       | $                                | —     |   | $ | 300 |   |
|                               |            |                                  |            |  |  |  |  |

 

7

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Thechange in the balance of accrued contingent consideration in the accompanyingcondensed consolidated balance sheet included as part of other accrued expensesis as follows (in thousands):

 

|                                        | ** ** | **Total** | ** ** |
|----------------------------------------|------------|-----------|------------|
| Balance at December 31, 2005 |       | $         | 1,336      |   |
| Contingent consideration               |       | —    |       |
| Payments to former shareholders        |       | (446      | )          |
| Balance at  March 31, 2006        |       | $         | 890        |   |

** **

The pro forma operatingresults of the Acquired Businesses for thethree months ended March 31, 2005 discussed above are immaterial tothe Company’s consolidated results of operations.

**Divestitures**

The operating results,related income taxes, and any gains or losses of the following divestitures(collectively, the “Disposed Businesses”) have been reported in discontinued operationsin the condensed consolidated statements of operations for the three monthsended March 31, 2006 and 2005. ****Interest expense was not allocated to any of theCompany’s discontinued operations.****

*Arenacross*

In December 2005,the Company closed on the sale of its Arenacross Championship Series business(“Arenacross”) for a total selling price of $0.2 million. The Company recordeda $0.4 million loss on the sale. Arenacross had no revenue in the three monthsended March 31, 2005.

*EastCoast Fashion Trade Show Acquired from Larkin-Pluznik-Larkin,LLC*

In the second quarter of2005, the Company discontinued the remaining East Coast Fashion trade showbusiness acquired in the 1999 Larkin transaction (“East Coast Fashion”) andrecognized a $2.3 million impairment, which was the carrying value of therelated intangibles. East Coast Fashion had no revenue in the three monthsended March 31, 2005.

*PortfolioGroup*

On May 23, 2005, theCompany, Advanstar, Inc. and certain affiliates (Advanstar ExpositionsCanada Limited and Advanstar.com) completed the sale of virtually all its  business assets and liabilities associatedwith its tradeshows and conferences, trade publications and direct marketingproducts serving information, technology, communications, travel, beauty, homeentertainment, and portfolio markets, including the shares of the Company’sHong Kong subsidiaries. The shares of the Company’s Brazilian subsidiary weresold to the same buyer in July 2005 after obtaining final regulatoryapproval. Collectively, all of the above properties are referred to as “thePortfolio Group.” The sale price for these assets and shares was $185.0 millionin cash less selling expenses and working capital adjustments of $11.2million. The Company recorded a gain of $52.9 million on the sale.

Revenue of the Portfolio Group, included indiscontinued operations in the condensed consolidated statements of operations,was $23.4 million for the three months ended March 31, 2005.

8

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**AssetsHeld for Sale**

In the secondquarter of 2005, the Company committed to a plan to sell its Cleveland officebuilding and land (“the Cleveland Office”) as a result of the sale of thePortfolio Group. The Company ceased depreciation of these assets, effectivesecond quarter of 2005. As of March 31, 2006 and December 31, 2005,the Company reported this building and land as assets held for sale in thecondensed consolidated balance sheet.

The financial results ofthe Disposed Businesses included in discontinued operations in the accompanyingcondensed consolidated statements of operations are as follows (in thousands):

 

|                                                  | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------|------------|----------------------------------|------------|
| ** **                                       | ** ** | **March 31,**               | ** ** |
| ** **                                       | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| (Loss) income  before income taxes               |       | $                                | (119       | ) | $ | 1,432 |   |
| Income tax  (benefit) provision                  |       | (45                              | )          | 1,654 |   |
| Minority interests                               |       | —                           |       | (646 | ) |
|                                             |       |                             |       |   |   |
| Loss from operations of  discontinued businesses |       | $                                | (74        | ) | $ | (868 | ) |

 

The Company allocatedgoodwill to the Portfolio Group and included the allocated goodwill in itscalculation of gain on disposal in the second quarter of 2005. Goodwillallocated to the Portfolio Group was based on its relative fair value to the entirereporting unit prior to disposal. No goodwill was allocated to DisposedBusinesses during the quarters ended March 31, 2006 and 2005.

**5.**                          Debt

**Creditfacility**

The Company is party to acredit facility (the “Credit Facility”) with a group of financial institutionsacting as lenders. The Credit Facility is guaranteed by the Company’s domesticsubsidiaries and is collateralized by first priority liens on substantially allof the assets of the Company and the guarantors. The Credit Facility containsrestrictive covenants, including limitations on certain asset dispositions,dividends, investments and other restricted payments. In addition, the CreditFacility requires a minimum quarterly fixed charge coverage ratio (as defined). Failure tocomply with the covenants could cause an event of default under the CreditFacility.

Prior to the June 2005transaction described below, the Credit Facility consisted of (i) $25.0million of term B loans due October 11, 2008, and (ii) $60.0 millionof revolving loan availability through April 11, 2007.

InJune 2005, the Company repaid the outstanding term B loans with proceedsfrom the sale of the Portfolio Group (see Note 4) and amended the CreditFacility to allow the Company to retain its revolving loan availability at$60.0 million while allowing for repayment of second lien and junior debt withproceeds from the sale of the Portfolio Group. As of March 31, 2006, theCompany had $1.1 million of unused letters of credit, which reduce borrowingsavailable under the Credit Facility to $58.9 million.

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**Seniorsecured notes**

The Senior SecuredNotes initially consisted of $130.0 million of Second Priority Senior SecuredFloating Rate Notes due 2008 (the “floating rate notes”), which requirequarterly amortization equal to 0.25% of the principal amount thereof, and$300.0 million of 10.75% Second Priority Senior Secured Notes due 2010 (the “fixedrate notes”). Interest on the floating rate notes is payable at a rate equal tothree-month LIBOR, which is reset quarterly, plus 7.5%.

The floating rate notesand fixed rate notes prior to the transaction described below were fully andunconditionally guaranteed on a senior basis, jointly and severally, by theCompany’s wholly owned domestic subsidiaries and collateralized by second priorityliens on substantially all the collateral pledged against borrowings under theCompany’s Credit Facility (other than the capital stock of certain of itssubsidiaries and assets of its parent companies, including Advanstar). Thecovenants under the notes include limitations on certain asset dispositions,liens, debt incurrence, dividends, investments and other restricted payments.

In June 2005,the Company used a portion of the proceeds from the Portfolio Group sale torepurchase $8.7 million of the fixed rate notes at a price equal to 100% of theprincipal amount plus accrued interest.

Separately, theCompany also consummated a tender offer in June 2005 for the floating ratenotes and repurchased $117.8 million of the floating rate notes at a priceequal to $1,073 per $1,000 principal amount tendered plus accrued and unpaidinterest to the date of settlement. In the second quarter of 2005, the Company recognized a $12.6 million loss onextinguishment of debt related to the repurchase, including $8.6 million in tender offer premium andconsent fees, a write-off of $3.5 million in unamortized deferred financingcosts, and $0.5 million in legal fees and expenses.

In connection withthe tender offer,the Company and the trustee entered into a supplemental indenture thateliminated substantially all of the restrictive and reporting covenants,certain events of default and certain other provisions with respect to thefloating rate notes and released the floating rate notes’ lien on thecollateral under the indenture. The fixed rate notes remain collateralized bythe collateral and subject to the restrictive covenants in the indenture.

**Seniorsubordinated notes**

The Company’s$160.0 million unsecured, 12% senior subordinated notes due 2011 (the “SeniorSubordinated Notes”) bear interest payable semiannually on February 15 andAugust 15 of each year. The Senior Subordinated Notes are fully andunconditionally guaranteed on a senior subordinated basis, jointly andseverally, by the Company’s wholly owned domestic subsidiaries. The covenantsunder the Senior Subordinated Notes include limitations on certain assetdispositions, liens, debt incurrence, dividends, investments and other restrictedpayments.

10

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Long-term debt consistsof the following (in thousands):

|                                                                                                                                                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                         | ** ** | **2006**           | ** ** | **2005**              | ** ** |
|                                                                                                                                                               |       |               |       |                  |       |
| Revolving credit  loan, interest at LIBOR plus 3.75%; due April 11, 2007                                                                                      |       | $                  | —     |                  | $          | — |   |
| Second priority  senior secured floating rate notes, interest at LIBOR plus 7.5%; 12.33% at  March 31, 2006, due 2008                                         |       | 9,848              |       | 9,872                 |       |
| 10.75% Second  priority senior secured notes, due 2010, plus unamortized premium of $643 and  $680 at March 31, 2006 and December 31, 2005, respectively |       | 291,978            |       | 292,015               |       |
| Senior  subordinated notes, interest at 12.00%, due 2011                                                                                                           |       | 160,000            |       | 160,000               |       |
| Acquisition note  payable, due June 2006                                                                                                                      |       | 100                |       | 100                   |       |
|                                                                                                                                                               |       | 461,926            |       | 461,987               |       |
| Less current  maturities                                                                                                                                           |       | (201               | )          | (201                  | )          |
|                                                                                                                                                               |       | $                  | 461,725    |                  | $          | 461,786 |   |

 

**6.**                          Comprehensive Income

The table below presentscomprehensive income, defined as changes in the equity of the Company excludingchanges resulting from investments by and distributions to shareholders (inthousands):

 

|                                                                  | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                       | ** ** | **March 31,**               | ** ** |
| ** **                                                       | ** ** | **2006**                         | ** ** | **2005** | ** ** |
|                                                             |       |                             |       |   |   |
| Net income                                                       |       | $                                | 15,076     |   | $ | 6,145 |   |
| Change in  cumulative translation adjustment                     |       | 194                              |       | (458 | ) |
| Change in  unrealized losses on derivative financial instruments |       | —                           |       | (26 | ) |
| Comprehensive income                                             |       | $                                | 15,270     |   | $ | 5,661 |   |

 

**7.**                          Segments

The Company follows theprovisions of SFAS No. 131, “Disclosures about Segments of an Enterpriseand Related Information.” During the first quarter of 2006, the Companyundertook a strategic change in the monitoring and management of the businessto better reflect management’s focus and commitment to its threeindustry-focused segments: Fashion & Licensing, Life Sciences, andPowersports. This change was prompted as a result of a substantial change inthe business organization following the divestiture of the Portfolio Group (seeNote 4). The Company has included its non reportable operating segments inOther. In the Company’s most recently filed annual report on Form 10-Kfor the year ended December 31, 2005, the Company’s reportable segmentswere by product type rather than by market sector as currently is beingreported. The Company has restated its segment information for the quarterended March 31, 2005 into the new reportable segments.

