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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X]
    
    ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 OR [  ]
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM __________ TO __________. COMMISSION FILE NUMBER
0-22582 TBA ENTERTAINMENT CORPORATION  DELAWARE
    
    62-1535897(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. employer identification no.)16501 VENTURA BOULEVARDENCINO, CALIFORNIA
    
    91436(Address of principal executive offices)
    
    (Zip Code)
 (818) 728-2600
(Issuers telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR VALUE $0.001 PER SHARE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [  ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) YES [  ] NO [X]. The aggregate market value of the voting and non-voting common stock held
by non-affiliates of the registrant (based on the closing sale price of such
stock as reported on March 26, 2004 on the American Stock Exchange) was
approximately $2,680,900. As of March 26, 2004, 7,375,400 shares of the registrants Common Stock
were outstanding. 1




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|              |                                                                                               |  |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS                                                                             
|              | ITEM 2. PROPERTIES                                                                           
|              | ITEM 3. LEGAL PROCEEDINGS                                                                    
|              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|              | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                             
|              | ITEM 6. SELECTED FINANCIAL DATA                                                              
|              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|              | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|              | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|              | ITEM 9A. CONTROLS AND PROCEDURES                                                             
|PART III     
|              | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|              | ITEM 11. EXECUTIVE COMPENSATION                                                              
|              | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|              | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|              | ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                              
|PART IV      
|              | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 10.11
|EXHIBIT 21   
|EXHIBIT 23   
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 
|EXHIBIT 32.2 



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INTRODUCTORY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Except for historical information, the matters discussed in this Form 10-K
contain certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements are intended to be covered by the safe harbors created
by such provisions. These statements include, but are not limited to:
management beliefs regarding the future operations of the Company, any
projections of revenues, earnings or cash flows and the plans and objectives of
management for future growth or sale of the Company. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgments with respect to, among other
things, future political, economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although
the Company believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this Form 10-K will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives of the
Company will be achieved. 2




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DOCUMENTS INCORPORATED BY REFERENCE: None. 
 PART I 
 ITEM 1. BUSINESS. GENERAL TBA Entertainment Corporation (TBA or the Company) is a strategic
communications and entertainment company that creates comprehensive programs to
reach and engage audiences worldwide. TBA provides a broad range of strategic
communications and entertainment services through its four integrated business
segments. TBA believes that its strong presence in each of these very
fragmented industries has created an industry-leading integrated services
company. With a base of Fortune 1,000 companies, fairs, festivals and
recording artists as clients, TBA links global business with popular culture,
enabling clients to maximize the impact of the message and the results
achieved. TBA has offices spanning from Los Angeles to London including
Nashville, Chicago, San Diego, Salt Lake City, Atlanta, and Omaha. TBAs four
business segments are as follows:  
    
    Corporate Communications  Develops and produces strategic
communications, entertainment and special event services to corporate
clients worldwide.
    
    Entertainment Marketing  Creates and executes innovative
entertainment marketing initiatives including music tours, television
broadcasts and special events.
    
    Fairs and Festivals  Develops and produces a broad range of
entertainment programs, national sponsorship initiatives and seasonal
programming for fairs and festival clients.
    
    Artist Management  Develops and implements career strategies
and corporate partnerships for some of the most successful artists in
the entertainment industry. The integration of TBAs four business divisions creates competitive
advantages for the Company. TBA believes that while a variety of competitors
exist with each of the Companys divisions, none offers the complete scope of
services provided by TBA. This intra-company synergy provides TBAs clients
with an expanded range of comprehensive services while creating additional
sources of revenues and profits for the Company. For example, in producing
corporate meetings and entertainment marketing programs, the Company creates
opportunities to showcase artist management clients. Providing entertainment
marketing programs for corporate clients conversely provides opportunities to
cross-sell client decision makers on other corporate communication and
entertainment events. The Company was incorporated in Tennessee in June 1993 and reincorporated
in Delaware in September 1997. PROPOSED SALE OF THE COMPANY On April 8, 2004, the Company signed definitive merger documents for the
proposed sale of 100% of the capital stock of the Company in an all cash
transaction. The proposed sale of the Company, which requires shareholder
approval, is likely to close in the second quarter of 2004. The proposed terms
of the transaction provide for cash consideration in the amount of $6,150,000
which, after deduction of certain transaction expenses, results in net
consideration of $0.67 per share of common stock and $0.70 per share of
preferred stock, subject to downward adjustment based on certain of the
Companys other expenses incurred in connection with the transaction. It is
anticipated that the transaction will result in the Company no longer being a
publicly traded entity. CORPORATE COMMUNICATIONS The Corporate Communications division is an industry leader in the
strategic development and production of innovative business communications,
entertainment and special event programs that enable corporate clients to reach
and engage targeted internal and business-to-business audiences worldwide. TBA
utilizes award-winning creative capabilities and state-of-the-art technology to
help corporate clients worldwide deliver targeted messages that educate,
inspire and motivate. The Corporate Communications division 3




