**UNITEDSTATES****SECURITIESAND EXCHANGE COMMISSION****Washington, 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, 2007**

**OR**

**Transition Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934**

**Commission File Number: 333-57201**

**Advanstar Communications Inc.**(Exact name of registrant as specified in its charter)

| **New York  (**State or other jurisdiction of  incorporation or organization)   |   | **59-2757389**(I.R.S. Employer  Identification No.) |
|---------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| ** **                                                                      |   | ** **                                          |
| **641  Lexington Avenue, New York, NY**(Address of principal executive offices) |   | **10022**(Zip Code)                                 |

 

##### Registrant’s Telephone Number, Including Area Code: **(212) 951-6600**

Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes x No o

Indicate by check mark if the registrant is a large accelerated filer,an accelerated filer or a non accelerated filer.   Large Accelerated Filer o         AcceleratedFiler o        Non-AcceleratedFiler  x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes o No x

As of May 8, 2007,1,000,000 shares of the registrant’s common stock were outstanding.

 

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| **PART I**   | **FINANCIAL  INFORMATION**                                                                                      | 2      |
|--------------|-----------------------------------------------------------------------------------------------------------------|--------|
|         |                                                                                                            |   |
| **Item 1.**  | ***Financial  Statements:***                                                                                    |   |
|         |                                                                                                            |   |
|              |                                                                                                            |   |
|         | Condensed Consolidated Balance Sheets (unaudited) at  March 31, 2007 and December 31, 2006                      | 2      |
|         |                                                                                                            |   |
|         | Condensed Consolidated Statements of Operations  (unaudited) for the three months ended March 31, 2007 and 2006 | 3      |
|         |                                                                                                            |   |
|         | Condensed Consolidated Statements of Cash Flows  (unaudited) for the three months ended March 31, 2007 and 2006 | 4      |
|         |                                                                                                            |   |
|         | Notes to Condensed Consolidated Financial Statements  (unaudited)                                               | 5      |
|         |                                                                                                            |   |
| **Item 2.**  | ***Management’s  Discussion and Analysis of Financial Condition and Results of Operations***               | 23     |
| ** **   | *** ***                                                                                                    |   |
| **Item 3.**  | ***Quantitative  and Qualitative Disclosures About Market Risk***                                               | 34     |
| ** **   | *** ***                                                                                                    |   |
| **Item 4T.** | ***Controls and  Procedures***                                                                                  | 35     |
| ** **   | *** ***                                                                                                    |   |
| **PART II**  | **Other Information**                                                                                           | 35     |

 
| ** Item 1.**    | ***Legal Proceedings*** | 35     |
|----------------------|-------------------------|--------|
| ** **           |                    |   |
| ** Item 1A.**   | ***Risk Factors***      | 35     |
| ** **           |                    |   |
| ** Item 6.**    | ***Exhibits***          | 35     |
| ** **           |                    |   |
| ** SIGNATURES** |                    | 36     |

 

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**PARTI         FINANCIAL INFORMATION**

**Advanstar Communications Inc.Condensed Consolidated Balance Sheets****(Unaudited)****(In thousands, exceptper share data)**
| ** **                                                                                                                                        | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                        | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| ** **                                                                                                                                        | ** ** | ** **         | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                        | ** ** | ** **         | ** ** | ** **            | ** ** |
| Current assets                                                                                                                                    |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                        |       | $                  | 13,201     |                  | $          | 36,918 |   |
| Accounts  receivable, net of allowance of $1,085 and $1,001 at March 31, 2007 and  December 31, 2006                                              |       | 28,835             |       | 23,562                |       |
| Prepaid expenses                                                                                                                                  |       | 8,251              |       | 9,280                 |       |
| Other                                                                                                                                             |       | 1,920              |       | 1,855                 |       |
| Total current  assets                                                                                                                             |       | 52,207             |       | 71,615                |       |
| Due from parent                                                                                                                                   |       | 2,641              |       | 2,595                 |       |
| Property, plant and  equipment, net                                                                                                               |       | 24,700             |       | 25,026                |       |
| Intangible and other  assets                                                                                                                      |       |               |       |                  |       |
| Goodwill                                                                                                                                          |       | 598,457            |       | 598,398               |       |
| Intangibles and  other, net                                                                                                                       |       | 35,719             |       | 38,664                |       |
| Total intangible  and other assets, net                                                                                                           |       | 634,176            |       | 637,062               |       |
| Non-current assets held  for sale                                                                                                                 |       | 3,670              |       | 3,670                 |       |
|                                                                                                                                              |       | $                  | 717,394    |                  | $          | 739,968 |   |
| **Liabilities and Stockholder’s  Equity**                                                                                                    | ** ** | ** **         | ** ** | ** **            | ** ** |
| Current liabilities                                                                                                                               |       |               |       |                  |       |
| Accounts payable                                                                                                                                  |       | $                  | 18,279     |                  | $          | 15,556 |   |
| Accrued  compensation                                                                                                                             |       | 5,996              |       | 11,306                |       |
| Other accrued  expenses                                                                                                                           |       | 40,153             |       | 54,730                |       |
| Deferred revenue                                                                                                                                  |       | 27,520             |       | 51,167                |       |
| Total current  liabilities                                                                                                                        |       | 91,948             |       | 132,759               |       |
| Long-term debt, net of  current maturities                                                                                                        |       | 461,831            |       | 461,868               |       |
| Deferred income taxes                                                                                                                             |       | 41,183             |       | 39,244                |       |
| Other long-term  liabilities                                                                                                                      |       | 3,853              |       | 2,846                 |       |
| 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, 2007 and December 31, 2006 |       | 10                 |       | 10                    |       |
| Capital in  excess of par value                                                                                                                   |       | 405,370            |       | 418,254               |       |
| Accumulated  deficit                                                                                                                              |       | (297,707           | )          | (325,875              | )          |
| Accumulated  other comprehensive income                                                                                                           |       | 10,906             |       | 10,862                |       |
| Total  stockholder’s equity                                                                                                                  |       | 118,579            |       | 103,251               |       |
|                                                                                                                                              |       | $                  | 717,394    |                  | $          | 739,968 |   |
|                                                                                                                                              |       |               |       |                  |       |

 

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

2

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**Advanstar Communications Inc.Condensed Consolidated Statements of Operations (Unaudited)(In thousands)**
| ** **                                                                         | ** ** | **For the**                 | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** |
| ** **                                                                         | ** ** | **March 31,**               | ** ** |
| ** **                                                                         | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| ** **                                                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Revenue                                                                            |       | $                                | 110,708    |   | $ | 106,578 |   |
| Operating expenses                                                                 |       |                             |       |   |   |
| Cost of  production (excluding depreciation)                                       |       | 22,584                           |       | 22,139 |   |
| Selling,  editorial and circulation (excluding depreciation)                       |       | 32,189                           |       | 32,695 |   |
| General and  administrative (excluding depreciation)                               |       | 10,662                           |       | 10,078 |   |
| Restructuring  charge                                                              |       | —                           |       | 2,405 |   |
| Depreciation and  amortization                                                     |       | 4,524                            |       | 8,662 |   |
| Total operating  expenses                                                          |       | 69,959                           |       | 75,979 |   |
| Operating income                                                                   |       | 40,749                           |       | 30,599 |   |
| Other income (expense)                                                             |       |                             |       |   |   |
| Interest expense                                                                   |       | (13,542                          | )          | (13,772 | ) |
| Interest income                                                                    |       | 203                              |       | 475 |   |
| Other expense,  net                                                                |       | (669                             | )          | (153 | ) |
| Income from  continuing operations before income taxes                             |       | 26,741                           |       | 17,149 |   |
| Income tax  provision                                                              |       | 1,950                            |       | 1,999 |   |
| Income from  continuing operations                                                 |       | 24,791                           |       | 15,150 |   |
| Loss from operations of  discontinued businesses, net of income taxes (see Note 4) |       | (7                               | )          | (74 | ) |
| Net income                                                                         |       | $                                | 24,784     |   | $ | 15,076 |   |
|                                                                               |       |                             |       |   |   |

 

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

3

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**Advanstar Communications Inc.Condensed Consolidated Statements of Cash Flows (Unaudited)(In thousands)**
| ** **                                                                  | ** ** | **For the**                 | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
| ** **                                                                  | ** ** | **March 31,**               | ** ** |
| ** **                                                                  | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                                        |       |                             |       |   |   |
| Operating activities:                                                       |       |                             |       |   |   |
| Net income                                                                  |       | $                                | 24,784     |   | $ | 15,076 |   |
| Adjustments to  reconcile net income to net cash from operating activities: |       |                             |       |   |   |
| Depreciation and  amortization                                              |       | 4,524                            |       | 8,662 |   |
| Loss on asset  disposal                                                     |       | 39                               |       | 176 |   |
| Non-cash  interest expense                                                  |       | 644                              |       | 644 |   |
| Deferred income  taxes                                                      |       | 1,939                            |       | 1,949 |   |
| Provision for  bad debts                                                    |       | 277                              |       | 738 |   |
| Payments of  contingent acquisition compensation                            |       | (28,000                          | )          | (446 | ) |
| Changes in  operating assets and liabilities                                |       | (26,364                          | )          | (12,958 | ) |
| Net cash (used  in) provided by operating activities                   |       | (22,157                          | )          | 13,841 |   |
|                                                                        |       |                             |       |   |   |
| Investing activities:                                                       |       |                             |       |   |   |
| Additions to  property, plant and equipment                                 |       | (1,972                           | )          | (1,877 | ) |
| Acquisitions of  intangibles, contingent payments, and other                |       | (12                              | )          | (9 | ) |
| Net cash used in  investing activities                                      |       | (1,984                           | )          | (1,886 | ) |
|                                                                        |       |                             |       |   |   |
| Financing activities:                                                       |       |                             |       |   |   |
| Payments of  long-term debt                                                 |       | —                           |       | (25 | ) |
| Project grant  funds received                                               |       | 425                              |       | — |   |
| Dividend paid to  stockholder                                               |       | —                           |       | (12,936 | ) |
| Net cash  provided by (used in) financing activities                        |       | 425                              |       | (12,961 | ) |
| Effect of exchange rate  changes on cash                                    |       | (1                               | )          | (60 | ) |
| Net decrease in cash  and cash equivalents)                                 |       | (23,717                          | )          | (1,066 | ) |
| Cash and cash  equivalents, beginning of period                             |       | 36,918                           |       | 46,609 |   |
| Cash and cash  equivalents, end of period                                   |       | $                                | 13,201     |   | $ | 45,543 |   |
|                                                                        |       |                             |       |   |   |

 

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**

The accompanying unaudited condensedconsolidated financial statements have been prepared by AdvanstarCommunications Inc. (the “Company”) in accordance with the instructions to Form10-Q and, therefore, do not include all the information and footnotes requiredby generally accepted accounting principles for complete financialstatements.  Management believes that alladjustments, consisting solely of normal recurring items, considered necessaryfor a fair statement of financial position and results of operations, have beenincluded.  These condensed consolidatedfinancial statements, however, should be read in conjunction with the audited financialstatements and the related notes included in the Company’s annual report onForm 10-K for the year ended December 31, 2006, filed with the Securities andExchange Commission on April 2, 2007. The results of operations for the three months ended March 31, 2007 arenot necessarily indicative of the operating results that may be expected forthe entire year ending December 31, 2007.