 

11

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The Company evaluates the performance of, andallocates resources to, its segments based on contribution margin —defined as revenue lesscost of production; selling, editorial and circulation costs; and segmentmanagement costs (excluding depreciation), which is a non-GAAP measure. Theaccounting policies of the reportable segments are the same as those describedin the summary of significant accounting policies. There are no inter-segmentsales or transfers. Assets are not allocated to segments and therefore have notbeen presented. Revenue and contribution margins of the Company’s reportablesegments are as follows (in thousands):
| ** **                              | ** ** | **Fashion &   Licensing** | ** ** | **Life  Sciences** | ** ** | **Powersports** | ** ** | **Other** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|-----------------------------------------|------------|--------------------|------------|-----------------|------------|-----------|------------|-----------|------------|
|                                    |       |                                    |       |               |       |            |       |      |       |      |       |
| Three months ended  March 31, 2006 |       |                                    |       |               |       |            |       |      |       |      |       |
| Revenue                                 |       | $48,093                                 |       | $35,103            |       | $21,154         |       | $2,228    |       | $106,578  |       |
| Contribution  margin                    |       | 28,918                                  |       | 10,135             |       | 10,535          |       | 1,004     |       |      |       |
|                                    |       |                                    |       |               |       |            |       |      |       |      |       |
| Three months ended  March 31, 2005 |       |                                    |       |               |       |            |       |      |       |      |       |
| Revenue                                 |       | $36,896                                 |       | $32,701            |       | $18,624         |       | $2,349    |       | $90,570   |       |
| Contribution margin                     |       | 23,586                                  |       | 9,172              |       | 9,157           |       | 1,257     |       |      |       |

 

The reconciliation of total segment contributionmargin to consolidated income from continuing operations before income taxesand cumulative effect of accounting change is as follows (in thousands):

 
| ** **                                                                                         | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                         | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
|                                                                                               |       |                                             |       |   |   |
| Total segment  contribution margin                                                                 |       | $50,592                                          |       | $43,172 |   |
| General and  administrative expense                                                           |       | (8,926                                           | )          | (11,546 | ) |
| Restructuring charge                                                                               |       | (2,405                                           | )          | — |   |
| Depreciation and  amortization                                                                     |       | (8,662                                           | )          | (9,958 | ) |
| Other expense  (primarily interest)                                                                |       | (13,450                                          | )          | (17,478 | ) |
|                                                                                               |       |                                             |       |   |   |
| Income from continuing operations before income taxes and cumulative   effect of accounting change |       | $17,149                                          |       | $4,190 |   |

** **

**8.**                          RestructuringActivity

Relatedto the sale of the Portfolio Group (see Note 4), in May 2005, the Companyceased use of certain leased office space in New York, NY, Milford, CT, andSanta Ana, CA. In the third quarter of 2005,the Company vacated additional leased office space in Milford, CT and Chicago,IL. These activities resulted in charges to the Company’s operations during2005. In the first quarter of 2006, the Company vacatedadditional leased office space in New York, NY, and revised its estimate ofexpected future sublease income for this space, resulting in additionalcharges during thethree months ended March 31, 2006.These charges consist of the discounted remaining future minimum lease paymentsdue under non-cancelable leases, net of estimated future sublease income. Theselease commitments expire at various dates through 2010.

12

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During2005 the Company notified 120 employees that they would be severed from theCompany in connection with the sale of the Portfolio Group and thereorganization of the Company’s operating and support department managementteam. As of March 31, 2006, 117 of these employees have been terminated. Severancepayments are expected to continue through 2006.

Restructuringcharges incurred are as follows (in thousands):

 
| ** **                                      | ** ** | **Three Months Ended  March 31,  2006** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------------|------------|
|                                            |       |                                                   |       |
| Facility exit  costs                            |       | $2,421                                                 |       |
| Employee  severance and other termination costs |       | (16                                                    | )          |
| Restructuring charge                            |       | $2,405                                                 |       |

 

Thesummary of the Company’s change in restructuring accruals is as follows (inthousands):

 
| ** **                              | ** ** | **Facility Exit  Costs** | ** ** | **Employee  Severance** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|-------------------------------|------------|-------------------------|------------|-----------|------------|
| Balance at  December 31, 2005 |       | $3,412                        |       | $807                    |       | $4,219    |       |
| Restructuring charge                    |       | 2,421                         |       | (16                     | )          | 2,405     |       |
| Utilized-cash                           |       | (542                          | )          | (480                    | )          | (1,022    | )          |
| Utilized-non-cash                       |       | —                        |       | —                  |       | —    |       |
| Balance at  March 31, 2006         |       | $5,291                        |       | $311                    |       | $5,602    |       |

** **

Therestructuring accrual balance in the accompanying condensed consolidatedbalance sheet is $5.6 million and $4.2 million at March 31, 2006 and December 31,2005, of which $2.0 million and $2.1 million is in other accrued expenses at March 31,2006 and December 31, 2005, and $3.6 million and $2.1 million is in otherlong term liabilities at March 31, 2006 and December 31, 2005.

**9.**                          Stock Based Compensation

OnJanuary 1, 2006, the Company adopted Statements of Financial Accounting Standards No. 123R, *Share-Based Payment* (“SFAS 123R”). Under SFAS 123R, theCompany’s share based awards meet the definition of liability awards. As allowed under the provisions of thisstatement for entities not meeting the public company definition, the Companyadopted the intrinsic value method of accounting for its liability awards. Accordingly,compensation expense and a related liability is recorded only if the value ofthe Company’s shares underlying its share based awards are greater than theawards’ exercise price as of the end of the applicable reporting period. As of March 31,2006, the Company’s management has determined that the fair value of its commonstock is less than its exercise price of all its options. Accordingly, noliability or expense has been recorded during the three months ended March 31,2006. The Company had no options exercised or cash settlement transactions duringthe three months ended March 31, 2006 relating to its stock option plan.

13

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Priorto January 1, 2006, the Company accounted for its stock options and awards to employees under theprovisions of Accounting Principles Board (“APB”) Opinion No. 25, *Accounting for Stock Issued to Employees*, and relatedinterpretations. No compensation expense was recorded in the condensedconsolidated statement of operations for the three months ended March 31,2005.

On October 12, 2000,Advanstar Holdings Inc. (“Holdings”), the parent company of Advanstar, Inc.,adopted the 2000 Management Incentive Plan (“the Plan”). A maximum of 4,072,789shares of Holdings are authorized for grant to participants under the Plan. Optionsare granted by Holdings’ board of directors at an exercise price of not lessthan the fair value of Holdings common stock at the date of grant and vest overa maximum of nine years. Shares available for grant under the Plan totaled147,789 at March 31, 2006.

A summary of stock optionactivity under the Plan is as follows:

 
| ** **                             | ** ** | **Options  Outstanding** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|----------------------------------------|------------|--------------------------|------------|----------------------------------------|------------|
|                                   |       |                     |       |                                   |       |
| Outstanding at  December 31, 2005 |       | 3,965,000                |       | $10.00                                 |       |
| Cancelled                              |       | (40,000                  | )          | 10.00                                  |       |
| Outstanding at  March 31, 2006    |       | 3,925,000                |       | $10.00                                 |       |

 

At March 31, 2006,the outstanding stock options had a weighted average remaining contractual lifeof 5.0 years and an exercise price of $10.00 per option. Of the optionsoutstanding at March 31, 2006, 2,744,321 were exercisable.

**10.**                   Related-PartyTransactions

**Financial advisory fees andagreements**

In May 2005, theCompany paid a consulting fee of $1.5 million to Credit Suisse Securities(USA), LLC (“CSS (USA)”), an affiliate of Credit Suisse Corporation (“CS Corp.”),an affiliate of the DLJ Merchant Banking funds, related to the sale of the PortfolioGroup (see Note 4).

In June 2005,the Companyrepurchased $7.1 million of its fixed rate notes at par, and $4.6 million ofits floating rate notes at a price equal to 107.3% of principal, from CSS (USA)pursuant to the Company’s tender offer (see Note 5).

**Advanstar, Inc. notes**

In February 2001,Advanstar, Inc. issued discount notes bearing interest at 15% (the “DiscountNotes”) with an aggregate principal due October 2011 of $171.8 million. Thesenotes require cash interest payments starting in April 2006. Neither theCompany nor any of its subsidiaries guarantee the Discount Notes.

Advanstar, Inc.is a holding company and its ability to pay interest on the Discount Notes willbe dependent upon the receipt of dividends from its subsidiaries, including theCompany. The Credit Facility, Senior Secured Notes and the Senior Subordinated Notes impose substantial restrictions on the Company’sand its subsidiaries’ ability to pay dividends.

14

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The restricted paymentscovenants in the Company’s Senior Secured Notes indenture and SeniorSubordinated Notes indenture provide that it can pay dividends only if itsleverage ratio (as defined) is 6.0 to 1.0 or better and only from “a basket” asdefined as the amount by which its cumulative EBITDA (as defined) since January 1,2001 exceeds 150% of the Company’s cumulative interest expense in that periodplus other items including proceeds from equity offerings. The Company cannotassure you its results will allow it to make future distributions in light ofthese restrictions. Failure to pay the interest on these notes will be a default under the notes and also resultin a default under the Company’s Credit Facility, which could have a materialadverse effect on the Company’s financial position, results of operations, andcash flows and/or could impact the Company’s ability to continue to operatewithout an amendment or restructuring of its Credit Facility and the notes. Notwithstanding the leverage ratio limitation onrestricted payments, the Company can make restricted payments in anaggregate amount of up to $20 million to Advanstar, Inc., none ofwhich has been used as of March 31, 2006. On March 14, 2006, theCompany declared and paid a dividend of $12.9 million to Advanstar, Inc.to be used for its April 2006 interest payment on its Discount Notes.