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targets clients with recurring needs for business communications and
entertainment services. The Companys client list encompasses a number of
industry sectors including telecommunications, information technology,
pharmaceuticals, food service and insurance. Representative clients include
Nortel, SAP, BEA Systems, Motorola, Bristol Myers Squibb Company, McDonalds
Corporation, and State Farm. The Corporate Communications division specializes in the creative
development, design, production and staging of a wide range of internal and
business-to-business events including: sales conferences, business meetings and
headline entertainment, product introductions and recognition events. TBA
believes that it has benefited from the decision by an increasing number of
major corporations to outsource their business communications and entertainment
needs. Through its nationwide offices, TBA delivers a full range of strategic
communications and entertainment services to its clients. The Corporate
Communications division emphasizes the coordination and allocation of resources
and services between the divisions offices. TBA has long-standing
relationships with freelance contractors in various production, technical and
creative disciplines, and supplements its full-time staff with independent
contractors where needed. The Corporate Communications division serves its nationwide client base
from offices in Chicago, Nashville, Salt Lake City and San Diego. These
offices were assembled via strategic acquisitions over the past seven years.
During 2002, TBA elected to close Corporate Communications offices in Atlanta,
Dallas, Phoenix and New York. The closures were instituted to consolidate
operations into larger, more profitable offices and, thus, reduce Company-wide
expenses. The Company has made four strategic acquisitions over the past seven years
in assembling the Corporate Communications division. The Company believes,
based on its experience, that the corporate communications industry is highly
fragmented. Further, the Company believes that many of its competitors consist
of a number of small, primarily regional companies that provide only a limited
range of services. However, the Company believes that there are other
competitors who have been in business longer and have larger staffs and whose
business, like the Companys, is full service in scope. The most important
competitive factors include creative and production capabilities, quality and
price. The Company believes that it can compete successfully in this market by
utilizing the Companys production capabilities and existing entertainment
relationships to produce an exceptional event. TBAs commitment to providing
exceptional events has developed a loyal client base. The Company also
competes with in-house corporate communications staffs of existing and
potential clients and with staffs of hotel and convention centers. ENTERTAINMENT MARKETING The Entertainment Marketing division links global business with popular
culture through the development, marketing and production of consumer-focused
entertainment events, music marketing initiatives, concert tours, television
broadcasts, recorded music products and brand building initiatives. This
division forges new ways for clients to reach their audiences and realize their
marketing objectives. The entertainment marketing division specializes in the
creative development, design, production and execution of a broad range of
marketing initiatives that may include: national music tours, lifestyle events,
network television broadcast specials, point of purchase campaigns,
premium/incentive programs, brand imaging campaigns, sponsorship fulfillment,
experiential branding initiatives and consumer/trade promotions. TBA provides companies with the power to reach and engage their customers
in a fresh, contemporary manner utilizing relevant programming and experiential
branding techniques to integrate their company or brand into the lifestyle of
their consumers. The Entertainment Marketing division seeks to develop
music-marketing programs that appeal to highly focused demographic segments.
In addition, corporations are increasingly utilizing entertainment
personalities as advertising tools, having recognized the effectiveness of
concert/tour sponsorship as a cost-effective means to reach a target audience.
The Company has produced sponsored music-marketing programs for clients that
include CMT, Kelloggs, General Motors, and Nescafe. In addition, the Company
has produced major television broadcast events and specials for clients that
include Turner Sports, NASCAR, Blockbuster and Hard Rock Café. The Companys
Entertainment Marketing division is currently characterized by a relatively
small number of accounts with high revenues per account. As a result, the loss
or addition of any one account could have a material effect on the Companys
revenues. TBA has made two strategic acquisitions in the past five years, increasing
the Companys competitive position in the entertainment marketing industry,
including the February 2001 acquisition of Moore Entertainment, Inc., a
producer of music tours and corporate sponsored events. Management believes
that there are a number of companies who compete with TBA in providing
entertainment marketing services including specialty marketing companies,
advertising agencies and other media and entertainment companies. Like the
corporate communications business, the most important competitive factors
include creative and production capabilities, quality and price. The Company
believes that many of these competitors have been in business longer and have
greater resources than those of the Company. 4




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FAIRS AND FESTIVALS The Fairs and Festivals division engages in the strategic development and
production of a broad range of entertainment programs, national sponsorship
initiatives and seasonal programming for many of the countrys largest fairs,
festivals and rodeos. The Company provides entertainment, production and
consultation services to more than 100 fairs, festivals and rodeos across North
America, including Cheyenne Frontier Days, Greeley Stampede, Colorado and
Nebraska State Fairs, and Country Thunder Festival. Combined, these programs
reach over 17 million consumers annually. This unique platform provides a
powerful opportunity to promote consumer brand awareness, product sampling and
sales programs to corporate advertisers. By utilizing established relationships with corporate clients, the Company
can work with fair and festival clients to participate in mutually beneficial
sponsorship programs, content development and facilities utilization strategies
to help them successfully compete against other entertainment venues. In
addition, the Company can utilize its strong entertainment background to offer
its fairs and festival clients improved pricing for entertainment, while at the
same time providing a more efficient and turnkey routing solution for its
touring artist clients. The Companys Fairs and Festivals division was assembled through two
acquisitions completed in 2000. The Company believes that the fairs and
festivals industry is highly fragmented and its competitors consist of
primarily small, regional companies that, like the Company, have long standing
relationships with their clients. The most important competitive factors are
the ability to provide the fairs and festivals with quality music entertainment
at a competitive price and to produce an exceptional entertainment event. The
Company believes that it can compete successfully in this market by utilizing
the Companys extensive entertainment relationships with artists and artist
booking agencies to secure musical talent while utilizing the Companys
production capabilities to produce a high quality event. ARTIST MANAGEMENT The Artist Management division develops and implements career strategies
for music industry artists, including high-profile artists in country music
(such as Brooks & Dunn, Terri Clark and Clay Walker), classic rock (such as
Styx and Survivor), alternative rock (such as Papa Roach) and contemporary
Christian (such as Point of Grace and Jaci Velasquez). The Company, as a
leader in the production of corporate communications and entertainment
programs, entertainment marketing initiatives, special events and sponsorship
procurement, is uniquely positioned to create opportunities for artists.
Management believes that the Companys familiarity with all facets of the
entertainment industry enables it to help artists create and capitalize on
opportunities. With its expertise in concert production and corporate
entertainment events and its relationships with venue managers, outside concert
promoters, broadcasting executives and other industry professionals, management
believes that the Company is uniquely positioned to offer services that can
significantly enhance the careers of its clients. The Company develops
long-term career strategies and represents music industry artists in the
negotiation of recording, touring, merchandising and performance contracts.
Using these integrated resources, the Artist Management team is unified around
the strategy of creating long-term, sustained success for the Companys artist
management clients. The Company has made five strategic acquisitions over the past six years
in assembling the Artist Management division, including the July 2001
acquisition of Alliance Artists Ltd. The Company believes that the artist
management industry is highly-fragmented and its competitors consist primarily
of small independent artist managers with a limited roster of clients, although
there are several participants in the industry that have capabilities and
resources comparable to and, in certain respects, greater than those of the
Company. BUSINESS SEGMENT INFORMATION The Company classifies its operations into the four business segments
discussed above. See Note 12 to the consolidated financial statements
contained in Item 8 of this Form 10-K for summarized financial information
concerning the Companys reportable segments. 5