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

**Interim incometax expense**

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

**3.**                    Goodwill and OtherIntangible Assets

**Goodwill**

Thechanges in the carrying amount of goodwill by operating segment are as follows:
| **(in thousands)**                               | ** ** | **Fashion &** | ** ** | **Life**     | ** ** | **Powersports**           | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|--------------|------------|---------------------------|------------|------------|------------|------------|------------|
| ** **                                            | ** ** | **Licensing**          | ** ** | **Sciences** | ** ** | **& Automotive** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
| Balance as of December  31, 2006                      |       | $                      | 316,554    |         | $          | 188,837                   |       | $          | 80,005     |       | $          | 13,002 |   | $ | 598,398 |   |
| Settlement of  contingent purchase price arrangements |       | —                 |       | —       |       | 15                        |       | —     |       | 15         |       |
| Foreign currency  translation                         |       | —                 |       | —       |       | —                    |       | 44         |       | 44         |       |
| Balance as of March 31,  2007                         |       | $                      | 316,554    |         | $          | 188,837                   |       | $          | 80,020     |       | $          | 13,046 |   | $ | 598,457 |   |

 

5

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

**Intangible Assets**

Trade exhibitorand advertiser lists are amortized on a double-declining balance method oversix years and five years, respectively, and other intangible assets areamortized on a straight-line basis over three to ten years, and trademarks andtrade names are amortized on a straight-line basis over twenty years.  These intangible assets consist of thefollowing:
| **(in thousands)**                | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                             | ** ** | **2007**           | ** ** | **2006**              | ** ** |
|                                   |       |               |       |                  |       |
| Trade exhibitor  lists                 |       | $                  | 9,311      |                  | $          | 9,301 |   |
| Advertiser lists                       |       | 29,680             |       | 29,680                |       |
| Trade names and  trademarks            |       | 19,211             |       | 19,211                |       |
| Other intangible  assets               |       | 20,761             |       | 20,761                |       |
| Deferred  financing costs              |       | 16,479             |       | 16,479                |       |
|                                   |       | 95,442             |       | 95,432                |       |
| Accumulated  amortization              |       | (59,723            | )          | (56,768               | )          |
| Total intangible and other assets, net |       | $                  | 35,719     |                  | $          | 38,664 |   |

Estimated amortization expense of identified intangible and otherassets for the remaining nine months of 2007 and for the next five years is asfollows:
| **(in thousands)** | ** ** | ** ** | ** ** |
|-------------------------|------------|------------|------------|
| * *                | * *   | * *   | * *   |
| 2007                    |       | $          | 5,643      |   |
| 2008                    |       | 5,931      |       |
| 2009                    |       | 1,962      |       |
| 2010                    |       | 1,601      |       |
| 2011                    |       | 1,184      |       |
| 2012                    |       | 961        |       |
|                         |            |            |            |  |

 

**4.**                    Acquisitions, Divestitures and Assets Held for Sale

**Acquisitions**

All acquisitions(collectively, the “Acquired Businesses”) have been accounted for using thepurchase method of accounting and, accordingly, the assets acquired andliabilities assumed have been recorded at their fair values as of the dates ofthe acquisitions.  The excess of thepurchase price over the fair value of the assets acquired and liabilitiesassumed has been recorded as goodwill. Results of operations for the Acquired Businesses have been included inthe accompanying condensed consolidated financial statements since theirrespective dates of acquisition.  TheAcquired Businesses were completed to expand the Company’s show and publicationpresence within its existing market sector and to maximize marketing andcustomer service infrastructure and expertise.

In 2005, the Companypurchased an off-road consumer event business (“Off-Road Expo”).  The Company paid $0.1 million in additionalcash consideration in the fourth quarter of 2006 to the former shareholdersbased on the actual 2006 operating revenue from the acquired assets.  This contingent consideration was recorded asgoodwill on the condensed consolidated balance sheet.

6

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

In August 2005, the Companypurchased a fashion industry tradeshow business and related products from theowner of POOL Tradeshow (‘‘POOL’’). The original POOL purchaseagreement provided for additional contingent cash consideration to be paid tothe former owner based on the 2007 and 2008 operating results of POOL andrequired the owner’s continued employment with the Company.  In July 2006, the Company and the formerowner of POOL entered into an agreement which terminated the former owner’semployment with the Company, terminated the former owner’s right to receiveadditional contingent payments and eliminated the Company’s obligations underthe POOL asset purchase agreement and the employment agreement.  Upon execution of this agreement, the Companymade an initial payment of $1.5 million to the former owner. A final payment of$0.5 million under the agreement will be made in July of 2007.  This $2.0 million in consideration wasrecorded as compensation expense in the third quarter of 2006.

On August 19, 2005, theCompany purchased Project Global Tradeshow, Inc. (‘‘Project”), a producer oftradeshows serving the fashion industry, for $9.9 million in cash.  The original Projectpurchase agreement provided for additional contingent cash consideration to bepaid to the former owners based on the 2007 and 2008 operating results ofProject and required the former principal owner’s continued employment with theCompany.  In December2006, the Company and the former owners of Project agreed to amend thepurchase agreement in order to terminate the principal former owner’semployment with the Company, terminate the former owners’ right to receiveadditional payments and eliminate the Company’s obligations under the Projectstock purchase agreement and the employment agreement. Under the terms of theamended agreement, the Company made a payment of $28.0 million to the formerowners in January 2007.  This $28.0million in consideration was recorded as compensation expense in the third andfourth quarter of 2006.

In 2005, the Companycompleted two other acquisitions of consumer tradeshow businesses. In 2006, theCompany accrued $0.2 million in contingent consideration based on 2006operating results, which was recorded as goodwill on the condensed consolidatedbalance sheet.

In 2004, the Companypurchased a portfolio of pharmaceutical industry conferences and magazines (‘‘IVT’’).The Company is obligated to pay contingent consideration based on the 2005operating results of the acquired assets and the continued employment of theformer shareholders. Theestimated contingent consideration based on 2005 results was expensed in 2005and is subject to further negotiation with the former shareholders.  The Company expects the finalpayout to the former shareholders to be made in 2007.

Thechange in the balance of accrued contingent consideration included in otheraccrued liabilities in the accompanying condensed consolidated balance sheet isas follows:
| **(in thousands)**                      | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|------------|------------|
| ** **                              | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2006 |       | $          | 29,584     |   |
| Payments to former owners               |       | (28,178    | )          |
| Balance at March  31, 2007              |       | $          | 1,406      |   |
|                                    |       |       |       |
|                                         |            |            |            |  |  |  |  |

** **

7

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

**Divestitures**

The operating results,related income taxes, and any gains or losses of the following divestitures(collectively, the “Disposed Businesses”) have been reported in discontinuedoperations in the condensed consolidated statements of operations for the threemonths ended March 31, 2007 and 2006. ** ******Interest expense was not allocated to any of theCompany’s discontinued operations.****

*Arenacross*

In December 2005, theCompany sold its Arenacross Championship Series business (“Arenacross”) for atotal selling price of $0.2 million. The Company recorded a $0.4 million losson the sale in 2005. Both in the first and the second quarter of 2006, theCompany incurred $0.1 million in additional costs related to the sale ofArenacross. These costs were reported in loss from discontinued operations.

*DMS*

In 2004, the Company soldits German tradeshow business (“DMS”). The Company is continuing to incur accounting and legal fees inconnection with the closure of its DMS office. These costs are reported as lossfrom discontinued operations.

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,**               | ** ** |
| ** **                                      | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                            |       |                             |       |   |   |
| Loss before  income taxes                       |       | $                                | (7         | ) | $ | (119 | ) |
| Income tax  benefit                             |       | —                           |       | (45 | ) |
| Loss from operations of discontinued businesses |       | $                                | (7         | ) | $ | (74 | ) |
|                                            |       |                             |       |   |   |

 

**Non-CurrentAssets Held for Sale**

Inthe second quarter of 2005, the Company committed to a plan to sell itsCleveland office building and land (“the Cleveland Office”). The Company ceaseddepreciation of these assets, effective the second quarter of 2005. During thefourth quarter of 2006, the Company recognized a $1.0 million impairment on theCleveland Office to write its carrying value down to its estimated sellingprice less selling costs.  The fair valuewas estimated primarily based upon terms of a letter of intent between theCompany and a buyer of the building and a portion of the land.  As of March 31, 2007 and December 31,2006, the Company reported this building and land as assets held for sale inthe condensed consolidated balance sheet.

8

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

**5.**                          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:
| **(in thousands)**                      | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|
| ** **                                   | ** ** | **March 31,**               | ** ** |
| ** **                                   | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                         |       |                             |       |   |   |
| Net income                                   |       | $                                | 24,784     |   | $ | 15,076 |   |
| Change in  cumulative translation adjustment |       | 44                               |       | 194 |   |
| Comprehensive income                         |       | $                                | 24,828     |   | $ | 15,270 |   |
|                                         |       |                             |       |   |   |

**6.**                          Debt

**Credit facility**

The Company is party to acredit facility (the “Credit Facility”) with a group of financial institutionsacting as lenders. On May 24, 2006, the Company amended and restated itsexisting credit facility. The amended Credit Facility reduced the revolvingloan from $60.0 million to $50.0 million, added a $10.0 million Term Loan, modified or eliminated certain restrictivecovenants and extended the maturity date from April 2007 to May 2009 for theentire Credit Facility.** **The Credit Facility isguaranteed by the Company’s parent, Advanstar, Inc., its parent, AdvanstarHoldings Corp. (“Holdings”), and by the Company’s domestic subsidiaries and iscollateralized by first priority liens on substantially all of the assets ofthe Company and the guarantors.  As aresult of the amendment and restatement of the Credit Facility, the Companyexpensed pre-existing unamortized deferred finance costs of $0.6 million andcapitalized new deferred finance costs of $1.7 million.

The Credit Facilitycontains restrictive covenants, including limitations on certain assetdispositions, dividends, investments and other restricted payments.  Failure to comply with the covenants couldcause an event of default under the Credit Facility.  The Company incurs a daily commitment fee of0.5% and 1.25% per annum for unused revolving loan availability and standbyletters of credit, respectively.  As ofMarch 31, 2007, the Company had $1.6 million of standby letters of credit,which reduced borrowings available under the Credit Facility to $48.4 million.

**Senior secured notes**

The Senior SecuredNotes initially consisted of $130.0 million of Second Priority Senior SecuredFloating Rate Notes due 2008 (the “floating rate notes”), which requiredquarterly 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”).

The fixed rate notes arefully and unconditionally guaranteed on a senior basis, jointly and severally,by the Company’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, Advanstar, Inc., and Holdings,the parent company of Advanstar, Inc.).  Thecovenants under the notes include limitations on certain asset dispositions,liens, debt incurrence, dividends, investments and other restricted payments.

9

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

In June 2005, theCompany used a portion of the proceeds from the 2005 sale of business assets and liabilitiesassociated with certain tradeshows and conferences, trade publications anddirect marketing products to repurchase $8.7 million of the fixed rate notes and $117.8 millionof the floating rate notes.