**11.**                   Relationship with Advanstar.com, Inc.

Advanstar.com, Inc.(“Advanstar.com”), an affiliate of the Company, operates the Company’s eventand publication-related web sites and develops certain enhanced webopportunities to serve the Company’s customers in selected industries.

Effective January 1,2005, the Company began consolidating the operations of Advanstar.com with itsoperations upon the adoption of Financial Accounting Standards Board (“FASB”)Interpretation No. 46R, *Consolidation of VariableInterest Entities*. As a result of the adoption of FASBInterpretation No. 46R, the Company recorded a $4.6 million gain, whichwas recorded as a cumulative effect of accounting change in the first quarterof 2005.

**12.**                   Unaudited Supplemental Guarantor Condensed Consolidating FinancialStatements

**Basis of presentation**

TheCompany’s Senior Subordinated Notes and Senior Secured Notes are fully andunconditionally guaranteed on a senior subordinated basis and senior basis,respectively, jointly and severally, by the Company’s wholly owned domesticsubsidiaries. The subsidiary guarantors are Men’s Apparel Guild in California, Inc.,Applied Business teleCommunications, CME2, Inc. and Project GlobalTradeshow, Inc. The unaudited condensed consolidating financial statementsof the guarantors are presented below and should be read in conjunction withthe condensed consolidated financial statements of the Company. Separatefinancial statements of the guarantors are not presented because the guarantorsare jointly, severally, fully and unconditionally liable under the guaranteesand the Company believes the condensed consolidating financial statementspresented are sufficiently meaningful in understanding the financial positionand results of the guarantors. There are no significant restrictions on theability of the subsidiary guarantors to make distributions to the Company.

15

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**Advanstar Communications Inc.Condensed Consolidating Balance Sheets (Unaudited)At March 31, 2006**(Inthousands)

** **

** **
| **ASSETS**                                              | ** ** | **Communications** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Total** | ** ** |
|---------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|--------------------------------------|------------|------------------|------------|-------------------------|------------|
| ** **                                              | ** ** | ** **         | ** ** | ** **                  | ** ** | ** **                           | ** ** | ** **       | ** ** | ** **              | ** ** |
| Current assets:                                         |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Cash and cash equivalents                               |       | $                  | 41,551     |                        | $          | 3,326                                |       | $                | 666        |                    | $          | — |   | $ | 45,543 |   |
| Accounts receivable, net                                |       | 21,754             |       | 898                         |       | 1,603                                |       | —           |       | 24,255                  |       |
| Prepaid expenses                                        |       | 5,230              |       | 1,084                       |       | 443                                  |       | —           |       | 6,757                   |       |
| Other                                                   |       | 2,301              |       | —                      |       | 33                                   |       | —           |       | 2,334                   |       |
| Total current assets                                    |       | 70,836             |       | 5,308                       |       | 2,745                                |       | —           |       | 78,889                  |       |
|                                                    |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Non-current  assets:                                    |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Due from parent                                         |       | 2,299              |       | —                      |       | —                               |       | —           |       | 2,299                   |       |
| Property, plant and equipment, net                      |       | 17,728             |       | 2,760                       |       | 174                                  |       | —           |       | 20,662                  |       |
| Deferred tax asset                                      |       | 3,217              |       | 502                         |       | —                               |       | (3,719           | )          | —                  |       |
| Intangible and other assets, net                        |       | 365,162            |       | 262,563                     |       | 22,799                               |       | —           |       | 650,524                 |       |
| Investments in subsidiaries                             |       | 530,184            |       | —                      |       | —                               |       | (530,184         | )          | —                  |       |
| Intercompany receivable                                 |       | —             |       | 265,930                     |       | (5,863                               | )          | (260,067         | )          | —                  |       |
| Non-current assets held for sale                        |       | 4,620              |       | —                      |       | —                               |       | —           |       | 4,620                   |       |
|                                                    |       | $                  | 994,046    |                        | $          | 537,063                              |       | $                | 19,855     |                    | $          | (793,970 | ) | $ | 756,994 |   |
|                                                    |       |               |       |                        |       |                                 |       |             |       |                    |       |
| **LIABILITIES AND**                                     | ** ** | ** **         | ** ** | ** **                  | ** ** | ** **                           | ** ** | ** **       | ** ** | ** **              | ** ** |
| **STOCKHOLDER’S EQUITY**                           | ** ** | ** **         | ** ** | ** **                  | ** ** | ** **                           | ** ** | ** **       | ** ** | ** **              | ** ** |
| Current  liabilities:                                   |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Current maturities of long-term debt                    |       | $                  | 201        |                        | $          | —                               |       | $                | —     |                    | $          | — |   | $ | 201 |   |
| Accounts payable                                        |       | 8,063              |       | 8,502                       |       | 999                                  |       | —           |       | 17,564                  |       |
| Accrued liabilities                                     |       | 29,065             |       | 8,092                       |       | 195                                  |       | —           |       | 37,352                  |       |
| Deferred revenue                                        |       | 21,585             |       | 4,242                       |       | 790                                  |       | —           |       | 26,617                  |       |
| Total current liabilities                               |       | 58,914             |       | 20,836                      |       | 1,984                                |       | —           |       | 81,734                  |       |
|                                                    |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Long-term debt,  net of current maturities              |       | 461,725            |       | —                      |       | —                               |       | —           |       | 461,725                 |       |
| Deferred income  taxes and other  long-term liabilities |       | 39,398             |       | 3,719                       |       | 195                                  |       | (3,719           | )          | 39,593                  |       |
| Intercompany  payable                                   |       | 260,067            |       | —                      |       | —                               |       | (260,067         | )          | —                  |       |
|                                                    |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Stockholder’s  equity:                             |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Common stock                                            |       | 10                 |       | 8                           |       | 353                                  |       | (361             | )          | 10                      |       |
| Capital in excess of par value                          |       | 434,431            |       | 448,112                     |       | 48,704                               |       | (496,816         | )          | 434,431                 |       |
| (Accumulated deficit) retained earnings                 |       | (269,106           | )          | 64,388                      |       | (39,988                              | )          | (24,400          | )          | (269,106                | )          |
| Accumulated other comprehensive income                  |       | 8,607              |       | —                      |       | 8,607                                |       | (8,607           | )          | 8,607                   |       |
| Total stockholder’s equity                         |       | 173,942            |       | 512,508                     |       | 17,676                               |       | (530,184         | )          | 173,942                 |       |
|                                                    |       | $                  | 994,046    |                        | $          | 537,063                              |       | $                | 19,855     |                    | $          | (793,970 | ) | $ | 756,994 |   |

 

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**Advanstar Communications Inc.**

**Condensed Consolidating Statements of Operations(Unaudited)**

**For the three months ended March 31, 2006**

(In thousands)

 
| ** **                                                                         | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                         | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**       | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Revenue                                                                            |       | $                  | 58,210     |             | $          | 46,628                 |       | $                | 1,740      |             | $          | — |   | $ | 106,578 |   |
| Operating  expenses:                                                               |       |               |       |             |       |                   |       |             |       |             |       |
| Cost of production, selling, editorial, circulation,  and segment management costs |       | 36,425             |       | 17,926           |       | 1,635                  |       | —           |       | 55,986           |       |
| General and administrative                                                         |       | 8,103              |       | 490              |       | 333                    |       | —           |       | 8,926            |       |
| Restructuring charge                                                               |       | 2,405              |       | —           |       | —                 |       | —           |       | 2,405            |       |
| Depreciation and amortization                                                      |       | 4,564              |       | 3,939            |       | 159                    |       | —           |       | 8,662            |       |
| Total operating expenses                                                           |       | 51,497             |       | 22,355           |       | 2,127                  |       | —           |       | 75,979           |       |
| Operating income  (loss)                                                           |       | 6,713              |       | 24,273           |       | (387                   | )          | —           |       | 30,599           |       |
| Other income  (expense):                                                           |       |               |       |             |       |                   |       |             |       |             |       |
| Interest expense, net                                                              |       | (13,297            | )          | —           |       | —                 |       | —           |       | (13,297          | )          |
| Other expense, net                                                                 |       | (34                | )          | (2               | )          | (117                   | )          | —           |       | (153             | )          |
| (Loss) income  from continuing operations before income taxes                      |       | (6,618             | )          | 24,271           |       | (504                   | )          | —           |       | 17,149           |       |
| (Benefit)  provision for income taxes                                         |       | (7,263             | )          | 9,262            |       | —                 |       | —           |       | 1,999            |       |
| Equity in  earnings of subsidiaries                                                |       | 14,505             |       | —           |       | —                 |       | (14,505          | )          | —           |       |
| Income (loss)  from continuing operations                                          |       | 15,150             |       | 15,009           |       | (504                   | )          | (14,505          | )          | 15,150           |       |
| (Loss) income  from operations of discontinued businesses, net of taxes            |       | (74                | )          | —           |       | 6                      |       | (6               | )          | (74              | )          |
| Net income (loss)                                                                  |       | $                  | 15,076     |             | $          | 15,009                 |       | $                | (498       | )                | $          | (14,511 | ) | $ | 15,076 |   |

 