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GOODWILL IMPAIRMENT In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which establishes accounting and reporting for acquired goodwill and
other intangible assets. SFAS No. 142 requires that goodwill and other
intangible assets that have indefinite useful lives not be amortized but,
instead, tested at least annually for impairment. The Company adopted SFAS No.
142 beginning in the first quarter of 2002. The Companys only identifiable
intangible asset is goodwill. In accordance with the provisions of SFAS No. 142, the Company uses a two-step
process when performing its annual review for goodwill impairment. The first
step is to determine the fair value of the reporting unit (each of the
Companys four business segments) and compare this value to its carrying
amount. The fair value is determined using a discounted future cash flow
methodology. If the carrying value exceeds the fair value, a second step is
required to determine whether goodwill has been impaired and if so, measure the
amount of the impairment. Upon the adoption of SFAS No. 142 in the first
quarter of 2002, the Company determined that the goodwill of its Fairs and
Festivals unit was impaired by $1,988,600, as a result of the earnings of that
unit not meeting the earnings expectations set by the Company at the time the
businesses were acquired. During the annual impairment review process as of
November 2003, the Company determined that its goodwill was further impaired as
a result of the carrying value of three of its four business segments exceeding
the fair value of those units. Accordingly, for the year ended December 31,
2003, the Company recorded goodwill impairment of $6,152,700, $3,184,000 and
$1,063,500, relating to its Artist Management, Fairs and Festivals and
Corporate Communications business segments, respectively. The decrease in fair
value from November 2002 was due to a decrease in the projected future
operating profits and cash flows from these business segments. The reduction
in Artist Management is due primarily to reduced revenue projections from its
artist roster and an increase in the compensation structure paid to retain
senior executives. The reduction in Fairs and Festivals is due primarily to
the projected revenue loss from the departure of a senior account executive.
The reduction in Corporate Communications is due primarily to reduced revenue
projections and gross margins due to heightened competition and an increase in
the compensation structure paid to retain senior executives. COMPETITION In addition to the competitive factors outlined above for each of the
Companys four business groups, the success of the Companys entertainment
operations are dependent upon numerous factors beyond the Companys control,
including economic conditions, amounts of available leisure time,
transportation costs, lifestyle trends and weather conditions. SEASONALITY The Company experiences quarterly fluctuations in revenue, operating
income and net income as a result of many factors, including the timing of
clients meetings and events, timing of artists tours and recording releases,
weather related issues, delays in or cancellation of clients entertainment
marketing programs, as well as changes in the Companys mix among the various
services offered. DISCONTINUED OPERATIONS During the first quarter of 2001, the Company approved a formal plan to
discontinue its merchandising operations in order to better focus on its core
business as a strategic communications and entertainment company. The
disposition of the merchandising operations represents the disposal of a
business segment. Accordingly, this former segment is accounted for as a
discontinued operation. TRADEMARKS The Company has obtained registered trademarks for the TBA Entertainment
Corporation mark for television show production and programming. The Company
has also filed Intent-To-Use Trademark Applications for the TBA Entertainment
Corporation mark for the various other classes of goods and services in which
the Companys mark will be utilized. In addition, the Company has filed or
intends to file Intent-To-Use Trademark Applications for other proprietary
programs developed by the Company. There can be no assurance, however, that
these trademarks will proceed to registration, and if so registered, that the
trademarks, in any one or more classes, will not violate the proprietary rights
of others, that any registration of the trademarks or the Companys use thereof
will be upheld if challenged, or that the Company will not be prevented from
using the trademarks. 6




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REGULATION AND LICENSES The Company is subject to federal, state and local laws affecting its
business, including various health, sanitation and safety standards. The
Companys entertainment operations are subject to state and local government
regulation, including regulations relating to live music performances. Each
live concert performance must comply with regulations adopted by federal
agencies and with licensing and other regulations enforced by state and local
health, sanitation, safety, fire and other departments. Difficulties or
failures in obtaining the required licenses or approvals can delay and
sometimes prevent the promotion of live concerts. The failure to receive or
retain, or delay in obtaining, a license to serve alcohol and beer in a
particular location could adversely affect the Companys operations in that
location and impair the Companys ability to obtain licenses elsewhere. The
failure or inability of the Company to maintain insurance coverage could
materially and adversely affect the Company. EMPLOYEES As of December 31, 2003, the Company had approximately 116 full-time and
part-time employees. It is the Companys intention to manage its growth
consistent with its ability to attract and retain qualified employees to manage
its operations. Over the course of any given event or program, the Company
evaluates the production personnel requirements and determines the extent to
which it must supplement its available employee base with the use of
independent contractors or part-time employees. The Company believes that its
relationship with its employees and independent contractors is good. The Company has no full-time employees whose employment is covered by
collective bargaining or similar agreements with unions; however, the Company
does from time to time independently contract with or hire part-time union
personnel, especially during the production of a particular corporate
communication or entertainment marketing program and, accordingly, the Company
is a party to certain agreements with unions governing the hiring and terms of
employment of such personnel. RISK FACTORS If the Company does not Achieve its Operating Plan for 2004, the Company may
have Insufficient Cash Flow to Fund Operations and Pay its Debt. Achieving the Companys operating plan for 2004 is critical to the future
operations of the Company. Only a small portion of the Companys expenses vary
with revenue in the short term. Net income may be
disproportionately affected by a reduction in revenue in 2004.
Although management of the Company believes that the 2004 operating plan is achievable, if the Company
does not achieve its revenue targets forecasted for 2004, it may not generate
sufficient cash flows to fund future operations. In addition, as of December 31, 2003, the Company was in default on
substantially all its long-term debt. From January 1, 2004 to April 14, 2004,
the Company completed a restructuring of all debt that was in default. The
Company provided its 2004 operating plan, including its 2004 cash flow
projections to its debt holders. These cash flow projections were used by the
debt holders in determining whether to restructure the Companys various notes
payable.  Although management of the Company believes that the 2004
operating plan is achievable, if the Company does not achieve its 2004 operating plan, it may not
generate sufficient cash flow to make the scheduled principal payments required
pursuant to the restructured bank term loan or restructured acquisition notes
payable. Failure to make scheduled principal payments would result in the
Company again being in default on its long-term debt which could have a
material adverse impact on the Companys financial position and results of
operations. Key Senior Executives may Leave the Company. Certain of the Companys key senior executives do not have long-term employment
contracts with the Company and are not subject to any covenants prohibiting
competition with the Company or solicitation of clients of the
Company. In addition, the Companys services to its customers
are currently managed by a relatively small number of account
executives and artist managers. Although no current key executive has
informed the Company of their intent to terminate, a loss
of these key senior executives and a loss of their clients could have a
material adverse impact on the financial position and future operations of the
Company. Further Terrorist Attacks or Continuation of Global Economic Slowdown could
Adversely Affect the Company. The terrorist attacks of September 11, 2001 and the global economic slowdown of
2001-2002 had a devastating impact on the operations of the Company. The
Company experienced immediate program cancellations and postponements impacting
greater than $15 million of revenue which management otherwise would have
expected to have been realized during 2001. The economic slowdown also
impacted the Companys business activity throughout 2002. In 2003, the Company
began to experience an increase in its corporate client sales activity as a
result of the apparent beginning of an
economic recovery. If there are further
terrorist attacks or if the economic recovery does not materialize in the short
term, the Companys corporate client business may be adversely affected and,
in turn, the Companys revenue may experience another decline. The Lengthy Sales Cycle and Increased Competition for Corporate Client Business
could Adversely Affect the Company. The corporate communications and entertainment marketing business segments typically have a lengthy sales cycle and
are subject to delays beyond the Companys control. In addition, as a result of
the tightening economy, the Companys customers may be reluctant to purchase
the Companys services and rely instead on internally developed programs. The
slowdown in the corporate client business activity in 2001 and 2002 has also
created increased competition for existing business, resulting in lower gross
profit margins. Whether or not within the Companys control, delays in the
sales cycle or increased competition for customers could materially affect the
Companys financial position and future operations. The Company may Lose Customers Due to its Financial Position. Although the Company has experienced significant net losses for 2001-2003, the
Company has successfully produced over 700 corporate communications events during that
period. The Company has been able achieve these results by successfully
managing its cash flow requirements, working with its vendors on payment terms
and negotiating with its debt holders to restructure debt payments. However,
as of December 31, 2003, the Company had a net working capital deficit of
$3,947,300 and must achieve its 2004 operating plan in order to fund its operations
and make scheduled principal payments on its debt. Certain of the Companys
customers may have financial requirements that the Company would be required to
meet in order to become a vendor to the customer. Although no customer has indicated that the Company does not meet its financial requirements, if the Company fails to
achieve its 2004 operating plan or if the financial condition of the Company
worsens, such events could lead to the Company losing existing and potential
customers resulting in a substantial loss of revenues.  
 ITEM 2. PROPERTIES. The Company and/or its subsidiaries have entered into lease agreements
with respect to leased office space in eight cities in which the Company
operates. These leases expire at various dates through December 2007. As of
December 31, 2002, the Companys wholly-owned subsidiary, TBA Entertainment
Group Dallas, Inc., owned the building in which its offices and production
facilities were located, as well as certain vacant land adjacent to such
building. As a result of the Companys decision to close the Dallas office,
the Dallas facility was reclassified as Asset Held for Sale as of December
31, 2002. In February 2003, the Company sold the land and building, using the
proceeds to reduce the balance of its bank credit facility. The Company has offices located in Hickory Valley, Tennessee in a building
owned by a limited partnership, the general partner of which is a corporation
owned by Thomas J. Weaver III and Frank A. McKinnie Weaver, Sr., each an
officer and director of the Company, and of which they also are limited
partners. The limited partnership does not charge the Company rent for its
Hickory Valley, Tennessee offices. The fair market rental value for this
office space is not material to the Companys consolidated results of
operations. TBA believes that the properties and facilities it leases are suitable and
adequate for the Companys current business and operations. The Company
anticipates that as it expands, it will require additional office space to
support such growth and believes that suitable space will be available as
needed on commercially reasonable terms. 
 ITEM 3. LEGAL PROCEEDINGS. As of December 31, 2003, the Company was in default on substantially all
of its bank debt and acquisition notes payable. On March 18, 2004, a Verified
Complaint was filed against the Company by Richard S. Smith in the Circuit
Court of Cook County, Illinois, seeking payment in full under one of
acquisition notes payable by the Company. The suit seeks payment in full of
all $566,751 of outstanding principal amount due under the note, plus all
accrued but unpaid interest and all costs for enforcing the note, including
attorneys fees and expenses. On March 29, 2004, the plaintiff agreed to a
modification to the payment terms of the acquisition note payable and an
extension of the due date until March 31, 2005. In addition, the plantiff
agreed to withdraw the Verified Complaint, without prejudice, at the request of
the entity proposing to acquire the Company. As of April 14, 2004, such
request had not been made and the Verified Complaint had not been withdrawn. 7