In August 2006, the Company used a portion of the proceeds from theTerm Loan to redeemall of its remaining $9.8 million of outstanding floating rate notes atpar.  As a result of the redemption, the Companyrecognized a $0.1 million loss on extinguishment of debt related tothe redemption due tothe write off of unamortized deferred financing costs.

**Senior subordinated 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 SeniorSubordinated Notes are fully and unconditionally guaranteed on a seniorsubordinated basis, jointly and severally, by the Company’s wholly owneddomestic subsidiaries.  The covenantsunder the Senior Subordinated Notes include limitations on certain assetdispositions, liens, debt incurrence, dividends, investments and otherrestricted payments.

Long-term debt consists of the following:
| ** **                                                                                                                                 | ** ** | ** **         | ** ** | ** **            | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| **(in thousands)**                                                                                                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                                                 | ** ** | **2007**           | ** ** | **2006**              | ** ** |
|                                                                                                                                       |       |               |       |                  |       |
| Revolving Credit  Facility, interest at LIBOR plus 2.5%; due 2009                                                                          |       | $                  | —     |                  | $          | — |   |
| Term loan, interest at  LIBOR plus 2.5%; 7.82% at March 31, 2007 due 2009                                                                  |       | 10,000             |       | 10,000                |       |
| 10.75% Second priority  senior secured notes, due 2010, plus unamortized premium of $496 and $533 at  March 31, 2007 and December 31, 2006 |       | 291,831            |       | 291,868               |       |
| Senior subordinated  notes, interest at 12.00%, due 2011                                                                                   |       | 160,000            |       | 160,000               |       |
|                                                                                                                                       |       | 461,831            |       | 461,868               |       |
| Less: Current  maturities                                                                                                                  |       | —             |       | —                |       |
|                                                                                                                                       |       | $                  | 461,831    |                  | $          | 461,868 |   |
|                                                                                                                                       |       |               |       |                  |       |

 

**On April 19, 2007, the Company issued a tender offer forany and all fixed rate notes, the Senior Subordinated Notes and a relatedconsent solicitation seeking to eliminate substantially all restrictivecovenants contingent upon the pending transaction described in Note 11.**Proceeds from the pendingtransaction are expected to be used to settle all of the Company’s outstandinglong-term debt obligations, including any tender premiums, fees and expenses.

10

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

**7.**                          Segments

The Company follows theprovisions of SFAS No. 131, “Disclosures about Segments of an Enterpriseand Related Information” and has three industry focused segments: Fashion &Licensing, Powersports & Automotive and Life Sciences.

The Company evaluates theperformance of, and allocates resources to, its segments based on contributionmargin, which is a non-GAAP measure — defined as revenue lesscost of production; selling, editorial and circulation; and certain allocatedgeneral and administrative costs.  Theaccounting policies of the reportable segments are the same as those describedin the summary of significant accounting policies.  The segments derive revenue from shows andconferences; trade, professional and consumer periodicals; marketing, directmail and database products and services; and electronic media products.  There are no inter-segment sales ortransfers.  Assets are not allocated tosegments and therefore have not been presented. Revenue and contribution margin from continuing operations of theCompany’s reportable segments are as follows for the three months ended March31, 2007 and 2006:

 
| **(in thousands)**           | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|
| ** **                        | ** ** | **March 31,**               | ** ** |
| ** **                        | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                              |       |                             |       |   |   |
| Revenue                           |       |                             |       |   |   |
| Life Sciences                     |       | $                                | 33,155     |   | $ | 35,038 |   |
| Fashion & Licensing           |       | 52,932                           |       | 48,128 |   |
| Powersports & Automotive      |       | 22,000                           |       | 21,145 |   |
| Other                             |       | 2,621                            |       | 2,267 |   |
| Total revenue                     |       | $                                | 110,708    |   | $ | 106,578 |   |
|                              |       |                             |       |   |   |
| Contribution  margin              |       |                             |       |   |   |
| Life Sciences                     |       | $                                | 11,532     |   | $ | 10,093 |   |
| Fashion & Licensing           |       | 31,306                           |       | 28,875 |   |
| Powersports & Automotive      |       | 11,169                           |       | 10,526 |   |
| Other                             |       | 858                              |       | 1,098 |   |
| Total segment contribution margin |       | $                                | 54,865     |   | $ | 50,592 |   |
|                              |       |                             |       |   |   |

 

11

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

The reconciliation oftotal segment contribution margin to consolidated income from continuingoperations before income taxes is as follows:

 
| **(in thousands)**                                                    | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                 | ** ** | **March 31,**               | ** ** |
| ** **                                                                 | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                                       |       |                             |       |   |   |
| Total segment  contribution margin                                         |       | $                                | 54,865     |   | $ | 50,592 |   |
| General and  administrative expense unallocated to segment operations |       | (9,592                           | )          | (8,926 | ) |
| Restructuring  charge                                                      |       | —                           |       | (2,405 | ) |
| Depreciation and  amortization                                             |       | (4,524                           | )          | (8,662 | ) |
| Other expense  (primarily interest)                                        |       | (14,008                          | )          | (13,450 | ) |
|                                                                       |       |                             |       |   |   |
| Income from continuing operations before income  taxes                     |       | $                                | 26,741     |   | $ | 17,149 |   |
|                                                                       |       |                             |       |   |   |

** **

**8.**                          Restructuring Activities and Contract TerminationCosts

In 2005, the Company soldvirtually all of its business assets and liabilities associated with itstradeshows and conferences, trade publications and direct marketing products inthe following primary industries: Information Technology & Communications,Travel/Hospitality, Beauty, Home Entertainment, Abilities and Portfolio,including the shares of the Company’s Hong Kong and Braziliansubsidiaries.   In 2005 related to the above sale, the Company ceased use of certainleased office space in New York, NY, Milford, CT, Santa Ana, CA, and Chicago, IL. In the first quarter of2006, the Company vacated additional leased office space in New York, NY, andrevised its estimate of expected future sublease income for this space, resulting in $2.4million in additional charges during the first quarter of 2006. These charges consist of the discountedremaining future minimum lease payments due under non-cancelable leases, net ofestimated future sublease income. These lease commitments expire at variousdates through 2010.

InJune 2006, the Company entered into a lease modification and surrenderagreement for approximately 60% of its vacated office space in New York,NY.  Under the terms of the agreement,the Company paid the lessor $2.8 million in cash, the lease covering thesurrendered space was terminated and the Company has no further future leaseobligations for the surrendered space. In June 2006 the Company adjusted its accrual for this space based uponthe terms of the agreement and recorded a reduction of operating expenses of$0.1 million.

Thesummary of the Company’s change in facility exit costs restructuring accrual isas follows:

 
| **(in thousands)**                 | ** ** | **Facility Exit  Costs** | ** ** |
|-----------------------------------------|------------|-------------------------------|------------|
| * *                                | ** ** | ** **                    | ** ** |
| Balance at  December 31, 2006 |       | $                             | 1,166      |   |
| Utilized-cash                           |       | (233                          | )          |
| Utilized-non-cash                       |       | —                        |       |
| Balance at March  31, 2007              |       | $                             | 933        |   |
|                                    |       |                          |       |

** **

Thefacility exit costs restructuring accrual balance in the accompanying condensedconsolidated balance sheet is $0.9 million and $1.2 million at March 31, 2007and December 31, 2006, of which 

12

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

$0.4million and $0.5 million is in other accrued expenses at March 31, 2007 andDecember 31, 2006, and $0.5 million and $0.7 million is in other long-termliabilities at March 31, 2007 and December 31, 2006.

**Long-Term Contract Termination**

In October 2006, theCompany and one of its vendors entered into an agreement which terminated along-term contract originally effective through December 31, 2008.  The termination agreement required theCompany to pay a termination fee of $1.9 million which was paid by the Companyin March 2007 and provided for services to be performed by the vendor throughApril 1, 2007.  The Company took a chargeto operations of $1.9 million during the fourth quarter of 2006.  The related liability is included in accountspayable in the accompanying condensed consolidated balance sheet as of December31, 2006.

****9.********                   ********Accounting andReporting of Uncertain Income Tax Positions****

The Company adopted the provisions of FASB Interpretation No. 48 (“FIN48”) *Accounting for Uncertainty in Income Taxes — aninterpretation of FASB Statement No. 109*effective January 1, 2007. FIN 48 establishes a single model to address accounting for uncertaintax positions. FIN 48 clarifies the accounting for income taxes by prescribinga minimum recognition threshold a tax position is required to meet before beingrecognized in the financial statements. FIN 48 also provides guidance onderecognition, measurement classification, interest and penalties, accountingin interim periods, disclosure and transition. Upon adoption on January 1, 2007, the Companyeliminated existing reserves of $3.4 million for uncertain tax positions,related to local tax matters.  Thisreduction was accounted for as a cumulative effect adjustment to the January 1,2007 balance of retained earnings.

The Company is subject to U.S. federal incometax as well as income tax of multiple state, local and foreign jurisdictions.The Company has substantially concluded all U.S. federal income tax matters foryears through 2002. Substantially all material state and foreign income taxmatters have been concluded for years through 2002. The Company’s U.S. federalincome tax return for 2004 is currently under a Limited Issue FocusExamination. New York City income tax returns are currently under examinationfor tax years 2000-2002 for which the statutes have been extended.  The Company believes that its income taxfiling positions and deductions will be sustained on audit and does notanticipate any adjustments that will result in a material change to itsfinancial position.  Therefore, theCompany has no reserves for uncertain tax positions.

TheCompany from time to time may be assessed interest or penalties by major taxjurisdictions, although any such assessments historically have been minimal andimmaterial to our financial results. The Company classifies these items asincome tax expense.

13

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

**10.**             Related-PartyTransactions

**Advanstar, Inc. notes**

InFebruary 2001, Advanstar, Inc. issued discount notes bearing interest at 15%(the “Discount Notes”) with an aggregate principal amount due October 2011 of$171.8 million.  These notes requiresemi-annual cash interest payments. Neither the Company nor any of its subsidiaries guarantee the DiscountNotes.

Advanstar,Inc. is a holding company and its ability to pay interest on the Discount Notesis dependent upon the receipt of dividends from its subsidiaries, including theCompany.  The Credit Facility, SeniorSecured Notes and the SeniorSubordinated Notes impose substantialrestrictions on the Company’s and its subsidiaries’ ability to pay dividends.

The restricted paymentscovenants in the Company’s Senior Secured Notes indenture and SeniorSubordinated Notes indenture provide that the Company can pay dividends only ifits leverage ratio (as defined) is 6.0 to 1.0 or better and only from a “basket”as defined as the amount by which its cumulative EBITDA (as defined) sinceJanuary 1, 2001 exceeds 150% of the Company’s cumulative interest expense inthat period plus other items including proceeds from equity offerings. TheCompany cannot provide assurance that its results will allow it to make futuredistributions in light of these restrictions. Failure to pay the interest on these notes will be a default under the notes and also result in a default underthe Company’s Credit Facility, which could have a material adverse effect onthe Company’s financial position, results of operations, and cash flows and/orcould impact the Company’s ability to continue to operate without an amendmentor restructuring of its Credit Facility and the notes.  Notwithstandingthe leverage ratio limitation on restricted payments, the Company can makerestricted payments in an aggregate amount of up to $20 million toAdvanstar, Inc., none of which has been used as of March 31, 2007.