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**AdvanstarCommunications Inc.Condensed Consolidating Statements of Cash Flows (Unaudited)For the three months ended March 31, 2006**(Inthousands)
| ** **                                                                         | ** ** | **Communications** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Total** | ** ** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|--------------------------------------|------------|------------------|------------|-------------------------|------------|------------|
| Operating activities:                                                              |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Net income (loss)                                                                  |       | $                  | 15,076     |                        | $          | 15,009                               |       | $                | (498       | )                       | $          | (14,511    | ) | $ | 15,076 |   |   |
| Adjustments to  reconcile net income (loss) to net cash from operating activities: |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Equity in earnings of subsidiaries                                                 |       | (14,511            | )          | —                      |       | —                               |       | 14,511           |       | —                  |       |       |
| Depreciation and amortization                                                      |       | 4,564              |       | 3,939                       |       | 159                                  |       | —           |       | 8,662                   |       |       |
| Other non-cash items                                                               |       | 3,383              |       | 186                         |       | (62                                  | )          | —           |       | 3,507                   |       |       |
| Change in working capital items                                                    |       | 3,486              |       | (17,265                     | )          | 375                                  |       | —           |       | (13,404                 | )          |       |
| Net cash provided by (used in) operatingactivities                                 |       | 11,998             |       | 1,869                       |       | (26                                  | )          | —           |       | 13,841                  |       |       |
| Investing activities:                                                              |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Additions to property, plant and equipment                                         |       | (1,571             | )          | (282                        | )          | (24                                  | )          | —           |       | (1,877                  | )          |       |
| Acquisitions of intangible assets and other                                        |       | (23                | )          | 14                          |       | **—**                           |       | **—**       |       | (9                      | )          |       |
| Net cash used in investing activities                                              |       | (1,594             | )          | (268                        | )          | (24                                  | )          | **—**       |       | (1,886                  | )          |       |
| Financing activities:                                                              |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Payments of long-term debt                                                         |       | (25                | )          | **—**                  |       | **—**                           |       | **—**       |       | (25                     | )          |       |
| Dividend paid to stockholder                                                       |       | (12,936            | )          | **—**                  |       | **—**                           |       | **—**       |       | (12,936                 | )          |       |
| Net cash used in financing activities                                              |       | (12,961            | )          | **—**                  |       | **—**                           |       | **—**       |       | (12,961                 | )          |       |
| Effect of  exchange rate changes on cash                                      |       | **—**         |       | **—**                  |       | (60                                  | )          | **—**       |       | (60                     | )          |       |
| Net (decrease)  increase in cash and cash equivalents                              |       | (2,557             | )          | 1,601                       |       | (110                                 | )          | **—**       |       | (1,066                  | )          |       |
| Cash and cash  equivalents, beginning of year                                      |       | 44,108             |       | 1,725                       |       | 776                                  |       | **—**       |       | 46,609                  |       |       |
| Cash and cash equivalents,  end of year                                            |       | $                  | 41,551     |                        | $          | 3,326                                |       | $                | 666        |                    | $          | —     |   | $ | 45,543 |   |   |

 

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**AdvanstarCommunications Inc.Condensed Consolidating Balance SheetsAt December 31, 2005**(Inthousands)

|                                                        | ** ** | **Communications** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Total** | ** ** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|--------------------------------------|------------|------------------|------------|-------------------------|------------|------------|
| **Assets**                                             | ** ** | ** **         | ** ** | ** **                  | ** ** | ** **                           | ** ** | ** **       | ** ** | ** **              | ** ** | ** ** |
| Current assets                                         |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Cash and cash equivalents                              |       | $                  | 44,108     |                        | $          | 1,725                                |       | $                | 776        |                    | $          | —     |   | $ | 46,609 |   |   |
| Accounts receivable, net                               |       | 23,140             |       | 446                         |       | 1,021                                |       | —           |       | 24,607                  |       |       |
| Prepaid expenses                                       |       | 6,539              |       | 1,136                       |       | 196                                  |       | —           |       | 7,871                   |       |       |
| Other                                                  |       | 1,929              |       | —                      |       | 36                                   |       | —           |       | 1,965                   |       |       |
| Total current assets                                   |       | 75,716             |       | 3,307                       |       | 2,029                                |       | —           |       | 81,052                  |       |       |
| Non-current assets                                     |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Due from parent                                        |       | 2,232              |       | —                      |       | —                               |       | —           |       | 2,232                   |       |       |
| Property, plant and equipment, net                     |       | 18,360             |       | 2,778                       |       | 168                                  |       | —           |       | 21,306                  |       |       |
| Deferred tax asset                                     |       | 3,217              |       | 502                         |       | —                               |       | (3,719           | )          | —                  |       |       |
| Intangible and other assets, net                       |       | 368,693            |       | 266,246                     |       | 22,687                               |       | —           |       | 657,626                 |       |       |
| Investments in subsidiaries                            |       | 515,479            |       | —                      |       | —                               |       | (515,479         | )          | —                  |       |       |
| Intercompany receivable                                |       | —             |       | 259,760                     |       | (5,423                               | )          | (254,337         | )          | —                  |       |       |
| Non-current assets held for sale                       |       | 4,620              |       | —                      |       | —                               |       | —           |       | 4,620                   |       |       |
|                                                   |       | $                  | 988,317    |                        | $          | 532,593                              |       | $                | 19,461     |                    | $          | (773,535   | ) | $ | 766,836 |   |   |
| **Liabilities and Stockholder’s  Equity**         |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Current liabilities                                    |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Current maturities of long-term debt                   |       | $                  | 201        |                        | $          | —                               |       | $                | —     |                    | $          | —     |   | $ | 201 |   |   |
| Accounts payable                                       |       | 10,948             |       | 449                         |       | 945                                  |       | —           |       | 12,342                  |       |       |
| Accrued liabilities                                    |       | 29,625             |       | 8,086                       |       | 283                                  |       | —           |       | 37,994                  |       |       |
| Deferred revenue                                       |       | 23,585             |       | 22,840                      |       | 47                                   |       | —           |       | 46,472                  |       |       |
| Total current liabilities                              |       | 64,359             |       | 31,375                      |       | 1,275                                |       | —           |       | 97,009                  |       |       |
| Long-term debt,  net of current maturities             |       | 461,786            |       | —                      |       | —                               |       | —           |       | 461,786                 |       |       |
| Deferred income  taxes and other long-term liabilities |       | 36,227             |       | 3,719                       |       | 206                                  |       | (3,719           | )          | 36,433                  |       |       |
| Intercompany  payable                                  |       | 254,337            |       | —                      |       | —                               |       | (254,337         | )          | —                  |       |       |
| Stockholder’s equity                              |       |               |       |                        |       |                                 |       |             |       |                    |       |       |
| Common stock                                           |       | 10                 |       | 8                           |       | 353                                  |       | (361             | )          | 10                      |       |       |
| Capital in excess of par value                         |       | 447,367            |       | 448,112                     |       | 48,704                               |       | (496,816         | )          | 447,367                 |       |       |
| (Accumulated deficit) retained earnings                |       | (284,182           | )          | 49,379                      |       | (39,490                              | )          | (9,889           | )          | (284,182                | )          |       |
| Accumulated other comprehensive income (loss)          |       | 8,413              |       | —                      |       | 8,413                                |       | (8,413           | )          | 8,413                   |       |       |
| Total stockholder’s equity                        |       | 171,608            |       | 497,499                     |       | 17,980                               |       | (515,479         | )          | 171,608                 |       |       |
|                                                   |       | $                  | 988,317    |                        | $          | 532,593                              |       | $                | 19,461     |                    | $          | (773,535   | ) | $ | 766,836 |   |   |

 

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**AdvanstarCommunications Inc.Condensed Consolidating Statements of Operations (Unaudited)For the three months ended March 31, 2005**(Inthousands)

|                                                                                                          | ** ** | **Communications** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Total** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|--------------------------------------|------------|------------------|------------|-------------------------|------------|
| Revenue                                                                                                  |       | $                  | 52,952     |                        | $          | 36,413                               |       | $                | 1,205      |                    | $          | — |   | $ | 90,570 |   |
| Operating expenses                                                                                       |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Cost of production, selling, editorial, circulation,  and segment management costs                  |       | 33,643             |       | 12,459                      |       | 1,296                                |       | —           |       | 47,398                  |       |
| General and administrative                                                                               |       | 10,561             |       | 340                         |       | 645                                  |       | —           |       | 11,546                  |       |
| Depreciation and amortization                                                                       |       | 6,168              |       | 3,603                       |       | 187                                  |       | —           |       | 9,958                   |       |
| Total operating expenses                                                                                 |       | 50,372             |       | 16,402                      |       | 2,128                                |       | —           |       | 68,902                  |       |
| Operating income (expense)                                                                          |       | 2,580              |       | 20,011                      |       | (923                                 | )          | —           |       | 21,668                  |       |
| Other income (expense)                                                                                   |       |               |       |                        |       |                                 |       |             |       |                    |       |
| Interest (expense) income, net                                                                      |       | (17,502            | )          | —                      |       | 9                                    |       | —           |       | (17,493                 | )          |
| Other income (expense), net                                                                              |       | 128                |       | —                      |       | (113                                 | )          | —           |       | 15                      |       |
| (Loss) income from continuing operations before  income taxes and cumulative effect of accounting change |       | (14,794            | )          | 20,011                      |       | (1,027                               | )          | —           |       | 4,190                   |       |
| (Benefit)  provision for income taxes                                                               |       | (5,798             | )          | 7,584                       |       | 9                                    |       | —           |       | 1,795                   |       |
| Equity in  earnings of subsidiaries                                                                 |       | 11,391             |       | —                      |       | —                               |       | (11,391          | )          | —                  |       |
| Income (loss) from continuing operations before  cumulative effect of accounting change                  |       | 2,395              |       | 12,427                      |       | (1,036                               | )          | (11,391          | )          | 2,395                   |       |
| (Loss) income  from operations of discontinued business, net of tax                                      |       | (868               | )          | —                      |       | 2,404                                |       | (2,404           | )          | (868                    | )          |
| Income (loss) before cumulative effect of accounting  change                                             |       | 1,527              |       | 12,427                      |       | 1,368                                |       | (13,795          | )          | 1,527                   |       |
| Cumulative  effect of accounting change                                                                  |       | 4,618              |       | —                      |       | —                               |       | —           |       | 4,618                   |       |
| Net income (loss)                                                                                        |       | $                  | 6,145      |                        | $          | 12,427                               |       | $                | 1,368      |                    | $          | (13,795 | ) | $ | 6,145 |   |