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no meetings of the Companys shareholders or matters submitted
to a vote of the Companys shareholders during the fourth quarter of 2003.
PART II 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.  (a)
    
    The Common Stock is listed for trading on the American Stock
Exchange under the symbol TBA. On March 26, 2004, the last reported
sale price of the Common Stock was $0.44 per share. The following table
sets forth the range of high and low sales prices of the Common Stock as
reported on the American Stock Exchange during each quarterly period
within the two most recent fiscal years. HIGH
    
    LOW2003First Quarter
    
    $
    1.35
    
    
    $
    0.76Second Quarter
    
    
    0.99
    
    
    
    0.70Third Quarter
    
    
    0.93
    
    
    
    0.50Fourth Quarter
    
    
    1.20
    
    
    
    0.602002First Quarter
    
    $
    4.15
    
    
    $
    3.10Second Quarter
    
    
    4.00
    
    
    
    1.60Third Quarter
    
    
    2.53
    
    
    
    1.33Fourth Quarter
    
    
    2.03
    
    
    
    1.08
  (b)
    
    The approximate number of holders of record of Common Stock on March
26, 2004 was 147.(c)
    
    The Company has not paid or declared cash distributions or dividends
and does not intend to pay cash dividends on the Common Stock in the
foreseeable future. The Company currently intends to retain all
earnings to finance the development and expansion of its operations.
The declaration of cash dividends in the future will be determined by
the Board of Directors based upon the Companys earnings, financial
condition, capital requirements and other relevant factors.(d)
    
    The following table summarizes as of December 31, 2003, the shares of
Common Stock authorized for issuance under the Companys equity
compensation plans: EQUITY COMPENSATION PLAN INFORMATION Number of securities to
    
    Weighted averagebe issued upon exercise
    
    exercise price of
    
    Number of securitiesof outstanding options,
    
    outstanding options,
    
    remaining available forPlan category
    
    warrants and rights
    
    warrants and rights
    
    future issuanceEquity compensation plans
approved by security holders
    
    
    857,100
    
    
    $
    4.20
    
    
    
    542,900Equity compensation plans not
approved by security holders
    
    
    40,000
    
    
    
    4.75
    
    
    
    Total:
    
    
    897,100
    
    
    $
    4.23
    
    
    
    542,900
 The only equity compensation plan of the Company that was not approved by
the Companys stockholders is the 1995 Stock Option Plan. The options
outstanding under this plan were originally granted between August 1995 and
April 1996. All of such options are fully vested and expire 10 years from the
date of grant. 8




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA 2003
    
    2002
    
    2001
    
    2000
    
    1999STATEMENTS OF OPERATIONS DATA (1):Revenues
    
    $
    47,932,200
    
    
    $
    49,131,800
    
    
    $
    60,404,800
    
    
    $
    78,540,300
    
    
    $
    38,618,700Costs related to revenues
    
    
    32,977,500
    
    
    
    33,010,100
    
    
    
    40,999,200
    
    
    
    54,971,900
    
    
    
    25,003,600Gross profit margin
    
    
    14,954,700
    
    
    
    16,121,700
    
    
    
    19,405,600
    
    
    
    23,568,400
    
    
    
    13,615,100Selling, general and administrative expenses
    
    
    13,623,200
    
    
    
    16,491,000
    
    
    
    19,764,100
    
    
    
    19,471,900
    
    
    
    10,578,000Depreciation
and amortization (5)
    
    
    324,100
    
    
    
    677,600
    
    
    
    2,898,100
    
    
    
    2,479,800
    
    
    
    1,535,200Goodwill impairment (5)
    
    
    10,400,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in income of Joint Venture and other income
    
    
    (88,400
    )
    
    
    (478,400
    )
    
    
    (335,200
    )
    
    
    (272,700
    )
    
    
    (173,000
    )Net interest expense (income)
    
    
    566,000
    
    
    
    466,900
    
    
    
    548,300
    
    
    
    164,000
    
    
    
    (262,100
    )(Loss) income from continuing operations before
income taxes
    
    
    (9,870,400
    )
    
    
    (1,035,400
    )
    
    
    (3,469,700
    )
    
    
    1,725,400
    
    
    
    1,937,000Benefit (provision) for income taxes
    
    
    56,800
    
    
    
    860,000
    
    
    
    189,100
    
    
    
    (1,531,600
    )
    
    
    (770,200
    )(Loss) income from continuing operations
    
    
    (9,813,600
    )
    
    
    (175,400
    )
    
    
    (3,280,600
    )
    
    
    193,800
    
    
    
    1,166,800(Loss) income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (3,650,800
    )
    