In February 2007, the Companydeclared a dividend of $12.9 million payable to Advanstar, Inc. which was paidon April 16, 2007. The dividend payable is included in other accrued expensesin the accompanying condensed consolidated balance sheet as of March 31, 2007.In 2006, the Company paid a $12.9 million dividend to Advanstar, Inc. in bothMarch and October. These dividends made toAdvanstar, Inc. in 2007 and 2006 were used for its April 2006, October 2006 andApril 2007 Discount Notes interest payments. Debt service on Advanstar, Inc.’s Discount Notes will be $38.7million from April 1, 2007 through March 31, 2008 including the dividend paidin April 2007.  Although there can be noassurance, the Company expects its results will allow it to continue to makedividend payments to Advanstar, Inc., to satisfy its debt service obligations.

**On April 19, 2007, Advanstar, Inc. commenced a tender offerfor the Discount notes and a related consent solicitation seeking to eliminatesubstantially all restrictive covenants which is contingent on the pendingtransaction described in Note 11.**  Proceeds from thepending transaction are expected to be used to repurchase the Discount Notes.

**Stockholder dividend**

In July 2006, Holdingsentered into a stock purchase agreement with the Company’s former ChiefExecutive Officer.  Pursuant to theagreement, Holdings agreed to repurchase all of the shares of its common stockheld by the former CEO and he surrendered all of his stock options in exchangefor a $3.3 million payment.  The Companydeclared and paid a $3.3 million dividend to its parent, Advanstar, Inc., forpurposes of funding this transaction.

14

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

**11.**                   Sale and Merger Agreement

On March 28, 2007, theBoard of Directors of Holdings, unanimously approved, and Holdings enteredinto, a definitive merger agreement (“Merger Agreement”) among Holdings,VSS-AHC Consolidated Holdings Corp. (“Buyer”), VSS-AHC Acquisition Corp. (“MergerSub”), being a wholly owned subsidiary of the Buyer, and DLJ Merchant BankingIII, Inc., as the stockholders’ representative.  Pursuant to the MergerAgreement and subject to the terms and conditions set forth therein, as of theclosing of the merger, the Merger Sub will be merged with and into Holdings,with Holdings being the surviving corporation.

The aggregate purchaseprice is approximately $1.142 billion subject to deductions for costs of theoutstanding debt of Holdings and its subsidiaries, certain transaction expenses,change of control payments and certain other liabilities of Holdings and itssubsidiaries.  Additionally, the purchaseprice is subject to a post-closing adjustment specified in the Merger Agreementbased on the working capital of Holdings upon the closing of the merger. As a result of the merger, Holding’s shares of common stock will be convertedinto the right to receive the applicable merger consideration in cash at theclosing, subject to the post-closing working capital adjustment.  Theoutstanding options of Holdings, including those issued to the Company’semployees and directors, will be cancelled at closing and option holders willreceive the same per share merger consideration in cash as the holders ofcommon stock receive, net of the exercise price of the option and subject tothe post-closing working capital adjustment.

Under the MergerAgreement, as soon as practicable after signing, Holdings has agreed to causethe Company to commence a tender offer and consent solicitation for its outstanding10-3/4% Second Priority Senior Secured Notes due 2010 and 12% SeniorSubordinated Notes due 2011 and to cause Advanstar, Inc. to commence a tenderoffer for its outstanding 15% Senior Secured Discount Notes due 2011.  A tender offer was commenced for these noteson April 19, 2007 and a related consent solicitation seeking to eliminatesubstantially all restrictive covenants subject to closing of thetransaction.  Proceeds from the pendingtransaction are expected to be used to settle all outstanding debt, any tenderoffer premium and related fees. Upon settlement of the notes, the Company willwrite off approximately $6.9 million in unamortized deferred finance costs andunamortized debt premium.

In connection with theclosing of the pending transaction, the Company expects to incur an estimated$24.2 million of costs associated with change in control provisions in existingcompensation agreements, transaction bonuses, financial advisory and legalfees.  Of this amount $3.6 millionwas recognized in 2006 related to the Company’s accounting for stockcompensation and $0.6 million was recognized in the quarterly period endedMarch 31, 2007 for legal fees incurred.  The remainder will be recognizedupon closing of the pending transaction.

15

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**Advanstar CommunicationsInc.Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**

**12.**                   Recently Issued Accounting Pronouncements

InSeptember 2006, the FASB issued Statement of Financial Accounting Standard No.157, *Fair Value Measurement (“*FAS 157”). FAS 157 defines fairvalue, establishes a framework for measuring fair value in generally acceptedaccounting principles, and expands disclosures about fair value measurements.This Statement does not require any new fair value measurements. FAS 157 iseffective for the Company on January 1, 2008. The Company has not completed its evaluation of FAS157 and the effect its adoption will have on its consolidated financialstatements.

The FASB also issued inSeptember 2006 Statement of Financial Accounting Standards No. 158, *Employers’ Accounting for Defined Benefit Pension andOther Postretirement Plans*(“FAS158”). The new standard requires companies to recognize the overfundedor underfunded status of a defined benefit postretirement plan as an asset or liabilityon the balance sheet and to recognize changes in that funded status in the yearin which the change occurs through comprehensive income. FAS 158 provides foradoption effective December 31, 2007 for companies that do not have publiclytraded equity securities.  As such, ourconsolidated balance sheet as of December 31, 2007 will reflect the fundedstatus of our postretirement benefit plans, with the offset reported in othercomprehensive income (loss) in its consolidated balance sheet. If the Companyhad adopted FAS 158 on March 31, 2007, the Company would have recorded anadditional $1.2 million of other long term liabilities and other comprehensiveincome. Upon its adoption of FAS 158 as of December 31, 2007, the Company doesnot expect the actual impact to be materially different from this amount.

In February 2007, the FASBissued Statement of Financial Accounting Standard No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities (*“FAS159”). FAS 159 permits entities to measure many financial instruments andcertain other items at fair value that are not currently required to bemeasured at fair value.  FAS 159 iseffective for the Company on January 1, 2008. The Company has not completedits evaluation of FAS 159 and the effect its adoption will have on itsconsolidated financial statements.

**13.**             UnauditedSupplemental Guarantor Condensed Consolidating Financial Statements

**Basis ofpresentation**

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 guarantorsare Men’s Apparel Guild in California, Inc., Applied Business teleCommunications,CME2, Inc. and Project Global Tradeshow, Inc. The unaudited condensed consolidating financial statements of theguarantors are presented below and should be read in conjunction with thecondensed consolidated financial statements of the Company.  Separate financial statements of theguarantors are not presented because the guarantors are jointly, severally,fully and unconditionally liable under the guarantees and the Company believesthe condensed consolidating financial statements presented are sufficientlymeaningful in understanding the financial position and results of theguarantors.  There are no significantrestrictions on the ability of the subsidiary guarantors to make distributionsto the Company.

16

----

 

**Advanstar Communications Inc.Condensed Consolidating Balance Sheets (Unaudited)At March 31, 2007**
| ** **                                             | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| **Assets**                                             | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Current assets                                         |       |               |       |             |       |              |       |             |       |             |       |
| Cash and cash  equivalents                             |       | $                  | 10,659     |             | $          | 1,762             |       | $                | 780        |             | $          | — |   | $ | 13,201 |   |
| Accounts  receivable, net                              |       | 24,360             |       | 2,857            |       | 1,618             |       | —           |       | 28,835           |       |
| Prepaid expenses                                       |       | 5,075              |       | 2,631            |       | 545               |       | —           |       | 8,251            |       |
| Other                                                  |       | 1,821              |       | —           |       | 99                |       | —           |       | 1,920            |       |
| Total current  assets                                  |       | 41,915             |       | 7,250            |       | 3,042             |       | —           |       | 52,207           |       |
| Non-current assets:                                    |       |               |       |             |       |              |       |             |       |             |       |
| Due from parent                                        |       | 2,641              |       | —           |       | —            |       | —           |       | 2,641            |       |
| Property, plant  and equipment, net                    |       | 19,451             |       | 5,068            |       | 181               |       | —           |       | 24,700           |       |
| Deferred tax  asset                                    |       | —             |       | 1,127            |       | —            |       | (1,127           | )          | —           |       |
| Intangible and  other assets, net                      |       | 354,135            |       | 254,636          |       | 25,405            |       | —           |       | 634,176          |       |
| Investments in  subsidiaries                           |       | 571,626            |       | —           |       | —            |       | (571,626         | )          | —           |       |
| Intercompany  receivable                               |       | —             |       | 295,410          |       | 36                |       | (295,446         | )          | —           |       |
| Non-current  assets held for sale                      |       | 3,670              |       | —           |       | —            |       | —           |       | 3,670            |       |
|                                                   |       | $                  | 993,438    |             | $          | 563,491           |       | $                | 28,664     |             | $          | (868,199 | ) | $ | 717,394 |   |
|                                                   |       |               |       |             |       |              |       |             |       |             |       |
| **Liabilities and Stockholder’s  Equity**         |       |               |       |             |       |              |       |             |       |             |       |
| Current liabilities                                    |       |               |       |             |       |              |       |             |       |             |       |
| Accounts payable                                       |       | $                  | 7,918      |             | $          | 9,402             |       | $                | 959        |             | $          | — |   | $ | 18,279 |   |
| Accrued  liabilities                                   |       | 44,888             |       | 1,036            |       | 225               |       | —           |       | 46,149           |       |
| Deferred revenue                                       |       | 19,858             |       | 7,054            |       | 608               |       | —           |       | 27,520           |       |
| Total current  liabilities                             |       | 72,664             |       | 17,492           |       | 1,792             |       | —           |       | 91,948           |       |
| Long-term debt, net of  current maturities             |       | 461,831            |       | —           |       | —            |       | —           |       | 461,831          |       |
| Deferred income taxes  and other long-term liabilities |       | 44,918             |       | 1,127            |       | 118               |       | (1,127           | )          | 45,036           |       |
| Intercompany payable                                   |       | 295,446            |       | —           |       | —            |       | (295,446         | )          | —           |       |
| Stockholder’s equity                              |       |               |       |             |       |              |       |             |       |             |       |
| Common stock                                           |       | 10                 |       | 8                |       | 353               |       | (361             | )          | 10               |       |
| Capital in  excess of par value                        |       | 405,370            |       | 448,112          |       | 55,104            |       | (503,216         | )          | 405,370          |       |
| (Accumulated  deficit) retained earnings               |       | (297,707           | )          | 96,752           |       | (39,609           | )          | (57,143          | )          | (297,707         | )          |
| Accumulated  other comprehensive income (loss)         |       | 10,906             |       | —           |       | 10,906            |       | (10,906          | )          | 10,906           |       |
| Total  stockholder’s equity                       |       | 118,579            |       | 544,872          |       | 26,754            |       | (571,626         | )          | 118,579          |       |
|                                                   |       | $                  | 993,438    |             | $          | 563,491           |       | $                | 28,664     |             | $          | (868,199 | ) | $ | 717,394 |   |

 

17

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**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Operations (Unaudited)**