 

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**AdvanstarCommunications Inc.Condensed Consolidating Statements of Cash Flows (Unaudited)For the three months ended March 31, 2005**(Inthousands)

|                                                                                    | ** ** | **Communications** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|--------------------------------------|------------|------------------|------------|-----------|------------|
| Operating activities:                                                              |       |               |       |                        |       |                                 |       |             |       |      |       |
| Net income (loss)                                                                  |       | $                  | 6,145      |                        | $          | 12,677                               |       | $                | 1,369      |      | $          | (14,046 | ) | $ | 6,145 |   |
| Adjustments to  reconcile net income (loss) to net cash from operating activities: |       |               |       |                        |       |                                 |       |             |       |      |       |
| Equity in earnings of subsidiaries                                                 |       | (14,046            | )          | —                      |       | —                               |       | 14,046           |       | —    |       |
| Gain on derivative financial instruments                                           |       | (26                | )          | —                      |       | —                               |       | —           |       | (26       | )          |
| Depreciation and amortization                                                      |       | 7,660              |       | 3,603                       |       | 357                                  |       | —           |       | 11,620    |       |
| Other non-cash items                                                               |       | (138               | )          | 53                          |       | 53                                   |       | —           |       | (32       | )          |
| Change in working capital items                                                    |       | (1,158             | )          | (15,863                     | )          | 3,358                                |       | —           |       | (13,663   | )          |
| Net cash (used in) provided by  operating activities                          |       | (1,563             | )          | 470                         |       | 5,137                                |       | —           |       | 4,044     |       |
| Investing activities:                                                              |       |               |       |                        |       |                                 |       |             |       |      |       |
| Additions to property, plant and equipment                                         |       | (1,047             | )          | (470                        | )          | (8                                   | )          | —           |       | (1,525    | )          |
| Net cash used in investing activities                                              |       | (1,047             | )          | (470                        | )          | (8                                   | )          | —           |       | (1,525    | )          |
| Financing activities:                                                              |       |               |       |                        |       |                                 |       |             |       |      |       |
| Payments of long-term debt                                                         |       | (4,888             | )          | —                      |       | —                               |       | —           |       | (4,888    | )          |
| Net cash used in financing activities                                              |       | (4,888             | )          | —                      |       | —                               |       | —           |       | (4,888    | )          |
| Effect of  exchange rate changes on cash                                           |       | —             |       | —                      |       | 251                                  |       | —           |       | 251       |       |
| Net (decrease)  increase in cash and cash equivalents                              |       | (7,498             | )          | —                      |       | 5,380                                |       | —           |       | (2,118    | )          |
| Cash and cash  equivalents, beginning of year                                      |       | 33,956             |       | —                      |       | 7,267                                |       | —           |       | 41,223    |       |
| Cash and cash  equivalents, end of year                                            |       | $                  | 26,458     |                        | $          | —                               |       | $                | 12,647     |      | $          | — |   | $ | 39,105 |   |

 

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**Item 2.  *Management’s Discussionand Analysis of Financial Condition and Results of Operations***

This quarterlyreport on Form 10-Q contains forward-looking statements madepursuant to the safe harbor provisions of the Private Securities LitigationReform Act of 1995. Investors are cautioned not to place undue reliance onthese forward-looking statements, including statements about plans andobjectives of management, potential acquisitions, market growth and opportunity.These forward-looking statements are neither promises nor guarantees andinvolve risks and uncertainties that could cause actual results to differmaterially from those indicated by such forward-looking statements. You shouldnot expect that these forward-looking statements will be updated or supplementedas a result of changing circumstances or otherwise, and we disavow and disclaimany obligation to do so. Important cautionary statements and risk factors thatwould affect actual results are discussed in the our periodic reports andregistration statements filed with the Securities and Exchange Commission,including those under the caption entitled “Risk Factors” in our 2005 annualreport on Form 10-K filed with the Securities and ExchangeCommission on March 30, 2006.

**Overview**

We are an integrated mediacompany providing market access media and services for bothbusiness-to-business and business-to-consumer firms targeting customersprimarily in the US. Our products and services are targeted to specificindustry sectors through shows and conferences, controlled circulation trade,business, professional and consumer magazines and electronic media. We alsoprovide a broad range of other marketing support, including classifiedadvertising, direct mail services, reprints, database marketing, guides andreference books.

During the first quarterof 2006, we undertook a strategic change in the monitoring and management of ourbusiness to better reflect our focus and commitment to our threeindustry-focused segments. This change was prompted as a result of asubstantial change in the business organization following the divestiture ofthe Portfolio Group. See “Presentation of Financial Information—Acquisitionsand Divestitures.”

We report our business in thesethree industry focused segments:

·                     Fashion & Licensing, which serves the men’s,women’s, children’s and product sourcing sectors of the apparel industry andthe merchandise licensing industry through industry tradeshows, conferences andon-line showrooms; publishing targeted magazines and directories; and offeringa broad range of marketing support services;

·                     Life Sciences, which serves the healthcare,dental, veterinary, pharmaceutical, and science fields through publishingprimary and specialty care magazines and professional journals; organizing conferencesand other events; developing continuing medical education (“CME”) products; andthe creation of a wide variety of custom marketing projects; and

·                     Powersports, which serves the powersports,off-road and automotive aftermarket industries through publishing trade andconsumer magazines and shows  andelectronic products.

In addition to our three segmentsdescribed above, we combine our European, market development and e-Mediaoperations into “Other.”

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Unless otherwise noted, disclosures herein relate onlyto our continuing operations. All historical amounts have been reclassified toexclude results and gains or losses from discontinued operations, unless notedotherwise. For further information on discontinued properties, see “Presentationof Financial Information—Acquisitions and Divestitures.”

Fashion & Licensingaccounted for 45% and 41% of total revenue for the three months ended March 31,2006 and 2005. Life Sciences accounted for33% and 36% of total revenue for the three months ended March 31, 2006 and 2005. Powersports accounted for 20% of totalrevenue for each of the three months ended March 31, 2006 and 2005, while Other operations accounted for 2%and 3% of total revenue for the three months ended March 31, 2006 and 2005. Our revenue reaches its highest levelsduring the first and third quarters of the year due to the timing of the MAGICMarketplace tradeshows and our other large tradeshows and conferences. Becauseshow and conference revenue is recognized when a particular event is held, wemay experience fluctuations in quarterly revenue based on the movement of showdates from one quarter to another.

**Trends and Developments**

Results for the first quarter of 2006 reflects the impact of ourstrategy put in place in 2005 to focus our portfolio on industry sectors wherewe can leverage our strong market positions, customer relationships andmanagement teams. We continue to develop new revenue streams through a varietyof growth initiatives across all segments and are constantly striving to improveoperating efficiency.

A number of new products have expanded and diversified our revenuestreams in Fashion & Licensing, and Powersports. In addition to theexpansion and development of new categories and trend areas in MAGIC, therecent acquisitions of POOL and Project have been integrated into the overallMAGIC Marketplace and contributed to the expansion of our fashion offerings toour exhibitors and attendees during the quarter.

The recent launches in Powersports in the off-road market continue todevelop, including *DIRTsports* and *Off-Road Business* magazines, Off-Road Impact tradeshow andthe Off-Road Expo consumer event acquired in October 2005.

In Life Sciences we have made good progress in refocusing ourhealthcare projects business through the strengthening of our sales efforts andeffectively addressing our pharmaceutical customers’ needs to comply withtighter regulations relating to the management and delivery of educationalprojects. We continued our growth initiatives including the launch of three newpublications and the development of several new webinars and conferenceproducts.

In the first quarter of 2006 we established a dedicated electronicmedia group to focus on developing opportunities for electronic products tomeet our customers’ evolving marketing and information requirements. Weanticipate accelerating our growth in electronic media as we move through thebalance of the year.

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**Presentationof Financial Information**

*Acquisitionsand divestitures*

We continue to look foropportunities to execute our strategy of building significant product positionsin targeted markets, through both the acquisition and sale of identified assets.Dispositions completed in 2005 are as follows:

·                  On December 31, 2005, we sold ourArenacross Championship Series (“Arenacross”) for a total selling price of$0.2 million. The loss on the sale of $0.4 million was recorded in December 2005.Arenacross had no revenue or contribution margin in the first quarter of 2005.

·                  In the second quarter of 2005, wediscontinued the remaining East Coast Fashion trade show business acquired in1999 from Larkin-Pluznik-Larkin, LLC. (the “East Coast Fashion Group”) as partof our new strategy. We recorded a $2.3 million impairment charge for theremaining intangible assets of this business in 2005. East Coast Fashion Grouphad no revenue in the first quarter of 2005. Contribution loss for the threemonths ended March 31, 2005 was $0.1 million.

·                  On May 23, 2005, we, our parentcompany and certain affiliates (Advanstar Expositions Canada Limited andAdvanstar.com) completed the sale of our business assets and liabilities associated with our tradeshows andconferences, trade publications and direct marketing products servicing theinformation, technology, telecommunications, travel, beauty, homeentertainment, and portfolio markets, including the shares of our Hong Kongsubsidiaries. The shares of our Brazilian subsidiary were sold in July 2005after receipt of final regulatory approval. Collectively, these assets andshares are referred to as the “Portfolio Group.” The sale price for thePortfolio Group was $185.0 million less $11.2 million in working capitaladjustments and expenses. We recorded a gain on the sale of $52.9 million. Revenueand contribution margin for the first quarter of 2005 was $23.4 million and$4.6 million.