    
    (92,500
    )
    
    
    359,200Cumulative effect of change in accounting principle (5)
    
    
    
    
    
    
    (1,988,600
    )
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (9,813,600
    )
    
    $
    (2,164,000
    )
    
    $
    (6,931,400
    )
    
    $
    101,300
    
    
    $
    1,526,000EBITDA (6)
    
    $
    1,419,900
    
    
    $
    (255,700
    )
    
    $
    (23,300
    )
    
    $
    4,369,200
    
    
    $
    3,210,100(Loss) income per share from continuing
operations  basic
    
    $
    (1.33
    )
    
    $
    (0.02
    )
    
    $
    (0.45
    )
    
    $
    0.02
    
    
    $
    0.14(Loss) income per share from continuing
operations  diluted
    
    $
    (1.33
    )
    
    $
    (0.02
    )
    
    $
    (0.45
    )
    
    $
    0.02
    
    
    $
    0.14Weighted average common stock
Outstanding  basic
    
    
    7,371,900
    
    
    
    7,364,700
    
    
    
    7,361,900
    
    
    
    8,055,100
    
    
    
    8,495,200Weighted average common stock
Outstanding  diluted
    
    
    7,371,900
    
    
    
    7,364,700
    
    
    
    7,361,900
    
    
    
    8,070,000
    
    
    
    8,540,000BALANCE SHEET DATA(1):Working capital (2)
    
    $
    (3,735,500
    )
    
    $
    (3,290,900
    )
    
    $
    (2,636,000
    )
    
    $
    189,700
    
    
    $
    7,892,700Goodwill, net(3) (5)
    
    
    12,295,100
    
    
    
    21,706,100
    
    
    
    25,668,700
    
    
    
    23,834,800
    
    
    
    17,318,400Net (liabilities) assets of discontinued operations
    
    
    (211,800
    )
    
    
    (211,800
    )
    
    
    (228,200
    )
    
    
    2,622,700
    
    
    
    2,364,200Total assets
    
    
    20,656,300
    
    
    
    27,807,800
    
    
    
    34,407,700
    
    
    
    39,416,900
    
    
    
    42,383,300Long-term
debt (3) (4)
    
    
    3,069,500
    
    
    
    3,562,300
    
    
    
    7,340,600
    
    
    
    4,373,600
    
    
    
    3,596,400Treasury stock
    
    
    (6,027,600
    )
    
    
    (6,057,600
    )
    
    
    (6,080,500
    )
    
    
    (5,500,700
    )
    
    
    (2,062,100
    )Stockholders equity
    
    
    5,894,200
    
    
    
    15,566,700
    
    
    
    17,719,900
    
    
    
    25,242,500
    
    
    
    27,858,800
  1)
    
    In 1999, the Company acquired a business that was discontinued in
2001. The discontinuation of this business has resulted in the
reclassification of the operating results and net assets and liabilities
of this business to discontinued operations for all periods presented.The Company has completed five acquisitions from 1999 to 2001. No
acquisitions were made in 2002 and 2003. Results of operations of each of
these acquisitions are included from their respective acquisition dates.
The accounting for these acquisitions was in accordance with purchase
method of accounting.2)
    
    Working capital represents total current assets less total current
liabilities (excluding net short-term liabilities of discontinued
operations).3)
    
    In September 2002, the Company reduced its recorded goodwill and
long-term debt by $3,518,400, representing the outstanding amount of
promissory notes that were subject to earn-out adjustments at that time,
as payment of such amounts were no longer considered probable. See
Notes 5 and 6 to the Consolidated Financial Statements contained in Item
8 of this Form 10-K for further discussion concerning the Companys
long-term debt and acquisitions, respectively.4)
    
    Long-term debt excludes notes payable and current portion of
long-term debt totaling $2,105,500, $1,617,200, $1,830,000, $3,049,600
and $2,913,200 as of December 31, 2003, 2002, 2001, 2000 and 1999,
respectively.5)
    
    Upon the adoption of SFAS No. 142, Goodwill and other Intangible
Assets in the first quarter of 2002, the Company tested its goodwill
for impairment. Based on the estimated fair market value of its fairs
and festivals reporting unit, the Company recorded a goodwill impairment
loss in the first quarter of 2002 of $1,988,600. Based on the annual
test for goodwill impairment performed as of November 2003, the Company
recorded a further goodwill impairment loss for 2003 of $6,152,700,
$3,184,000 and $1,063,500, associated with the artist management, fairs
and festival and corporate communications reporting units. Pursuant
to SFAS No. 142, the Company stopped amortizing goodwill on January
1, 2002. For the years ended December 31, 2001, 2000 and 1999,
goodwill amortization was $2,105,700, $1,800,000 and $940,900,
respectively. 9




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6)
    
    EBITDA is defined as earnings from continuing operations before
interest income and expense, income taxes, depreciation and
amortization, goodwill impairment charges, cumulative effect of
change in accounting principle and reversal of prior years
accrued interest. EBITDA is presented
supplementally because management believes it allows for a more complete
analysis of results of operations. This information should not be
considered as an alternative to any measure of performance or liquidity
as promulgated under accounting principles generally accepted in the
United States (such as net income (loss) or cash provided by or used in
operating, investing or financing activities), nor should it be
considered as an indicator of the overall financial performance of the
Company. The Companys calculation of EBITDA may be different from the
calculation used by other companies and, therefore, comparability may be
limited. The calculation of EBITDA is shown below: 2003
    
    2002
    
    2001
    
    2000
    
    1999Net (loss) income
    
    $
    (9,813,600
    )
    
    $
    (2,164,000
    )
    
    $
    (6,931,400
    )
    
    $
    101,300
    
    
    $
    1,526,000Goodwill impairment
    
    
    10,400,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    1,988,600
    
    
    
    
    
    
    
    
    
    
    
    Loss (income) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    3,650,800
    
    
    
    92,500
    
    
    
    (359,200
    )Income tax (benefit) provision
    
    
    (56,800
    )
    
    
    (860,000
    )
    
    
    (189,100
    )
    
    
    1,531,600
    
    
    
    770,200Net interest expense (income)
    
    
    566,000
    
    
    
    466,900
    
    
    
    548,300
    
    
    
    164,000
    
    
    
    (262,100
    )Reversal of prior years accrued interest
    
    
    
    
    
    
    (364,800
    )
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    324,100
    
    
    
    677,600
    
    
    
    2,898,100
    
    
    
    2,479,800
    
    
    
    1,535,200EBITDA
    
    $
    1,419,900
    
    
    $
    (255,700
    )
    
    $
    (23,300
    )
    