**For the three months ended March31, 2007**
| ** **                                                              | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                 | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                              | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Revenue                                                                 |       | $                  | 57,136     |             | $          | 51,447            |       | $                | 2,125      |             | $          | — |   | $ | 110,708 |   |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| Operating expenses:                                                     |       |               |       |             |       |              |       |             |       |             |       |
| Cost of  production, selling, editorial, and circulation                |       | 33,324             |       | 19,742           |       | 1,707             |       | —           |       | 54,773           |       |
| General and  administrative                                             |       | 9,413              |       | 665              |       | 584               |       | —           |       | 10,662           |       |
| Depreciation and  amortization                                          |       | 3,723              |       | 776              |       | 25                |       | —           |       | 4,524            |       |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| Total operating  expenses                                               |       | 46,460             |       | 21,183           |       | 2,316             |       | —           |       | 69,959           |       |
| Operating income  (loss)                                                |       | 10,676             |       | 30,264           |       | (191              | )          | —           |       | 40,749           |       |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| Other income (expense):                                                 |       |               |       |             |       |              |       |             |       |             |       |
| Interest  (expense) income, net                                         |       | (13,340            | )          | —           |       | 1                 |       | —           |       | (13,339          | )          |
| Other expense,  net                                                     |       | (654               | )          | —           |       | (15               | )          | —           |       | (669             | )          |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| (Loss) income  from continuing operations before income taxes           |       | (3,318             | )          | 30,264           |       | (205              | )          | —           |       | 26,741           |       |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| (Benefit) provision for  income taxes                              |       | (9,638             | )          | 11,583           |       | 5                 |       | —           |       | 1,950            |       |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| Equity in earnings of  subsidiaries                                     |       | 18,471             |       | —           |       | —            |       | (18,471          | )          | —           |       |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| Income (loss)  from continuing operations                               |       | 24,791             |       | 18,681           |       | (210              | )          | (18,471          | )          | 24,791           |       |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| (Loss) income from  operations of discontinued businesses, net of taxes |       | (7                 | )          | —           |       | (7                | )          | 7                |       | (7               | )          |
|                                                                    |       |               |       |             |       |              |       |             |       |             |       |
| Net income (loss)                                                       |       | $                  | 24,784     |             | $          | 18,681            |       | $                | (217       | )                | $          | (18,464 | ) | $ | 24,784 |   |

 

18

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**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Cash Flows (Unaudited)**

**For thethree months ended March 31, 2007**
| ** **                                                                               | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                                  | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                                               | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| **Cash flows from operating  activities**                                                |       |               |       |             |       |              |       |             |       |             |       |
| Net income (loss)                                                                        |       | $                  | 24,784     |             | $          | 18,681            |       | $                | (217       | )                | $          | (18,464 | ) | $ | 24,784 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities |       |               |       |             |       |              |       |             |       |             |       |
| Equity in  earnings of subsidiaries                                                      |       | (18,464            | )          | —           |       | —            |       | 18,464           |       | —           |       |
| Depreciation and  amortization                                                           |       | 3,723              |       | 776              |       | 25                |       | —           |       | 4,524            |       |
| Other non-cash  items                                                                    |       | 2,594              |       | 355              |       | (50               | )          | —           |       | 2,899            |       |
| Change in  working capital items                                                         |       | (27,379            | )          | (20,441          | )          | (6,544            | )          | —           |       | (54,364          | )          |
| Net cash used in  operating activities                                                   |       | (14,742            | )          | (629             | )          | (6,786            | )          | —           |       | (22,157          | )          |
|                                                                                     |       |               |       |             |       |              |       |             |       |             |       |
| **Cash flows from investing  activities**                                                |       |               |       |             |       |              |       |             |       |             |       |
| Additions to property,  plant and equipment                                              |       | (433               | )          | (1,497           | )          | (42               | )          | —           |       | (1,972           | )          |
| Purchase of  non-guarantor subsidiary stock                                              |       | (6,400             | )          |             |       | —            |       | 6,400            |       |             |       |
| Proceeds from sale of  assets and other                                                  |       | (12                | )          | —           |       | —            |       | —           |       | (12              | )          |
| Net cash used in  (provided by) investing activities                                     |       | (6,845             | )          | (1,497           | )          | (42               | )          | 6,400            |       | (1,984           | )          |
|                                                                                     |       |               |       |             |       |              |       |             |       |             |       |
| **Cash flows from financing  activities**                                                |       |               |       |             |       |              |       |             |       |             |       |
| Project grant funds  received                                                            |       | —             |       | 425              |       | —            |       | —           |       | 425              |       |
| Proceeds from stock  issuance                                                            |       |               |       |             |       | 6,400             |       | (6,400           | )          | —           |       |
| Net cash  provided by (used in) financing activities                                     |       | —             |       | 425              |       | 6,400             |       | (6,400           | )          | 425              |       |
| Effect of exchange rate  changes on cash                                                 |       | —             |       | —           |       | (1                | )          | —           |       | (1               | )          |
| Net decrease in  cash and cash equivalents                                               |       | (21,587            | )          | (1,701           | )          | (429              | )          | —           |       | (23,717          | )          |
| ** **                                                                               |       |               |       |             |       |              |       |             |       |             |       |
| **Cash and cash equivalents**                                                            |       |               |       |             |       |              |       |             |       |             |       |
| Beginning of year                                                                        |       | 32,246             |       | 3,463            |       | 1,209             |       | —           |       | 36,918           |       |
| End of year                                                                              |       | $                  | 10,659     |             | $          | 1,762             |       | $                | 780        |             | $          | — |   | $ | 13,201 |   |

 

19

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**Advanstar Communications Inc.**

**Condensed Consolidating BalanceSheet (Unaudited)**

**AtDecember 31, 2006**
| ** **                                                   | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                      | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                   | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| **Assets**                                                   | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Current assets                                               |       |               |       |             |       |              |       |             |       |             |       |
| Cash and cash  equivalents                                   |       | $                  | 32,246     |             | $          | 3,463             |       | $                | 1,209      |             | $          | — |   | $ | 36,918 |   |
| Accounts  receivable, net                                    |       | 20,516             |       | 1,396            |       | 1,650             |       | —           |       | 23,562           |       |
| Prepaid expenses                                             |       | 5,230              |       | 3,772            |       | 278               |       | —           |       | 9,280            |       |
| Other                                                        |       | 1,817              |       | —           |       | 38                |       | —           |       | 1,855            |       |
| Total current  assets                                        |       | 59,809             |       | 8,631            |       | 3,175             |       | —           |       | 71,615           |       |
| Non-current assets                                           |       |               |       |             |       |              |       |             |       |             |       |
| Due from parent                                              |       | 2,595              |       | —           |       | —            |       | —           |       | 2,595            |       |
| Property, plant  and equipment, net                          |       | 20,784             |       | 4,078            |       | 164               |       | —           |       | 25,026           |       |
| Deferred tax  asset                                          |       | (40                | )          | 1,127            |       | —            |       | (1,087           | )          | —           |       |
| Intangible and  other assets, net                            |       | 356,797            |       | 254,904          |       | 25,361            |       | —           |       | 637,062          |       |
| Investments in  subsidiaries                                 |       | 543,334            |       | —           |       | —            |       | (543,334         | )          | —           |       |
| Intercompany  receivable                                     |       | —             |       | 290,972          |       | —            |       | (290,972         | )          | —           |       |
| Non-current  assets held for sale                            |       | 3,670              |       | —           |       | —            |       | —           |       | 3,670            |       |
|                                                         |       | $                  | 986,949    |             | $          | 559,712           |       | $                | 28,700     |             | $          | (835,393 | ) | $ | 739,968 |   |
| **Liabilities and Stockholder’s  Equity**               |       |               |       |             |       |              |       |             |       |             |       |
| Current liabilities                                          |       |               |       |             |       |              |       |             |       |             |       |
| Accounts payable                                             |       | $                  | 11,649     |             | $          | 2,528             |       | $                | 1,379      |             | $          | — |   | $ | 15,556 |   |
| Accrued  liabilities                                         |       | 60,225             |       | 5,484            |       | 327               |       | —           |       | 66,036           |       |
| Deferred revenue                                             |       | 23,041             |       | 27,806           |       | 320               |       | —           |       | 51,167           |       |
| Total current  liabilities                                   |       | 94,915             |       | 35,818           |       | 2,026             |       | —           |       | 132,759          |       |
| Long-term debt, net of  current maturities                   |       | 461,868            |       | —           |       | —            |       | —           |       | 461,868          |       |
| Deferred income taxes  and other long-term  liabilities |       | 41,955             |       | 1,087            |       | 135               |       | (1,087           | )          | 42,090           |       |
| Intercompany payable                                         |       | 284,960            |       | —           |       | 6,012             |       | (290,972         | )          | —           |       |
| Stockholder’s equity                                    |       |               |       |             |       |              |       |             |       |             |       |
| Common stock                                                 |       | 10                 |       | 8                |       | 353               |       | (361             | )          | 10               |       |
| Capital in  excess of par value                              |       | 418,254            |       | 448,112          |       | 48,704            |       | (496,816         | )          | 418,254          |       |
| (Accumulated  deficit) retained earnings                     |       | (325,875           | )          | 74,687           |       | (39,392           | )          | (35,295          | )          | (325,875         | )          |
| Accumulated  other comprehensive income (loss)               |       | 10,862             |       | —           |       | 10,862            |       | (10,862          | )          | 10,862           |       |
| Total  stockholder’s equity                             |       | 103,251            |       | 522,807          |       | 20,527            |       | (543,334         | )          | 103,251          |       |
|                                                         |       | $                  | 986,949    |             | $          | 559,712           |       | $                | 28,700     |             | $          | (835,393 | ) | $ | 739,968 |   |

 

20

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**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Operations (Unaudited)**

**For thethree months ended March 31, 2006**
| ** **                                                                      | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                         | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                                      | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Revenue                                                                         |       | $                  | 58,210     |             | $          | 46,628            |       | $                | 1,740      |             | $          | — |   | $ | 106,578 |   |
| Operating expenses                                                              |       |               |       |             |       |              |       |             |       |             |       |
| Cost of  production and selling, editorial and circulation                      |       | 35,273             |       | 17,926           |       | 1,635             |       | —           |       | 54,834           |       |
| General and  administrative                                                     |       | 9,255              |       | 490              |       | 333               |       | —           |       | 10,078           |       |
| 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  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 business, net of tax             |       | (74                | )          | —           |       | 6                 |       | (6               | )          | (74              | )          |
| Net income (loss)                                                               |       | $                  | 15,076     |             | $          | 15,009            |       | $                | (498       | )                | $          | (14,511 | ) | $ | 15,076 |   |

 

21

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**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Cash Flows (Unaudited)**

**For thethree months ended March 31, 2006**
| ** **                                                                         | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                            | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                                         | ** ** | ** **         | ** ** | ** **       | ** ** | ** **        | ** ** | ** **       | ** ** | ** **       | ** ** |
| **Cash flows from 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) operating activities                               |       | 11,998             |       | 1,869            |       | (26               | )          | —           |       | 13,841           |       |
|                                                                               |       |               |       |             |       |              |       |             |       |             |       |
| **Cash flows from 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) provided by investing activities                               |       | (1,594             | )          | (268             | )          | (24               | )          | —           |       | (1,886           | )          |
|                                                                               |       |               |       |             |       |              |       |             |       |             |       |
| **Cash flows from 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           |       |
|                                                                               |       |               |       |             |       |              |       |             |       |             |       |
| End of year                                                                        |       | $                  | 41,551     |             | $          | 3,326             |       | $                | 666        |             | $          | — |   | $ | 45,543 |   |

 

22

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**Item2.   *Management’s Discussionand Analysis of Financial Condition and Results of Operations***

This quarterly report on Form 10-Q contains forward-looking statementsmade pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995.  Investorsare cautioned not to place undue reliance on these forward-looking statements,including statements about plans and objectives of management, potentialacquisitions, 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 should not expect that these forward-lookingstatements will be updated or supplemented as a result of changingcircumstances or otherwise, and we disavow and disclaim any obligation to doso.  Important cautionary statements andrisk factors that would affect actual results are discussed in the our periodicreports and registration statements filed with the Securities and ExchangeCommission, including those under the caption entitled “Risk Factors” in our2006 annual report on Form 10-K filed with the Securities and ExchangeCommission on April 2, 2007.