The financial results of the businesses included in discontinuedoperations in the accompanying condensed consolidated statements of operationsare as follows (in thousands):

|                                                  | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| (Loss) income  before income taxes               |       | $                                                | (119       | ) | $ | 1,432 |   |
| Income tax (benefit)  provision                  |       | (45                                              | )          | 1,654 |   |
| Minority  interests                              |       | —                                           |       | (646 | ) |
|                                             |       |                                             |       |   |   |
| Loss from operations of  discontinued businesses |       | $                                                | (74        | ) | $ | (868 | ) |

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In 2005, we completed five acquisitions.

·                  OnSeptember 12, 2005, we purchased an off-road consumer event business fromPetersen Events Corporation (“Off-Road Expo”) for $2.2 million in cash. Inaddition, we may pay additional contingent cash consideration to the formershareholders based on the 2006 operating revenue from the acquired business.

·                  OnAugust 23, 2005, we purchased two fashion industry tradeshows and relatedproducts from the owner of the POOL Tradeshow (‘‘POOL”) for $3.0 million incash, which will be completed in 2006. In addition, we may pay additionalcontingent cash consideration to the former owner based on the 2007 and 2008operating results from the acquired business and the owner’s continuedemployment with us.

·                  On August 19, 2005, we purchasedProject Global Tradeshow, Inc. (‘‘Project”), a producer of tradeshows forthe premium contemporary sector of the fashion industry, for $9.9 million incash, subject to a working capital adjustment, which will be completed in 2006.In addition, we may pay additional contingent cash consideration to the formershareholders based on the 2007 and 2008 operating results of the acquiredbusiness and their continued employment with us. The purchase price workingcapital adjustment has yet to be finalized. We do not believe the finalallocation of purchase price will be materially different from preliminaryestimates.

·                  In 2005, we completed two otheracquisitions of consumer shows with an aggregate purchase price of $0.5 millionin cash.

We have accounted for these acquisitions under thepurchase method of accounting. Accordingly, our results of operations includethe effect of the acquisition from the date of purchase.

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**SelectedFinancial Data**

Thefollowing table sets forth selected statements of operations and otherfinancial data.
| ** **                                                                                         | ** ** | **For the  Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                         | ** ** | **2006**                                                       | ** ** | **2005** | ** ** |
| ** **                                                                                         | ** ** | **(in thousands)**                                        | ** ** |
| **Income  Statement Data:**                                                                        |       |                                                           |       |   |   |
| Revenue                                                                                            |       |                                                           |       |   |   |
| Fashion &  Licensing                                                                      |       | $                                                              | 48,093     |   | $ | 36,896 |   |
| Life Sciences                                                                                      |       | 35,103                                                         |       | 32,701 |   |
| Powersports                                                                                        |       | 21,154                                                         |       | 18,624 |   |
| Other                                                                                              |       | 2,228                                                          |       | 2,349 |   |
|                                                                                               |       |                                                           |       |   |   |
| Total revenue                                                                                      |       | 106,578                                                        |       | 90,570 |   |
|                                                                                               |       |                                                           |       |   |   |
| Cost of  production, selling, and segment management costs                                         |       |                                                           |       |   |   |
| Fashion &  Licensing                                                                      |       | 19,175                                                         |       | 13,310 |   |
| Life Sciences                                                                                      |       | 24,968                                                         |       | 23,529 |   |
| Powersports                                                                                        |       | 10,619                                                         |       | 9,467 |   |
| Other                                                                                              |       | 1,224                                                          |       | 1,092 |   |
|                                                                                               |       |                                                           |       |   |   |
| Total cost of production, selling and segment  management costs                                    |       | 55,986                                                         |       | 47,398 |   |
|                                                                                               |       |                                                           |       |   |   |
| General and  administrative expenses                                                               |       | 8,926                                                          |       | 11,546 |   |
| Restructuring  charge                                                                              |       | 2,405                                                          |       | — |   |
| Depreciation and  amortization                                                                     |       | 8,662                                                          |       | 9,958 |   |
| Operating income                                                                                   |       | 30,599                                                         |       | 21,668 |   |
| Other income  (expense):                                                                           |       |                                                           |       |   |   |
| Interest expense                                                                                   |       | (13,772                                                        | )          | (17,670 | ) |
| Interest income                                                                                    |       | 475                                                            |       | 177 |   |
| Other (expense)  income, net                                                                       |       | (153                                                           | )          | 15 |   |
|                                                                                               |       |                                                           |       |   |   |
| Income from  continuing operations before income taxes  and cumulative effect of accounting change |       | 17,149                                                         |       | 4,190 |   |
| Provision for  income taxes                                                                        |       | 1,999                                                          |       | 1,795 |   |
|                                                                                               |       |                                                           |       |   |   |
| Income from  continuing operations  before cumulative effect of accounting change                  |       | 15,150                                                         |       | 2,395 |   |
|                                                                                               |       |                                                           |       |   |   |
| Loss from  operations of discontinued businesses, net of taxes                                     |       | (74                                                            | )          | (868 | ) |
|                                                                                               |       |                                                           |       |   |   |
| Income before  cumulative effect of accounting change                                              |       | 15,076                                                         |       | 1,527 |   |
|                                                                                               |       |                                                           |       |   |   |
| Cumulative  effect of accounting change                                                            |       | —                                                         |       | 4,618 |   |
|                                                                                               |       |                                                           |       |   |   |
| Net income                                                                                         |       | $                                                              | 15,076     |   | $ | 6,145 |   |

 

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**Results ofOperations**

# Three Months Ended March 31, 2006 Compared tothe Three Months Ended March 31, 2005

# *Revenue*

Revenue in the firstquarter of 2006 increased 17.7% to $106.6 million from $90.6 million in thefirst quarter of 2005.

Revenue from Fashion &Licensing of $48.1 million increased 30.3% or $11.2 million from $36.9 millionin the first quarter of 2005. Revenue from our spring 2006 MAGIC Marketplaceincreased $8.2 million or 22.5% over 2005. Total exhibit space increased by16.2% to 1,043,000 square feet. Additional growth came from a 3.4% increase inyield and growth in sponsorship and turnkey booth package programs. The August 2005acquisitions of POOL and Project expanded our presence in the contemporary andboutique fashion markets. The POOL and Project events, which were integratedinto MAGIC Marketplace in Las Vegas, along with the Project New York event in January contributed$9.2 million of revenue and 192,000 of square feet in the first quarter or2006.

Revenue from LifeSciences of $35.1 million increased 7.3% or $2.4 million from $32.7 million inthe first quarter of 2005. Revenue from healthcare custom projects increased$1.8 million or 103.6% from first quarter 2005 primarily due to a more focusedselling effort. We believe we are now well positioned to meet the newpharmaceutical regulatory rules governing the management and delivery ofmany of these projects. Revenue also increased $0.6 million in the firstquarter of 2006 compared to the first quarter of 2005 due to new publicationlaunchesincluding *Locum Life*, *Firstline*,and *Modern Hygienist*. Additionally, revenueincreased in the first quarter of 2006 compared to the first quarter of 2005across publications serving dental, specialty healthcare and pharmaceuticalmarkets primarily due to an increase in ad pages. These revenue gains werepartially offset by declines in primary care healthcare and veterinarypublications’ revenue of $1.0 million.

Revenue from Powersportsof $21.2 million increased 13.6% or $2.5 million from $18.6 million in thefirst quarter of 2005. Powersportsshows revenue increased by 11.3% and square footage by 8.1%, due to strongperformances from the International Motorcycle Shows, Off-Road Impact tradeshowand conference, and Dealer Expo. These shows contributed $1.6 million inrevenue growth. Ad pages in the Powersports publications increased 24.9%and revenue grew $0.8 million or 23.0% due to growth in our off-road launchpublications, *DIRTsports*and *Off-Road Business*, in the second year of their launch cyclealong with strong performances from *Dealernews* and *Motor Age.*

Revenue from Other operations in the firstquarter of 2006 was $2.2 million, compared to $2.3 million reported in firstquarter of 2005.

# *Cost of production, selling andsegment management costs*

Cost of production,selling and segment management expenses in the first quarter of 2006 increased18.1% to $56.0 million from $47.4 million in the first quarter of 2005 due toacquisitions and growth in revenue across segments.

Expenses of Fashion &Licensing in the first quarter of 2006 increased 44.1%, or $5.9 million, to$19.2 million from $13.3 million in the first quarter of 2005, primarily due tocosts related to the POOL and Project acquisitions of $5.4 million. Non-acquisitionexpenses increased 3.4% from first quarter 2005.

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Expenses in our LifeSciences segment in the first quarter of 2006 increased 6.1%, or $1.4 million,to $25.0 million from $23.5 million in the first quarter of 2005. The increaseis due to the growth in volume in healthcare custom projects causing expensesto increase along with increased costs for staffing and publication launches.

Powersports expensesincreased in the first quarter of 2006 by 12.2%, or $1.2 million, to $10.6million from $9.5 million in the first quarter of 2005. Expenses increasedprimarily due to investments in our Off-Road Impact tradeshow and conference,staffing and other direct costs related to the 2005 acquisition of Offroad.com.

Expenses of Otheroperations in thefirst quarter of 2006 were $1.2 million, compared to $1.1 million in the firstquarter of 2005.

# *General and administrative expenses*

General andadministrative costs decreased 22.7% to $8.9 million in the first quarter of2006 from $11.5 million in the first quarter of 2005. Costs declined due to $0.6million of cost savings related to office restructuring actions taken in 2005,a $0.6 million decline in employee benefit costs and a decline of $0.6 millionin audit, tax and Sarbanes-Oxley consulting services. Expense reductions alsoconsisted of certain first quarter 2005 costs which did not recur in 2006,including $0.6 million of strategic consulting fees for the Life Sciencessegment and a $0.3 million employee compensation accrual related to the IVTacquisition.

# *Restructuring charge*

In the first quarter of2006, we vacated the remaining part of our old leased office space in New Yorkand occupied smaller leased space, also in midtown Manhattan. We also revisedour estimate of expected future sublease income for the vacated space. These actions resultedin additional charges duringthe three months ended March 31, 2006, and consist of the discounted remaining future minimum lease payments dueunder non-cancelable leases, net of estimated future sublease income. Theselease commitments expire at various dates through 2010.