    $
    4,369,200
    
    
    $
    3,210,100
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of the following discussion and analysis is to explain the
major factors and variances between periods of the Companys results of
operations. The following discussion of the Companys financial condition and
results of operations should be read in conjunction with the historical
consolidated financial statements and notes thereto included in Item 8,
beginning on page 16. INTRODUCTION The Company is a strategic communications and entertainment company that
creates, develops and produces comprehensive programs to reach and engage its
clients target audiences. The Company produces a broad range of innovative
business communications programs, develops and produces highly integrated
entertainment marketing programs, develops content and entertainment programs
for a nationwide network of fairs and festivals and develops and implements
career strategies and corporate partnerships for its artist clients. The Company has built this comprehensive communications and entertainment
business model through a combination of internal growth and strategic
acquisitions. Since April 1997, the Company has completed 11 strategic
acquisitions and has built a comprehensive network of eight offices to serve
its client base. In 2001, the Company completed the acquisitions of Moore
Entertainment, Inc. (Moore) in February and Alliance Artists, Ltd.
(Alliance) in July (collectively, the 2001 Acquisitions). The results of
operations of the 2001 Acquisitions are included from the corresponding
acquisition dates. There were no acquisitions in 2003 or 2002. GENERAL Business Segments In accordance with SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information, the Company classifies it operations
according to four business segments. See Note 12 to the consolidated financial
statements contained in Item 8 of this Annual Report on Form 10-K for
summarized financial information concerning the Companys reportable segments. Critical Accounting Policies In response to the SECs Release No. 33-8040, Cautionary Advice Regarding
Disclosure About Critical Accounting Policy, the Company identified the most
critical accounting principles upon which its financial status depends. The
Company determined the critical accounting principles to be related to revenue
recognition, costs related to revenue and impairment of goodwill. 10




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Revenue Recognition The Company continues to derive a majority of its revenues (63%, 61%, and
70% of total revenues for the years ended December 31, 2003, 2002 and 2001,
respectively) from the production of innovative business communications
programs to help corporate clients reach and engage their target audiences.
The Company helps businesses effectively communicate their message via a broad
range of business communications, meeting production, and entertainment
production services. The Company receives a fee for providing these services,
which may include developing creative content, providing comprehensive project
management and arranging for live entertainment and related production
services. Revenue is recognized when an event occurs. Costs of producing the
event are also deferred until the event occurs. At December 31, 2003, deferred
revenue was $5,366,800 compared to $3,560,200 at December 31, 2002. The
increase is due primarily to deferred revenue having been received by December
31, 2003 on several new programs to be produced in the first and second
quarters of 2004. The remainder of the Companys revenues are generated from its roster of
artist clients (10%, 10% and 6% of total revenues for the years ended December
31, 2003, 2002 and 2001, respectively), entertainment marketing clients (6%, 8%
and 8% of total revenues for the years ended December 31, 2003, 2002 and 2001,
respectively) and fairs and festivals clients (21%, 21% and 16% of total
revenues for the years ended December 31, 2003, 2002 and 2001). Commissions
received from artists earnings are recognized in the period during which the
artist earns the revenue. There are generally only minimal direct costs
associated with generating revenue from artist clients. Entertainment
marketing revenues and cost of revenues are recognized when the services are
completed for each program or, for those programs with multiple events,
apportioned to each event and recognized as each event occurs. Fairs and
festivals also recognize revenue and cost of revenues when the services are
completed for each program and when the event has occurred. Costs Related to Revenue Costs related to revenue is comprised of all costs associated with the
production of an event, including talent fees, contracted services, equipment
rentals, costs associated with the production of audio-visual effects and the
cost of internal production labor. Direct out-of-pocket costs are deferred
until the event occurs. Internal production labor costs are expensed as
incurred. At December 31, 2003, deferred costs were $999,800 compared to
$1,030,700 at December 31, 2002. Goodwill and Other Intangible Assets In July 2001, the FASB issued SFAS No. 142 Goodwill and Other Intangible
Assets, which establishes financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. The Company adopted SFAS No. 142 beginning with the first
quarter of 2002. SFAS No. 142 requires that goodwill and intangible assets that
have indefinite useful lives not be amortized but, instead, tested at least
annually for impairment while intangible assets that have finite useful lives
continue to be amortized over their respective useful lives. Accordingly, the
Company ceased amortization of all goodwill, which is its only intangible asset
with an indefinite useful life, on January 1, 2002. The Company has no other
identified intangible assets. In accordance with the provisions of SFAS No. 142, the Company performs
its annual review of impairment of goodwill in accordance with the provisions
of SFAS No. 141 by comparing the carrying value of the applicable reporting
unit to the fair value of the reporting unit. If the fair value is less than
the carrying value, then the Company measures potential impairment by assigning
the assets and liabilities of the Company to the reporting unit and comparing
the implied value of goodwill to its carrying value. Upon the adoption of SFAS No. 142 in the first
quarter of 2002, the Company determined that the goodwill of its Fairs and
Festivals unit was impaired by $1,988,600, as a result of the earnings of that
unit not meeting the earnings expectations set by the Company at the time the
businesses were acquired. During the annual impairment review process as of
November 2003, the Company determined that its goodwill was further impaired as
a result of the carrying value of three of its four business segments exceeding
the fair value of those units. Accordingly, for the year ended December 31,
2003, the Company recorded goodwill impairment of $6,152,700, $3,184,000 and
$1,063,500, relating to its Artist Management, Fairs and Festivals and
Corporate Communications business segments, respectively. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 Revenues decreased $1,199,600, or 2%, to $47,932,200 for 2003 from
$49,131,800 for 2002. Revenues from corporate clients increased 1% to
$30,389,100 for 2003 from $29,966,700 for 2002. In late 2002, the Company
closed corporate client group offices in New York, Dallas and Atlanta to
consolidate operations into larger, more profitable offices. These closed
offices accounted for $2,949,100 of revenues and 32 corporate client events in
2002. Excluding the impact from these closed offices, corporate client
revenues for the remaining offices increased $3,371,500 or 12%, and the number
of corporate client events remained relatively unchanged at 188. The
average revenue per event in the remaining offices increased to
$161,600 per event for 2003, composed to $135,900 per event for 2002.
The increase in revenues and in
average revenue per event in the remaining offices resulted primarily from two, new large events
in the 2003 period with revenue in excess of $2 million. Revenues from entertainment marketing clients decreased $1,129,800 or 27%
from $4,116,400 in 2002 to $2,986,600 in 2003. The decrease is due primarily to
the loss of programs formerly produced by an employee who terminated his
employment with the 11