**Overview**

We report our business in these three industry focusedsegments:

·                                          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,  publishing targeted magazines anddirectories; and offering a 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; organizingconferences and other events; developing continuingmedical education (“CME”) products; and the creation of a wide variety ofcustom marketing projects; and

·                                          Powersports & Automotive, which serves thepowersports, off-road and automotive aftermarket industries through trade andconsumer magazines and shows as well as electronic products.

In addition to our three segments described above,we combine our European, market development and e-Media operations into “Other.”

The percentage of our total revenue by segment for thethree months ended March 31, 2007 and 2006 is as follows:
| ** **                    | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
|                          |       |                                             |       |   |   |
| Life Sciences                 |       | 30                                               | %          | 33 | % |
| Fashion & Licensing       |       | 48                                               | %          | 45 | % |
| Powersports &  Automotive |       | 20                                               | %          | 20 | % |
| Other                         |       | 2                                                | %          | 2 | % |

 

23

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Our revenue reaches its highest levels during the firstand third quarters of the year due to the timing of the MAGIC Marketplacetradeshows and our other large tradeshows and conferences.  Because show and conference revenue is recognizedwhen a particular event is held, we may experience fluctuations in quarterlyrevenue based on the movement of show dates from one quarter to another.

**Trends and Developments**

Results for thefirst quarter of 2007 reflects the continued progress of our strategy put inplace in 2005 to focus our portfolio on industry sectors where we can leverageour strong market positions, customer relationships and management teams.  We continue to develop new revenue streams througha variety of growth initiatives across all segments and are constantly strivingto improve operating efficiency.

A number of newproducts have expanded and diversified our revenue streams in Fashion &Licensing, and Powersports.  In additionto the expansion and development of new categories and trend areas in MAGIC,the recent acquisitions of POOL and Project have been integrated into theoverall MAGIC Marketplace and contributed to the expansion of our fashionofferings to our exhibitors and attendees during the quarter.

The recent launchesin Powersports in the off-road market continue to develop, including *DIRTsports* and *Off-Road Business*magazines, Off-Road Impact tradeshow and Off-Road Expo Pomona acquired inOctober 2005.

In Life Scienceswe have continued our progress in healthcare projects through the strengtheningof our sales efforts and effectively addressing our pharmaceutical customers’needs to comply with tighter regulations relating to the management anddelivery of educational projects.  Wehave also continued our growth initiatives including the launch of severalvertical editions of our flagship magazine, Medical Economics.

## **RecentDevelopments — Sale and Merger**

## On March 28, 2007, the Board of Directors of Advanstar Holdings Corp. (“Holdings”),our ultimate parent, unanimously approved, and Holdings entered into, adefinitive merger agreement (the “Merger Agreement”) among Holdings, VSS-AHCConsolidated Holdings Corp. (“Buyer”), VSS-AHC Acquisition Corp. (“Merger Sub”),being a wholly owned subsidiary of the Buyer, and DLJ Merchant Banking III,Inc., as the stockholders’ representative.  Pursuant to the MergerAgreement and subject to the terms and conditions set forth therein, as of theclosing of the merger, the Merger Sub will be merged with and into Holdings,with Holdings being the surviving corporation.

## The aggregate purchase price is approximately $1.142 billion subject todeductions for costs of the outstanding debt of Holdings and its subsidiaries,certain transaction expenses, change of control payments and certain otherliabilities of Holdings and its subsidiaries. Additionally, the purchase price is subject to a post-closing adjustmentspecified in the Merger Agreement based on the working capital of Holdings uponthe closing of the merger.  As a result of the merger, Holding’s shares ofcommon stock will be converted into the right to receive the applicable mergerconsideration in cash at the closing, subject to the post-closing workingcapital adjustment.  The outstanding options of Holdings, including thoseissued to our employees and directors, will be cancelled at closing and optionholders will receive the same per share merger consideration in cash as theholders of common stock receive, net of the exercise price of the option, andsubject to the post-closing working capital adjustment.

Under the Merger Agreement, as soon as practicable after signing,Holdings has agreed to cause us to commence a tender offer and consentsolicitation for our outstanding 10-3/4% Second Priority Senior

24

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Secured Notes due 2010 and our 12% Senior Subordinated Notes due 2011 andto cause Advanstar, Inc. to commence a tender offer for its outstanding 15%Senior Secured Discount Notes due 2011. A tender offer was commenced forthese notes on April 19, 2007 and a related consent solicitation seeking toeliminate substantially all restrictive covenants subject to closing of thetransaction.  Proceeds from the pendingtransaction are expected to be used to settle the notes tendered and fundtender offer premium and related fees. Upon settlement of the notes, we expectto write off approximately $6.9 million in unamortized deferred finance costsand unamortized debt premium.

In connection with the closing of the pending transaction, we expect toincur an estimated $24.2 million of costs associated with change in controlprovisions in existing compensation agreements, transaction bonuses, financialadvisory  fees, and legal fees.  Of this amount $3.6 million was recognized in2006 related to our accounting for stock compensation and $0.6 million wasrecognized in the quarterly period ended March 31, 2007 for legal feesincurred.  The remainder will be recognized upon closing of the pendingtransaction.

**Recent Developments —****Accounting for Uncertain Income Tax Positions**

We adopted the provisions of FASB Interpretation No. 48 (“FIN 48”) *Accounting for Uncertainty in Income Taxes — an interpretation of FASBStatement No. 109*effective January 1, 2007.  FIN 48establishes a single model to address accounting for uncertain tax positions.FIN 48 clarifies the accounting for income taxes by prescribing a minimumrecognition threshold a tax position is required to meet before beingrecognized in the financial statements. FIN 48 also provides guidance onderecognition, measurement classification, interest and penalties, accountingin interim periods, disclosure and transition. Upon adoption on January 1, 2007, we eliminatedexisting reserves of $3.4 million for uncertain tax positions, related to localtax matters.  This reduction wasaccounted for as a cumulative effect adjustment to the January 1, 2007 balanceof retained earnings.

25

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**Selected Financial Data**

The followingtable sets forth selected statements of operations and other financial data.
| ** **                                                     | ** ** | **For the**                 | ** ** |
|----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                     | ** ** | **Three Months Ended** | ** ** |
| ** **                                                     | ** ** | **March 31,**               | ** ** |
| **(in thousands)**                                        | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| ** **                                                     |       |                             |       |   |   |
| **Income  Statement Data:**                                    |       |                             |       |   |   |
| Revenue                                                        |       |                             |       |   |   |
| Life Sciences                                                  |       | $                                | 33,155     |   | $ | 35,038 |   |
| Fashion & Licensing                                        |       | 52,932                           |       | 48,128 |   |
| Powersports & Automotive                                   |       | 22,000                           |       | 21,145 |   |
| Other                                                          |       | 2,621                            |       | 2,267 |   |
| Total revenue                                                  |       | 110,708                          |       | 106,578 |   |
|                                                           |       |                             |       |   |   |
| Cost of  production, selling, editorial and circulation        |       |                             |       |   |   |
| Life Sciences                                                  |       | 21,083                           |       | 24,165 |   |
| Fashion & Licensing                                        |       | 21,393                           |       | 19,169 |   |
| Powersports & Automotive                                   |       | 10,534                           |       | 10,332 |   |
| Other                                                          |       | 1,763                            |       | 1,168 |   |
| Total cost of production and selling                           |       | 54,773                           |       | 54,834 |   |
|                                                           |       |                             |       |   |   |
| General and  administrative expenses                           |       | 10,662                           |       | 10,078 |   |
| Restructuring  charge                                          |       | —                           |       | 2,405 |   |
| Depreciation and  amortization                                 |       | 4,524                            |       | 8,662 |   |
| Operating income                                               |       | 40,749                           |       | 30,599 |   |
| Other income  (expense):                                       |       |                             |       |   |   |
| Interest expense                                               |       | (13,542                          | )          | (13,772 | ) |
| Interest income                                                |       | 203                              |       | 475 |   |
| Other expense, net                                             |       | (669                             | )          | (153 | ) |
| Income from continuing operations before income  taxes         |       | 26,741                           |       | 17,149 |   |
| Provision for  income taxes                                    |       | 1,950                            |       | 1,999 |   |
| Income from continuing operations                              |       | 24,791                           |       | 15,150 |   |
|                                                           |       |                             |       |   |   |
| Loss from  operations of discontinued businesses, net of taxes |       | (7                               | )          | (74 | ) |
| Net income                                                     |       | $                                | 24,784     |   | $ | 15,076 |   |

** **

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**Results of Operations**

# THREE MONTHS ENDED MARCH 31,2007 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2006

# *Revenue*

Revenue in the firstquarter of 2007 increased 3.9% to $110.7 million from $106.6 million in thefirst quarter of 2006.

Life Sciencesrevenue of $33.2 million decreased 5.4% or $1.8 million from $35.0 million inthe first quarterof 2006 primarily due to a $2.2 million decline in revenue from our healthcarecustom projects due to customers scheduling fewer custom projects to becompleted during the quarter.  Thedecrease in revenue was further attributable to an overall decline in our IVTpharmaceutical conferences as we continue to re-position our product offeringsto meet our customer needs in this market. These revenue declines were partially offset by ad page growth from ourprimary care and veterinary publications over the same quarter last year.

Fashion and Licensing revenue of $52.9 million increased 10.0% or $4.8million from $48.1 million in the first quarter of 2006 primarily due toour expansion of Premium Contemporary category at MAGIC Marketplace.  *License!*magazinegrew 25.5% in revenue over the same quarter of 2006.

Powersports &Automotive revenue of $22.0 million increased 4.0% or $0.9 million from $21.1million in the first quarter of 2006. This increase was drivenprimarily by growth in the square footage sold at our IMS events and DealerExpo shows, as well as improved yields from our publications and Dealer Expo*.*

Revenuefrom Other operations in the first quarter of 2007 was $2.6 millioncompared to $2.3 million reported in the first quarter of 2006 primarily due toan overall increase in ad page yield from our European operations.

*Cost of production, selling, editorial andcirculation costs*

Overall cost ofproduction, selling, editorial and circulation expenses in the first quarter of2007 were held flat at $54.8 million in both first quarter 2007 and 2006.