Pre-tax restructuring charges incurred are asfollows (in thousands):

 

|                                                 | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|
| ** **                                      | ** ** | **March 31,**               | ** ** |
| ** **                                      | ** ** | **2006**                         | ** ** |
| Facility exit  costs                            |       | $                                | 2,421      |   |
| Employee  severance and other termination costs |       | (16                              | )          |
| Restructuring  charge                           |       | $                                | 2,405      |   |

 

# *Depreciation and amortizationexpense*

Depreciation andamortization expense declined $1.3 million to $8.7 million in the first quarterof 2006 from $10.0 million in the first quarter of 2005 primarily due to theeffect of the double declining balance method of accelerated amortization onour exhibitor and advertiser lists partially offset by additional amortizationexpense related to the businesses acquired in 2005.

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*Interest expense*

Interest expense in the first quarter of 2006 declined$3.9 million, or 22.1%, to $13.8 million from $17.7 million in the firstquarter of 2005 primarily due to the repayment of $20.4 million of our termloans, $8.7 million of our fixed rate notes, and $117.8 million of our floatingrate notes in the second quarter of 2005 with the proceeds from the sale of thePortfolio Group.See “—Liquidity and CapitalResources-*Credit Facility Amendment and CreditFacility and Second Priority Secured and Floating Rate Notes Repayment*.”

At March 31, 2006, $451.4 million, or 98%, of our total debt is ata fixed rate with the remaining 2% of our debt subject to interest ratefluctuations.

# *Provision (benefit) for income taxes*

The provision for incometaxes before discontinued operations was a provision of $2.0 million in thefirst quarter of 2006 compared to a provision of $1.8 million in the firstquarter of 2005. The provision relates to income taxes in certain foreignjurisdictions and a deferred tax provision related to the basis of goodwill fortax purposes being less than the carrying value of goodwill for financialreporting purposes. We recorded no income tax benefit related to the netoperating losses we generated during 2005 or 2004 because we have established avaluation allowance to offset any related tax benefits due to uncertainty aboutrealization of these benefits.

# *Discontinued operations*

In December 2005, we sold our Arenacross Championship Series fora total selling price of $0.2 million. The loss on the sale of $0.4 million wasrecorded in December 2005.

In the second quarter of 2005, the Company discontinued the remainingEast Coast Fashion trade show business acquired in the 1999 Larkin transactionand recognized a $2.3 million impairment charge for the remaining carryingvalue of the intangible assets of this business.

In May and July 2005, Advanstar sold certain businesses toQuestex for net cash of $173.8 million. A gain of $52.9 million on the sale ofthese assets was recorded in 2005.

Seefurther information regarding discontinued operations in “—Presentation ofFinancial Information—Acquisitions and Divestitures.”

**Liquidityand Capital Resources**

Our principal sources ofliquidity have been, and are expected to be, cash flow from operations andborrowings under our credit facility. Our principal uses of cash have been, andare expected to be, the debt service requirements of our indebtedness describedbelow, dividends to Advanstar, Inc. to permit funding of its debt service,capital expenditures, investments in our products and selective acquisitions.

*Sources and uses of funds*

We generally operate withnegative working capital, excluding cash and current maturities of long-termdebt, due to the impact of deferred revenue from shows, which is billed andcollected as deposits up to one year in advance of the respective show.

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Operating cash flows may besignificantly affected by the working capital characteristics of our business. Deferredrevenue increases on the balance sheet in the quarters immediately precedingour busy first quarter show season as we collect deposits for booth spaceseveral months in advance of the shows. Revenue and contribution margin arerecognized in the quarter that the events are held, releasing the deferredrevenue from the balance sheet.

We anticipate that our operatingcash flow, together with borrowings under the credit facility and other futurefinancings and refinancings, will be sufficient to fund our anticipated futureoperating expenses, capital expenditures, debt service and other obligations asthey become due. However, our ability to make scheduled payments of principal,to pay interest on or to refinance our indebtedness and to satisfy our otherdebt obligations will depend upon our future operating performance. Our futureperformance and continued compliance with the covenants contained in our creditfacility will be affected by general economic, financial, competitive,legislative, regulatory, business and other factors beyond our control. Weexpect to be in compliance with our debt covenants during 2006.

As of March 31, 2006,we had cash and cash equivalents of $45.5 million and also had $58.9 million inavailability under our revolving credit facility. During the quarter we paid a$12.9 million dividend to Advanstar, Inc. to pay interest on its discountnotes in April 2006. The following table shows our cash flow activity forthe three months ended March 31, 2006, and 2005, and should be read inconjunction with the consolidated statements of cash flows (in thousands):

|                                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                      | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Net cash  provided by operating activities |       | $                                                | 13,841     |   | $ | 4,044 |   |
| Net cash used in  investing activities          |       | (1,886                                           | )          | (1,525 | ) |
| Net cash used in  financing activities          |       | (12,961                                          | )          | (4,888 | ) |
| Effect of  exchange rate changes on cash        |       | (60                                              | )          | 251 |   |
| Net decrease in  cash and cash equivalents      |       | $                                                | (1,066     | ) | $ | (2,118 | ) |

 

The$9.8 million increase in cash provided by operating activities as compared tothe first quarter of 2005 was due to the $7.6 million increase in operatingincome before depreciation and amortization and a reduction in cash interestpayments of $3.9 million. These increases were partially offset by $0.4 millionin IVT acquisition contingent consideration payments and cash flow provided bydiscontinued operations in first quarter 2005.

Net cash used in investingactivities increased $0.4 millionto $1.9 million in the first three months of 2006, from $1.5 million inthe first three months of 2005. This increase was principally due to theincrease in capital expenditures for computer upgrades and applicationsdevelopment and for build-outs and furnishing of our new downsized office inNew York. We incurred capital expendituresof $1.9 million and $1.5 million in the first three months of 2006 and 2005. Weanticipate that we will spend $9.8 million on capital expenditures in2006, which will be funded by cash flows from operations. The majority of theseexpenditures are related to expansions and enhancements to our IT andcommunications infrastructure and management and operating group informationsystems, and office build-outs arising from our recent office consolidations. Webelieve that this amount of capital expenditure will be adequate to grow ourbusiness according to our business strategy and to maintain the key tradeshows,publications and business of our continuing operations.

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We did not complete any acquisitions in the firstquarter of 2006. In connection with anyfuture acquisitions, as a part of our on-going business strategy, we mayrequire additional funding, which may be provided in the form of additionaldebt or equity financing or a combination thereof. There can be no assurancethat any additional financing will be available to us on acceptable terms or ina manner that complies with the restrictive covenants in our debt instruments. Consistentwith our longstanding strategy, we continue to pursue potential acquisitions ofcomplementary businesses.

Cash used in financing activitiesin the first three months of 2006 was$12.9 million compared to $4.9 million in the first three months of2005. In the first quarter of 2006, we paid $12.9 million in dividends to ourstockholder, Advanstar, Inc., to be used for cash interest payments in April 2006relating to its 15% senior discount notes. In the first quarter of 2005, werepaid $4.6 million of our outstanding Term Loan B with the proceeds from thesale of a tradeshow business in the first quarter of 2004.

*Debt service*

As of March 31, 2006, we hadtotal indebtedness of $461.3 million and $58.9 million of borrowingsavailable under our revolving credit facility. Our principal debt obligationsare described below.

*Credit Facility Amendment and Credit Facility andSecond Priority Secured and Floating Rate Notes Repayment*

In connection with the sale of the Portfolio Group werepaid all outstanding term debt under our credit facility and amended thecredit facility to retain revolving loan availability at $60 million whileallowing for repayment of second lien and junior debt with a portion of theproceeds from the sale of the Portfolio Group. The amendment also revised thefixed charge coverage ratio to exclude from the calculation any interestexpense related to debt repaid prior to July 31, 2005 with the proceedsfrom the sale of the Portfolio Group. See further information regarding thePortfolio Group divestiture in “—Presentation of Financial Information—Acquisitionsand Divestitures.”

Asa result of the sale of the Portfolio Group, our second priority senior securednotes indenture required that we either use the remaining net proceeds (afterrepayment of the Credit Facility borrowings) to invest in our business or tooffer to purchase our second priority senior secured notes at par plus accruedinterest. In June 2005, we offered to purchase up to $140.0 million of thesecond lien notes. Holders of the $8.7 million principal amount of the 10.75%Second Priority Senior Secured Notes (the “fixed rate notes”) tendered theirnotes for purchase, and we purchased all such notes.

Alsoin June 2005, we completed a cash tender offer for any and all of ouroutstanding Second Priority Senior Secured Floating Rate Notes due 2008 (the “floatingrate notes”). Holders of the $117.8 million aggregate outstanding principalamount of the floating rate notes tendered their notes for purchase, and wepurchased all such notes at a price equal to 107.3% (including a 3% consentfee) of outstanding principal plus accrued interest. In connection with thetender offer, we received consents to proposed amendments to the indenturegoverning the notes, resulting in the elimination of substantially all of therestrictive covenants and certain default provisions with respect to thefloating rate notes.