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Company in early 2003. Revenues from artist clients were $4,634,600 for
2003, which is relatively unchanged from 2002. There were no significant
changes in the Companys artist roster between periods. Revenues from fairs
and festivals clients decreased $454,000 or 4%, from $10,375,900 in 2002 to
$9,921,900 in 2003, primarily due to both a decrease in the number of fair and
festival clients for which the Company executed buy/sell arrangements with
respect to artist performances and to a decrease in average revenue per such
arrangement. Cost of revenues decreased $32,600 from $33,010,100 for 2002 to
$32,977,500 for 2003. Cost of revenues, as a percentage of revenues, increased
from 2002 to 2003, resulting in a decrease in gross profit margin to 31.2% for
2003 from 32.8% in 2002. The decrease in the total gross margin percentage is
due primarily to lower gross margins on corporate client events in the 2003
period due to increased competitive pricing to secure new corporate events.
This decrease was partially offset by an increase in gross margins on
entertainment marketing programs as more programs were produced for a flat fee,
with minimal cost of revenues. Selling, general and administrative expenses decreased $2,867,800, or 17%,
to $13,623,200 for 2003 compared to $16,491,000 for 2002. The decrease results
primarily from cost savings in the corporate client group, including reduced
expenses from the closure of the New York, Dallas and Atlanta offices in late
2002, reductions in overall headcount and related compensation costs, and a
reduction in travel related and other general and administrative costs. The
reduction was partially offset by increased compensation costs incurred in 2003
in the artist client group due to the addition of new artist managers and the
restructuring of compensation agreements to retain certain existing artist
managers. Depreciation expense decreased $353,500, or 52%, to $324,100 for 2003 from
$677,600 for 2002. The decrease resulted primarily from the disposal of
equipment from three offices, which were closed in 2002, and full depreciation
of other fixed assets. In accordance with the provisions of SFAS No. 142, Goodwill and Other
Intangibles, the Company performs its annual review for goodwill impairment in
November of each year. Based on the results of the November 2003 test, the
Company determined the carrying value for three of its four business segments
exceeded the fair value of those business segments. Accordingly, the Company
recorded a goodwill impairment charge of $10,400,200 in the fourth quarter of
2003. No annual goodwill impairment charge was recorded in 2002. Other income includes proceeds from the sale of the Companys interest in
a joint venture, formed to produce an entertainment marketing program in 2000
and 2001. For the years 2003 and 2002, the Company recognized $70,700 and
$63,000 of income, respectively, from this sale. Other income for the 2002
period also included $364,800 from the reversal of accrued interest expense
recorded in prior years associated with contingent promissory notes payable
related to certain of the Companys acquisitions in 1999-2001. The Company is
no longer accruing interest on this contingent purchase price consideration
until the actual payment is determined. Net interest expense increased $99,100, or 21% to $566,000 for 2003 from
$466,900 for 2002. The change is attributable primarily to increased interest
expense associated with additional bank borrowings in 2003, an increase in the
interest rate paid on certain acquisition notes payable due to the Company
being in default in 2003 and the amortization to interest expense of the fair
market value of warrants issued in May 2003 in connection with the
restructuring of the Companys bank term loan. The income tax benefit for the 2003 period is $56,800, or 0.6%, on a loss
from continuing operations before income taxes of $9,870,400. This compares to
an income tax benefit of $860,000, or 83%, for the 2002 period on a loss from
continuing operations before income taxes of $1,035,400. The effective tax
rates reflect statutory tax rates adjusted for estimated book/tax differences.
The primary reason contributing to the large income tax benefit in the prior
year was the recoverable federal taxes paid in years prior to 2002. As of
December 31, 2002, the Company had utilized the majority of its income tax
carrybacks. As of December 31, 2003, the Company had a net deferred tax asset
of $5,253,200, related primarily to net operating loss carryforwards
and the timing of deductibility of goodwill amortization and
impairment charges. The
Company has recorded a valuation allowance equal to the net deferred tax asset.
Realization of the future tax benefits related to this deferred tax asset is
dependent upon many factors, including the ability to generate taxable income
within the Companys net operating loss carry forward period. Until the
Company recognizes net income, no further tax benefit will be recognized. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 Revenues decreased $11,273,000, or 19%, to $49,131,800 for 2002 from
$60,404,800 for 2001. Revenues from the corporate client group decreased
$12,227,500, or 29%, from $42,194,200 in 2001 to $29,966,700 in 2002. The
number of corporate client events decreased to 227 in 2002 from 288 in 2001,
due to a reduction in customer demand during 2002 as a result of the continued
impact of the September 11, 2001, terrorist attacks and the global economic
slowdown which began in 2001 and continued throughout 2002. 12




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The average revenue per event decreased to $131,300 per event for 2002,
compared to $146,500 per event for 2001 due to a reduction in the number of
large corporate events produced in 2002. In 2002, the Company produced 32
events with revenues in excess of $250,000, versus 36 such events in 2001. The
reduction is due primarily to certain larger corporate events that occurred in
2001, which were not repeated or were scaled back due to the global economic
slowdown. Revenues from the entertainment marketing client group decreased $754,900,
or 15%, from $4,871,100 in 2001 to $4,116,400 in 2002. The decrease is
primarily due to two larger 2001 entertainment marketing programs that did not
repeat in 2002. The decrease was partially offset by an increase in the number
of smaller entertainment marketing programs and promoted music tour dates
occurring in 2002. Revenues from artist clients, which were not significantly
impacted by the September 11, 2001, terrorist attacks, increased $1,013,100, or
28%, to $4,672,800 in 2002 from $3,659,700 in 2001. Of this increase, $458,400
is attributed to a full year of operations of Alliance, which was acquired in
July 2001. The remaining increase is due to revenues generated by TBAs
expanding roster of artist clients. Revenues from the fairs and festivals
client group increased $695,900, or 7%, to $10,375,900 in 2002 from $9,680,000
in 2001. This increase is reflective of the 25% increase in the number of
fairs and festivals programs represented by TBA to 217 in 2002 from 174 in
2001. Cost
of revenues decreased $7,989,100, or 19%, to $33,010,100 for 2002 from
$40,999,200 for 2001. The decrease is attributable to the overall decrease in
revenues for the corporate client and entertainment marketing client groups
from 2001 to 2002. Cost of revenues, as a percentage of revenues, decreased
1%, resulting in an increase in gross profit margin to 33% for 2002 from 32% in
2001. The increase is primarily attributable to the 28% increase in artist
client revenues, which generally have minimal direct costs of revenues, offset
by lower gross profit margins on revenues from the corporate communications and
entertainment marketing client groups. The lower gross profit margins are a
result of a more competitive corporate environment brought about by the global
economic slowdown and an increase in the number of promoted music tour dates,
which generally have a lower gross profit margin. Selling, general and administrative expenses decreased $3,273,100, or 17%,
to $16,491,000 for 2002 from $19,764,100 for 2001. The decrease results
primarily from a comparative decrease in sales expense attributable to the
reduced level of revenues and cost savings implemented beginning in the third
quarter of 2001, including reductions in headcount and related compensation
costs, elimination of costs attributable to unprofitable operations,
elimination of certain incentive compensation costs and a reduction in
travel-related and other general and administrative expenses. The decrease is
partially offset by the impact of incremental selling, general and
administrative expenses associated with the 2001 Acquisitions, a $250,000
reserve for an account receivable from a corporate client in bankruptcy, a
$481,600 accrual for termination costs associated with closed offices and
approximately $280,000 of costs associated with the termination of certain
transactional discussions. Excluding 2001 goodwill amortization of $2,069,800, depreciation expense
and other amortization decreased $150,700, or 18%, to $677,600 in 2002 from
$828,300 for 2001. The decrease results primarily from the retirement of
certain equipment and other equipment being fully depreciated. The Company
adopted SFAS No. 142 in 2002 and no longer amortizes goodwill. Other income for 2002 includes $364,800 from the reversal of accrued
interest expense recorded in prior years associated with contingent promissory
notes payable related to certain of the Companys acquisitions in 1999-2001.
The Company is no longer accruing interest on this contingent purchase price
consideration because payment is not considered probable. Other income for
both years included income from a joint venture, which provided for the Company
to receive a percentage of gross revenues of the joint venture. The Company
received $63,000 in 2002 compared to $299,700 in 2001 under this agreement. In
December 2002, the Company sold its interest in the joint venture. Net interest expense decreased $81,400, or 15%, to $466,900 for 2002,
versus net interest expense of $548,300 for 2001. The decrease is attributable
primarily to no longer accruing interest expense related to contingent purchase
price consideration and lower interest expense from repayments of other
acquisition notes payable, partially offset by increased interest expense
associated with additional bank borrowings. The income tax benefit for 2002 is $860,000 or 83%, on a loss from
continuing operation before taxes of $1,035,400 compared to an income tax
benefit of $189,100, or 5%, for 2001 on a loss from continuing operations
before taxes of $3,469,700, and reflects statutory tax rates adjusted for
estimated permanent book/tax differences. The primary reason contributing to
the income tax benefit increase in the current year is the additional
recoverable federal taxes paid in prior years. At December 31, 2002, the
Company had utilized the majority of its tax carrybacks. In 2002, the Company recognized a goodwill impairment loss of $1,988,600
related to the adoption of SFAS No. 142, Goodwill and Other Intangibles.
Pursuant to the transitional rules of SFAS No. 142, this loss was recorded in
the first quarter of 2002 as a 13