Life Sciences expenses inthe first quarter of 2007 decreased by 12.8%, or $3.1 million, to $21.1 millionfrom $24.2 million in the same quarter of 2006. Cost declines were primarily driven by a decrease in the number ofhealthcare custom projects and IVT pharmaceutical conferences delivered or heldin the first quarter of 2007 as compared to the same quarter of 2006.  Additionally, costs declined due to improvedoperating efficiencies and favorable pricing under renegotiated vendorcontracts.

Fashion & Licensingexpenses in the first quarter of 2007 increased by 11.6%, or $2.2 million, to$21.4 million from $19.2 million in the first quarter of 2006, primarily due tothe expansion of our MAGIC Marketplace and our Las Vegas POOL and New YorkProject events being held in temporary venues.

Powersports & Automotiveexpenses in the first quarter of 2007 increased by 2.0%, or $0.2 million, to$10.5 million from $10.3 million in the first quarter of 2006 due primarily toincreased costs for our IMS shows.

Expenses of Otheroperations in the first quarter of 2007 were $1.8 million, compared to $1.2million in the first quarter of 2006. This increase is primarily due to costs associated with the increased adpages

27

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from *DPR Europe*,the Asian publication launches and investments in the development of oure-media product offerings.

# *General and administrative expenses*

General and administrative costs increased $0.6 million to$10.7 million in the first quarter of 2007 from $10.1 million in the firstquarter of 2006.  This increase is primarilydue to increases in employee medical expense from several large claims in thefirst quarter of 2007 compared to the same period of 2006.

# *Restructuring charge*

In 2005, we sold virtually all of our businessassets and liabilities associated with our tradeshows and conferences, tradepublications and direct marketing products in the following primary industries:Information Technology & Communications, Travel/Hospitality, Beauty, HomeEntertainment, Abilities and Portfolio, including the shares of our Hong Kongand Brazilian subsidiaries.   In 2005related to the above sale, we ceased use of certain leased office space in NewYork, NY, Milford, CT, Santa Ana, CA, and Chicago, IL. In the first quarter of2006, we vacated additional leased office space in New York, NY, and revisedour estimate of expected future sublease income for this space, resulting in$2.4 million in additional charges during the first quarter of 2006. Thesecharges 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.

In June 2006, we entered into a leasemodification and surrender agreement for approximately 60% of its vacatedoffice space in New York, NY.  Under theterms of the agreement, we paid the lessor $2.8 million in cash, the leasecovering the surrendered space was terminated and we have no further futurelease obligations for the surrendered space. In June 2006 we adjusted our accrual for this space based upon the termsof the agreement and recorded a reduction of operating expenses of $0.1million.

# *Depreciation and amortizationexpense*

Depreciation and amortizationexpense was $4.5 million in the first quarter of 2007 and $8.7 million in thefirst quarter of 2006. The decrease was primarily due to the reduction inamortization attributable to identifiable intangible assets which became fullyamortized in the fourth quarter of 2006.

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# *Interest expense*

Interest expense in the first quarter of 2007 decreased $0.3 million,or 1.7%, to $13.5 million from $13.8 million in the first quarter of 2006.  The decrease is primarily due to our $9.8million repayment of our floating rate notes in August 2006. See “—Liquidity and Capital Resources—Secondpriority secured notes.”

At March 31, 2007, $451.8 million, or 98%, of our total debt is at afixed rate with the remaining 2% of our debt subject to interest ratefluctuations.

# *Other expense*

Other expense in thefirst quarter of 2007 increased to $0.7 million compared to $0.2 million in thefirst quarter of 2006 primarily due to legal costs incurred in conjunction withthe pending transaction described in “—Recent Developments—Saleand Merger.”

# *Provision for income taxes*

The provision for incometaxes before discontinued operations was $2.0 million in both the first quarter2007 and 2006.  For both 2007 and 2006,the provision includes income taxes in certain foreign jurisdictions and adeferred tax provision related to the basis of goodwill for tax purposes beingless than the carrying value of goodwill for financial reporting purposes.

# *Discontinued operations*

In December 2005, we sold our Arenacross Championship Series (“Arenacross”)for a total selling price of $0.2 million. We recorded a loss on the sale of$0.4 million in December 2005.** **Both in the first and the secondquarter of 2006, the Company incurred $0.1 million in additional costs relatedto the sale of Arenacross. These costs were reported in loss from discontinuedoperations.

In 2004, we sold our German tradeshow business (“DMS”).  We are continuing to incur accounting andlegal fees in connection with the closure of its DMS office. These costs arereported as loss from discontinued operations.

**Liquidity and Capital Resources**

Our principal sources of liquidity have been, and areexpected to be, cash flow from operations and borrowings under our CreditFacility.  Our principal uses of cashhave been, and are expected to be, the debt service requirements of ourindebtedness described below, dividends to Advanstar, Inc. to permit funding ofits debt service, capital expenditures, investments in our products andselective acquisitions.

*Sources and uses of funds*

Operating cash flows may be significantly affected by theworking capital characteristics of our business. 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.Deferred revenue increases on the balance sheet in the quarters immediatelypreceding our busy first and third quarter show season as we collect depositsfor booth space several months in advance of the shows.  Revenue and contribution margin arerecognized in the quarter that the events are held, resulting in the reversalof the deferred revenue.

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We anticipate that our operating cash flow, together withborrowings under the Credit Facility and other future financings andrefinancings, will be sufficient to fund our anticipated future operatingexpenses, capital expenditures, debt service, dividends to our parent,Advanstar, Inc., to be used for servicing its debt obligations, and otherobligations as they become due.  However,our ability to make scheduled payments of principal, to pay interest on or torefinance our indebtedness and to satisfy our other debt obligations will dependupon our future operating performance. Our future performance and continued compliance with the covenantscontained in our Credit Facility will be affected by general economic,financial, competitive, legislative, regulatory, business and other factorsbeyond our control.  We expect to be incompliance with our debt covenants during 2007.

Ifthe pending transaction as described in “—Recent Developments— Sale and Merger”is consummated, we anticipate our financing structure should have adequate cashavailable to fund our future operating expenses, capital expenditures, debtservice and other obligations as they become due.

Historically,our financing requirements have been funded primarily through cash generated byoperating activities and borrowings under our revolving Credit Facility.  From time to time, we have also raisedadditional funds through sales of common stock, high yield offerings and termborrowings under our Credit Facility for purposes of completing selectiveacquisitions.

As of March 31, 2007, we had cash and cashequivalents of $13.2 million and also had $48.4 million in availability underour revolving credit facility. The following table shows our cash flow activityfor the three months ended March 31, 2007 and 2006 and should be read inconjunction with the consolidated statements of cash flows:
| **(in thousands)**                                   | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                | ** ** | **March 31,**               | ** ** |
| ** **                                                | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                      |       |                             | ** ** | ** ** | ** ** |
| Net cash (used  in) provided by operating activities |       | $                                | (22,157    | ) | $ | 13,841 |   |
| Net cash used in  investing activities                    |       | (1,984                           | )          | (1,886 | ) |
| Net cash  provided by (used in) financing activities      |       | 425                              |       | (12,961 | ) |
| Effect of  exchange rate changes on cash                  |       | (1                               | )          | (60 | ) |
| Net decrease in  cash and cash equivalents                |       | $                                | (23,717    | ) | $ | (1,066 | ) |

The $36.0 million decrease in cash from operatingactivities as compared to the first quarter of 2006 was due principally to the$28.0 million payment made in January 2007 for the settlement of a futurecontingent earn-out related to the Project tradeshow acquisition.  The decrease in cash is also attributable to1) an increase in accounts receivables of $5.6 million; and 2) a decrease incash collected in advance of our second and third quarter events of $3.8million primarily due to impact of timing of customer payments. Further thedecrease in cash is attributable to a decline in accounts payable and accruedcompensation of $3.0 million.  Thesedecreases were partially offset by improved operating results of $6.0 million.

Net cash used in investing activities was $2.0 million inthe first quarter of 2007 and $1.9 million in the same quarter of 2006. Cashused in investing activities was principally due to cash used for capitalexpenditures. The majority of the first quarter of 2007 expenditures arerelated to our shows and events infrastructure. We believe that this amount of capital expenditure will be adequate togrow our business according to our business strategy and to maintain the keytradeshows, publications and business of our continuing operations.

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Wedid not complete any acquisitions in the first three months of 2007. In connection with any future acquisitions, as apart of our on-going business strategy, we may require additional funding,which may be provided in the form of additional debt or equity financing or acombination thereof.  There can be noassurance that any additional financing will be available to us on acceptableterms or in a manner that complies with the restrictive covenants in our debtinstruments.  Consistent with ourlongstanding strategy, we continue to pursue potential acquisitions ofcomplementary businesses.

Cash provided by financing activities in the firstquarter of 2007 was$0.4 million compared to cash used in financing of $13.0 million inthe first three months of 2006.  In thefirst three months of 2007, we received $0.4 million in project grant funds.  In the first three months of 2006, we paid$12.9 million in dividends to our stockholder, Advanstar, Inc., to be used forcash interest payments in April 2006 relating to its 15% senior discount notes.

We may need to borrow against our Credit Facility in thesecond quarter of 2007 to meet our current debt service requirements.

*Debt service*

**As of March31, 2007, we had total indebtedness of $461.8 million and$48.4 million of borrowings available under our revolving creditfacility.  Our principal debt obligationsare described below.**

On April 19, 2007, subject to closing of the transaction, we withAdvanstar, Inc. commenced a tender offer and related consent solicitationseeking to eliminate substantially all restrictive covenants for the fixed ratenotes, the senior subordinated notes and Advanstar, Inc.’s Discount notes.  Proceeds from the pending transactiondescribed “—Recent Developments— Sale and Merger” are expected to be used tosettle the notes tendered and fund tender offer premium and related fees.

*Credit facility amendment and restatement*

On May 24, 2006, we amended and restated our existing Credit Facility.The amended Credit Facility reduced the revolving loan commitment amount from$60.0 million to $50.0 million, added a$10.0 million Term Loan, modified certain restrictive covenants and extendedthe maturity date from April 2007 to May 2009 for the entire Credit Facility.** **Theamendment also eliminated the minimum quarterly fixed charge coverageratio covenant.

*Second priority secured and floating rate notesrepayment*

In August 2006, we used aportion of the proceeds from the Credit Facility Term Loan to redeemall of our remaining $9.8 million of outstanding floating rate notes at par.

*Credit facility*

OurCredit Facility consists of a $50.0 million revolving credit facilitywhich terminates in May 2009, and a $10.0 million term loan which matures inMay 2009.  Borrowings under the CreditFacility generally bear interest based on a margin over, at our option, thebase rate or LIBOR.  The applicablemargin for revolving credit loans varies based upon our ratio of consolidateddebt to EBITDA, as defined in the Credit Facility, and is currently 2.5% overLIBOR or 2.5% over the base rate.  TheCompany incurs a daily commitment fee of 0.5% and 1.25% per annum for unusedrevolving loan availability and standby letters of credit, respectively.