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*Credit facility*

Our credit facility consists of a$60.0 million revolving credit facility which will terminate in April 2007.Borrowings under the credit facility generally bear interest based on a marginover, at our option, the base rate or LIBOR. The applicable margin forrevolving credit loans varies based upon our ratio of consolidated debt toEBITDA, as defined in the credit facility, and is currently 3.75% over LIBORand 2.50% over the base rate. Our obligations under the credit facility areguaranteed by Advanstar Holdings Corp. (“Advanstar Holdings” or “Holdings”),our ultimate parent company, Advanstar, Inc., our direct parent company,and all of our existing and future domestic subsidiaries. Our obligations underthe credit facility are collateralized by substantially all of the assets ofour company and the subsidiary guarantors, including a pledge of the capitalstock of all our existing and future domestic subsidiaries, a pledge of no morethan 65% of the voting stock of any foreign subsidiary directly owned by ourcompany or any domestic subsidiary, a pledge of all intercompany indebtednessin favor of our company and our domestic subsidiaries, a pledge of our Company’sand Advanstar IH, Inc.’s capital stock held by our direct parent company,and a pledge of our direct parent company’s capital stock held by AdvanstarHoldings. Our credit facility contains restrictive covenants which require usto, among other things, maintain a minimum fixed charge coverage ratio (asdefined in the credit facility documents) as of the end of each fiscal quarter.Although there can be no assurance, we believe, based on our anticipatedperformance and expected economic conditions, that we will be able to complywith the fixed charge coverage ratio covenant contained in the credit facilityin 2006.

*Second priority senior securednotes*

Our $9.8 million of floating rate notes mature in 2008.The floating rate notes bear interest at an annual rate equal to the three-monthLIBOR, which is reset quarterly, plus 7.50%. Interest on the floating ratenotes, along with amortization of 0.25% of the principal of such floating ratenotes, is payable quarterly in cash. In connection with the tender offer describedabove, we and the trustee entered into a supplemental indenturethat eliminated substantially all of the restrictive and reporting covenants,certain events of default and certain other provisions with respect to thefloating rate notes and released the floating rate notes’ lien on thecollateral under the indenture. The fixed rate notes remain secured by thecollateral and subject to the restrictive covenants in the indenture.

Our $292.0 million of fixedrate notes mature in 2010. The notes are guaranteed by each of our existing andfuture domestic restricted subsidiaries and collateralized by second-priorityliens on the assets collateralizing our credit facility (other than certainsubsidiary stock and assets of our parent companies). The fixed rate notes bearinterest at an annual rate of 10.75%, which is payable semi-annually in cash. Thenotes contain restrictive covenants that, among other things, limit our abilityto incur debt, pay dividends and make investments.

*Senior subordinated notes*

Our $160 million 12% seniorsubordinated notes mature in 2011 and are guaranteed by each of our existingand future domestic restricted subsidiaries. Interest on the notes is payablesemi-annually in cash. The notes contain restrictive covenants that, amongother things, limit our ability to incur debt, pay dividends and makeinvestments.

*Parent company notes*

Our parent, Advanstar, Inc.,issued 15% senior discount notes (“the discount notes”) due October 2011with a principal amount at maturity of $171.8 million. Interest on thediscount notes is payable in cash beginning in April 2006. These discountnotes contain restrictive covenants that, among other things, limit the abilityof Advanstar, Inc. and its subsidiaries (including us) to incur debt, paydividends and make investments.

 

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Neither we nor any of oursubsidiaries have guaranteed the discount notes. Advanstar, Inc., however,is a holding company and its ability to pay interest on these discount noteswill be dependent upon the receipt of dividends from its direct and indirect subsidiaries,principally dividends from us. However, the terms of our borrowing arrangementssignificantly restrict our ability to pay dividends to Advanstar, Inc. andAdvanstar, Inc.’s failure to pay these notes would be a default under ourcredit facility.

The restricted covenantsin our senior secured notes indenture and senior subordinated notes indentureprovide that we can pay dividends only if our leverage ratio (as defined) is6.0 to 1.0 or better and only from “a basket” equal to the amount by which ourcumulative EBITDA (as defined) since January 1, 2001 exceeds 150% of ourcumulative interest expense in that same period plus other items, includingproceeds from equity offerings. In addition to the basket and notwithstandingthe leverage ratio limitation on restricted payments, we can make additionalrestricted payments in an aggregate amount of up to $20 million toAdvanstar, Inc. As of December 31, 2005, our leverageratio under the most restrictive of these indentures was 5.96 to 1.0.In March 2006, we declared and paid adividend of $12.9 million to Advanstar, Inc. to be used for servicing itsdebt obligations. As of March 31, 2006, our leverageratio under the most restrictive of these indentures was 5.55 to 1.0.

We expect our resultswill allow us to continue to make dividend payments to Advanstar, Inc. forpurposes of debt service. However, our results are subject to a variety offactors, including general economic conditions and conditions in our markets.  We may notgenerate sufficient cash flow from operations or be permitted by the terms ofour debt instruments to pay dividends or distributions to Advanstar, Inc.in amounts sufficient to allow it to pay cash interest on the parent companynotes.  If Advanstar, Inc. is unableto meet its debt service obligations, it could attempt to restructure orrefinance its indebtedness or seek additional equity capital.  We cannot assure you that Advanstar, Inc.will be able to accomplish these actions on satisfactory terms or at all. Adefault under the parent company notes could result in an acceleration of alloutstanding loans under our credit facility which, in turn, would trigger across-default under both our second priority senior secured notes and oursenior subordinated notes.

*Contractual andcontingent obligations*

Our contractualobligations (excluding accounts payable and accrued expenses), as of March 31,2006 are as set forth below (in millions):

|                                     | ** ** | **Payments Due By Period** | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **2006 (1)**                         | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **After  2011** | ** ** | **Total** | ** ** |
| Indebtedness                        |       | $                                         | 0.2        |   | $ | 0.1 |   | $ | 9.7 |   | $ | — |   | $ | 292.1 |   | $ | 160.0 |   | $ | — |   | $ | 462.1 |   |
| Interest on indebtedness (2)        |       | 41.8                                      |       | 51.2 |   | 50.9 |   | 50.6 |   | 42.7 |   | 9.6 |   | — |   | 246.8 |   |
| Operating lease obligations         |       | 4.7                                       |       | 5.3 |   | 5.1 |   | 3.8 |   | 1.9 |   | 1.0 |   | 4.0 |   | 25.8 |   |
| Total contractual  cash obligations |       | $                                         | 46.7       |   | $ | 56.6 |   | $ | 65.7 |   | $ | 54.4 |   | $ | 336.7 |   | $ | 170.6 |   | $ | 4.0 |   | $ | 734.7 |   |

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(1)             Forthe period from April 1, 2006 through December 31, 2006.

(2)             Intereston our variable rate debt is calculated using LIBOR of 4.83%, the rate ineffect on March 31, 2006. Because our variable rate debt bears interest ata variable rate, actual payments could differ.

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We have no materialcapital lease obligations or purchase obligations. We have contingentobligations composed of $1.1 million of letters of credit securing ourlease facilities. Additionally, as a result of acquisitions discussed above, wemay have future cash consideration payable to the former selling shareholdersbased on the acquired businesses’ future periods operating results.

*Off-balance sheetarrangements*

We have no materialoff-balance sheet arrangements.

**Item 3.**                          Quantitative and Qualitative Disclosures about Market Risk

We are exposed to variousmarket risks, which are the potential losses arising from adverse changes inmarket rates and prices, such as foreign currency exchange and interest rates. Wedo not enter into derivatives or other financial instruments for trading orspeculative purposes. We have previously entered into financial instruments tomanage and reduce the impact of changes in interest rates and foreign currencyexchange rates.

**INTEREST RATES**

At March 31, 2006,we had fixed rate debt of $451.4 million and variable rate debt of$9.8 million.  A change in interestrates of 1% would not be material to our operating results.

**CURRENCIES**

Outside of the UnitedStates, we maintain assets and operations in the United Kingdom. These assetsand operations, and our exposure to any currency gains or losses, are notmaterial to our operating results.

**Item 4.**                          Controls and Procedures

*Evaluation ofdisclosure controls and procedures.*

Advanstar’s ChiefExecutive Officer and Chief Financial Officer, after evaluating theeffectiveness of the Company’s disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d-15(e) of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”)) as of the end of theperiod covered by this report (the “Evaluation Date”), have concluded that asof the Evaluation Date, our disclosure controls and procedures were effective

*Changes ininternal controls.*

There were no significantchanges during the Company’s first fiscal quarter in our internal controls overfinancial reporting that have materially affected or are reasonably likely tomaterially affect the Company’s internal controls over financial reporting.

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**PART II**                             OTHERINFORMATION

Items 1 to 5 of form 10-Qare not applicable.

Item 6.         Exhibits
|   |   | 31.1 |   | Certification of principal executive officer  required by Rule 13a-14(a) or 15d-14(a) of the Exchange  Act |
|--------|--------|------|--------|---------------------------------------------------------------------------------------------------------------------------|
|   |   | 31.2 |   | Certification of principal financial officer  required by Rule 13a-14(a) or 15d-14(a) of the  Exchange Act |
|   |   | 32.1 |   | Certification of principal executive officer  required by Rule 13a-14(b) or 15d-14(b) of the  Exchange Act |
|   |   | 32.2 |   | Certification of principal financial officer  required by Rule 13a-14(b) or 15d-14(b) of the  Exchange Act |

 

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|              | ADVANSTAR COMMUNICATIONS INC.                                                            |
|-------------------|------------------------------------------------------------------------------------------|
|              |                                                                                     |
|              |                                                                                     |
| May 15, 2006 | /s/ DAVID W.  MONTGOMERY                                                                 |
|              | **David  W. Montgomery**                                                                 |
|              | **Vice  President-Finance, Secretary and Chief Financial Officer**                       |
|              | **(Principal  Financial Officer and Authorized** Representative  of the Registrant) |

 

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**Exhibit Index**

| Exhibit No. | ** ** |                                                                                                                            | **Document** | ** ** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------|--------------|------------|
| 31.1             |       | Certification of  principal executive officer required by Rule 13a-14(a) or 15d-14(a) of  the Exchange Act  |
| 31.2             |       | Certification of  principal financial officer required by Rule 13a-14(a) or  15d- 14(a) of the Exchange Act |
| 32.1             |       | Certification of  principal executive officer required by Rule 13a-14(b) or 15d-14(b) of  the Exchange Act  |
| 32.2             |       | Certification of principal financial officer  required by Rule 13a-14(b) or 15d-14(b) of the  Exchange Act  |

 

 

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