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Ourobligations under the Credit Facility are guaranteed by Holdings,Advanstar, Inc., our direct parent company, and all of our existing andfuture domestic subsidiaries.  Ourobligations under the Credit Facility are collateralized by substantially allof the assets of our company and the subsidiary guarantors, including a pledgeof the capital stock of all our existing and future domestic subsidiaries, apledge of no more than 65% of the voting stock of any foreign subsidiarydirectly owned by our company or any domestic subsidiary, a pledge of allintercompany indebtedness in favor of our company and our domesticsubsidiaries, a pledge of our company’s capital stock held by our direct parentcompany, and a pledge of our direct parent company’s capital stock held byHoldings.  The Credit Facility containsrestrictive covenants, including limitations on certain asset dispositions,dividends, investments and other restricted payments.  Failure to comply with the covenants could cause an event of defaultunder the Credit Facility.

*Second priority senior secured notes*

Our$291.3 million of fixed rate notes mature in 2010.  The notes are guaranteed by each of ourexisting and future domestic restricted subsidiaries and collateralized bysecond-priority liens on the assets collateralizing our Credit Facility(other than certain subsidiary stock and assets of our parent companies).  The fixed rate notes bear interest at an annualrate of 10.75%, which is payable semi-annually in cash.  The notes contain restrictive covenants that,among other things, limit our ability to incur debt, pay dividends and makeinvestments.

*Senior subordinated notes*

Our$160.0 million 12% senior subordinated notes mature in 2011 and areguaranteed by each of our existing and future domestic restricted subsidiaries.Interest on the notes is payable semi-annually in cash.  The notes contain restrictive covenants that,among other things, limit our ability to incur debt, pay dividends and makeinvestments.

*Parent company notes*

Our parent, Advanstar, Inc., issued 15% seniordiscount notes (“the discount notes”) due October 2011 with a principalamount at maturity of $171.8 million. Interest on the discount notes ispayable in cash beginning in April 2006. These discount notes containrestrictive covenants that, among other things, limit the ability ofAdvanstar, Inc. and its subsidiaries (including us) to incur debt, paydividends and make investments.  Neitherwe nor any of our subsidiaries have guaranteed the discount notes.  Advanstar, Inc., however, is a holdingcompany and its ability to pay interest on these discount notes will bedependent upon the receipt of dividends from its direct and indirect subsidiaries,principally dividends from us.  However,the terms of our borrowing arrangements significantly restrict our ability topay dividends to Advanstar, Inc. and Advanstar, Inc.’s failure to paythese notes would be a default under our Credit Facility.

Therestrictive covenants in our senior secured notes indenture and seniorsubordinated notes indenture provide that we can pay dividends only if ourleverage ratio (as defined) is 6.00 to 1.00 or better and only from a “basket”equal to the amount by which our cumulative EBITDA (as defined) since January1, 2001 exceeds 150% of our cumulative interest expense in that same periodplus other items, including proceeds from equity offerings. In addition to thebasket and notwithstanding the leverage ratio limitation on restrictedpayments, we can make additional restricted payments in an aggregateamount of up to $20 million to Advanstar, Inc., none of which has been used as of March 31, 2007.   As of March 31, 2007, our leverageratio under the most restrictive of these indentures was 4.95 to1.00.

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InFebruary 2007, we declared a dividend of $12.9 million payable to Advanstar,Inc. which was paid on April 16, 2007. We declared and paid both in March2006 and October 2006 a dividend of $12.9 million to Advanstar, Inc. Thesedividends made to Advanstar, Inc. in 2006 and 2007 were used for its April2006, October 2006 and April 2007 discount note interest payments.  Debt service on Advanstar, Inc.’sdiscount notes will be $38.7 million from April 1, 2007 through March 31, 2008including the dividend paid in April 2007. We expect our results will allow us to continue to make dividendpayments to Advanstar, Inc. for purposes of servicing this debt.  However, our results are subject to a varietyof factors, including general economic conditions and conditions in ourmarkets.  We may not generate sufficient cash flow from operations or be permittedby the terms of our debt instruments to pay future dividends to Advanstar, Inc.in amounts sufficient to allow it to pay cash interest on the parent companynotes.   If Advanstar, Inc. is unable tomeet its debt service obligations, it could attempt to restructure or refinanceits 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.  A default under the parent company notescould result in an acceleration of all outstanding loans under our CreditFacility which, in turn, would trigger a cross-default under both oursecond priority senior secured notes and our senior subordinated notes.

*Contractual and contingent obligations*

Ourcontractual obligations (excluding accounts payable and accrued expenses), asof March 31, 2007 are as set forth below:
| **(in millions)**                      | ** ** | **Payments Due By Period** | ** ** |
|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                  | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **After** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | **2007(1)**                               | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2012** | ** ** | **Total** | ** ** |
|                                        |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Indebtedness                                |       | $                                         | —     |   | $ | — |   | $ | 10.0 |   | $ | 291.3 |   | $ | 160.0 |   | $ | — |   | $ | — |   | $ | 461.3 |   |
| Interest on  indebtedness(2)                |       | 41.7                                      |       | 51.6 |   | 51.1 |   | 42.7 |   | 9.6 |   | — |   | — |   | 196.7 |   |
| Acquisition related compensation payable(3) |       | 1.4                                       |       | — |   | — |   | — |   | — |   | — |   | — |   | 1.4 |   |
| Operating lease  obligations                |       | 3.6                                       |       | 4.5 |   | 3.1 |   | 2.7 |   | 2.1 |   | 2.1 |   | 3.8 |   | 21.9 |   |
| Total  contractual cash obligations         |       | $                                         | 46.7       |   | $ | 56.1 |   | $ | 64.2 |   | $ | 336.7 |   | $ | 171.7 |   | $ | 2.1 |   | $ | 3.8 |   | $ | 681.3 |   |

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(1)             For the period fromApril 1, 2007 through December 31, 2007.

(2)             Interest on ourvariable rate debt is calculated using LIBOR of 5.3%, the rate in effect onMarch 31, 2007.  Because our variablerate debt bears interest at a variable rate, actual payments could differ.

(3)             Relates to contingentcompensation obligations relating to acquisitions which had not been paid as ofMarch 31, 2007.

We haveno material capital lease obligations or purchase obligations.  We have contingent obligations composed of$1.6 million of letters of credit securing our lease facilities.

*Off-balancesheet arrangements*

We haveno material off-balance sheet arrangements.

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*Recentlyissued accounting pronouncements*

In September 2006, the FASB issued Statement of Financial AccountingStandard No. 157, *Fair Value Measurement (“*FAS157”). FAS 157 defines fair value, establishes a framework for measuring fairvalue in generally accepted accounting principles, and expands disclosuresabout fair value measurements. This Statement does not require any new fairvalue measurements.  FAS 157 is effectivefor us on January 1, 2008. We have not completed our evaluation of FAS 157 andthe effect its adoption will have on our consolidated financial statements.

The FASB also issued in September 2006 Statement of FinancialAccounting Standards No. 158, *Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans*(“FAS 158”). The new standardrequires companies to recognize the overfunded or underfunded status of adefined benefit postretirement plan as an asset or liability on the balancesheet and to recognize changes in that funded status in the year in which thechange occurs through comprehensive income. FAS 158 provides for adoptioneffective December 31, 2007 for companies that do not have publicly tradedequity securities.  As such, ourconsolidated balance sheet as of December 31, 2007 will reflect the fundedstatus of our postretirement benefit plans, with the offset reported in othercomprehensive income (loss). If we had adopted FAS 158 on March 31, 2007, wewould have recorded an additional $1.2 million of other long term liabilitiesand other comprehensive income on our consolidated balance sheet. We do notexpect the actual impact upon adoption on December 31, 2007 to be materiallydifferent from this impact

In February 2007, the FASB issuedStatement of Financial Accounting Standard No. 159, *The FairValue Option for Financial Assets and Financial Liabilities (*“FAS159”). FAS 159 permits entities to measure many financial instruments andcertain other items at fair value that are not currently required to bemeasured at fair value.  FAS 159 iseffective for us on January 1, 2008. We have not completed our evaluationof FAS 159 and the effect its adoption will have on our consolidated financialstatements.

# **ITEM 3.***** Quantitative and Qualitative Disclosures About Market Risk***

We are exposed to various market risks, which are thepotential losses arising from adverse changes in market rates and prices, suchas foreign currency exchange and interest rates.  We do not enter into derivatives or otherfinancial instruments for trading or speculative purposes.  We have previously entered into financialinstruments to manage and reduce the impact of changes in interest rates andforeign currency exchange rates. However, we have no such instruments asof March 31, 2007.

# **Interest Rates**

At March31, 2007, we had fixed rate debt of $451.8 million and variable rate debtof $10.0 million.   A change ininterest rates of 1% would not be material to our operating results.

# **Currencies**

Outsideof the United States, we maintain assets and operations in the United Kingdom.These assets and operations, and our exposure to any currency gains or losses,are not material to our operating results.

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**Item4T.  Controls and Procedures**

*Evaluationof disclosure 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 Securities Exchange Act of 1934, asamended (the “Exchange Act”)) as of the end of the period covered by thisreport (the “Evaluation Date”), have concluded that as of the Evaluation Date,our disclosure controls and procedures were effective.

*Changesin internal controls*

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

# **PART II         OTHERINFORMATION**

**Item 1.Legal Proceedings**

Weare not a party to any legal proceedings which would be material to ourbusiness, financial condition or results of operations other than ordinarycourse, routine litigation.

**Item 1A.Risk Factors**

There have been nomaterial changes in the risk factors provided in Part I, Item 1A of our 2006Annual Report on Form 10-K as filed with the SEC on April 2, 2007.

Items 2 to 5 ofform 10-Q are not applicable
| **Item 6.** | ** ** | **Exhibits** |
|-------------|------------|--------------|
| ** **  |
|        |       | 2.1          | Agreement and Plan of Merger dated as of March 28,  2007 among Advanstar Holdings Corp., VSS-AHC Consolidated Holdings Corp.,  VSS-AHC Acquisition Corp., and DLJ Merchant Banking Funds III, Inc.  (Previously filed as an exhibit to the Company’s current report on Form 8-K  dated March 28, 2007 and incorporated by reference herein) |
|        |       |         |   |
|        |       | 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 the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
|        | ** **  | ADVANSTAR COMMUNICATIONS  INC. |                                            |
|--------|-------------|--------------------------------|-------------------------------------------------|
|   | ** **  |                           |                                            |
|   | ** **  |                           |                                            |
|   | May 8, 2007 | /s/ Ted S. Alpert              |                                            |
|   | ** **  |                           | Theodore S. Alpert                              |
|   | ** **  |                           | Vice President-Finance, Assistant Secretary and |
|   | ** **  |                           | Chief Financial Officer                         |
|   | ** **  |                           | (Principal Financial Officer and Authorized     |
|   | ** **  |                           | Representative of the Registrant)               |
|        |             |                                |                                                 |  |

 

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**ExhibitIndex**
| Exhibit No. | ** ** | **Document**                                                                                                                                                                                                                                                                                                                                     |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                       |
| 2.1         |       | Agreement and Plan of Merger dated as of March 28,  2007 among Advanstar Holdings Corp., VSS-AHC Consolidated Holdings Corp.,  VSS-AHC Acquisition Corp., and DLJ Merchant Banking Funds III, Inc.  (Previously filed as an exhibit to the Company’s current report on Form 8-K  dated March 28, 2007 and incorporated by reference herein) |
|        |       |                                                                                                                                                                                                                                                                                                                                             |
| 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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