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##### Table of Contents



cumulative effect of accounting change. There was no tax effect of this
impairment as none of the goodwill impairment loss was deductible for tax
purposes. DISCONTINUED OPERATIONS In March 1999, the Company completed the acquisition of Karin Glass &
Associates Inc. and affiliated companies (collectively, KGA). KGA, along
with two smaller acquisitions completed prior to 1999, comprised the Companys
merchandising operations. During the first quarter of 2001, the Company
approved a formal plan to discontinue its merchandising operations in order to
better focus on its core business as a strategic communications and
entertainment company. The disposition of the merchandising operations
represents the disposal of a business segment under Accounting Principles Board
(APB) Opinion No. 30. Accordingly, this former segment is accounted for as a
discontinued operation. Operating results of this business segment and other
information for discontinued operations appear in the notes to consolidated
financial statements captioned Dispositions (Note 7). LIQUIDITY AND CAPITAL RESOURCES Although the operations of the Company, excluding the impact of goodwill
impairment, improved in 2003 over 2002, the Company is still recovering from
the impact of the September 11, 2001 terrorist attacks and the global economic
slowdown, which significantly reduced cash flows and resulted in a working
capital deficit of $2,912,200, including $1,830,000 of notes payable and
current portion of long-term debt, as of December 31, 2001. The Company took
aggressive actions beginning in the third quarter of 2001 to reduce expenses in
response to the significant continuing reduction in revenues attributable to
those events. Those actions have brought the Companys expenses in line with
the lower revenues. However, in 2002 and 2003, the Company has not been
successful in restructuring its bank debt and acquisition notes payable on a
long-term basis. Accordingly, payment commitments under its long-term debt
have prevented the Company from improving its working capital deficit. In order
to better manage its ongoing cash requirements, the Company elected to forego
making some of the scheduled principal payments on its bank term loan as well
as scheduled principal payments on certain of its acquisition notes payable
beginning in June 2003. As a result of the payment reductions in 2003, the Company was in default
on substantially all its long-term debt as of December 31, 2003. From January
1, 2004 to April 14, 2004, the Company completed the renegotiation of the terms
of all debt that was in default. The renegotiated terms extended the term of
its bank term loan to March 31, 2005 and provided for a reduction in the
current maturities of long-term debt due in 2004 to $2,105,500 from $4,692,200.
The Company has no borrowing capabilities under any of its loan agreements as
of December 31, 2003 and April 14, 2004. The Companys liquidity needs for the
foreseeable future continue to be primarily for repayment of indebtedness and
for working capital. Capital expenditures will be focused on equipment
replacements and are not expected to be significant. Based on current cash
flow projections for 2004, management believes that the Companys future cash
flows from operations and current cash reserves will be sufficient to satisfy
its current and future debt service, working capital requirements and
maintain debt covenant compliance through
at least March 31, 2005. However, there can be no assurance that managements
assumptions will correspond to actual events. The Company is also exploring strategic opportunities for the Company.
The Company has retained an investment-banking firm to assist the Company in
evaluating a variety of transactional and financing alternatives. On April 8,
2004, the Company signed definitive merger documents for the proposed sale of
100% of the capital stock of the Company. The proposed sale, which requires
shareholder approval, is expected to close in the second quarter of 2004. Upon
consummation of the transaction, it is anticipated that the Company will no
longer be a publicly traded entity. Since the transaction requires shareholder
approval, which has not yet been given as of April 14, 2004, and is subject to
additional conditions to closing, there can be no assurances that the
transaction will be consummated. At December 31, 2003, the Company had cash and cash equivalents of
$2,620,900 and a working capital deficit of $3,947,300, which includes
$2,105,500 of notes payable and the current portion of long-term debt and
$211,800 of net liabilities from discontinued operations. At December 31,
2002, the Company had cash and cash equivalents of $1,527,800 and a working
capital deficit of $3,502,700, which includes $1,617,200 of notes payable and
current portion of long-term debt and $211,800 of net liabilities from
discontinued operations. 14




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##### Table of Contents



Cash Flow Statement Analysis Summarized Statements of Cash Flow FOR THE YEARS ENDED DECEMBER 31,2003
    
    2002
    
    2001Net cash (used in) provided by:Operating activities
    
    $
    2,068,000
    
    
    $
    1,540,500
    
    
    $
    1,646,700Investing activities
    
    
    (310,900
    )
    
    
    (1,637,100
    )
    
    
    (1,812,100
    )Financing activities
    
    
    (664,000
    )
    
    
    (511,800
    )
    
    
    (794,100
    )Discontinued operations
    
    
    
    
    
    
    (15,000
    )
    
    
    (640,400
    )Net increase
(decrease) in cash and cash equivalents
    
    $
    1,093,100
    
    
    $
    (623,400
    )
    
    $
    (1,599,900
    )
 Cash provided by continuing operations was $2,068,000, $1,540,500, and $
1,646,700 for 2003, 2002 and 2001, respectively. Despite net losses in each of
the last three years, the Company was able to generate positive cash flows from
operations primarily from managing the timing of collections of accounts
receivable and payment of accounts payable and accrued liabilities and the
timing of collection of deferred revenues and payment of deferred charges
associated with programs occurring in the following year. Cash used in investing activities was $310,900, $1,637,100, and $
1,812,100, in 2003, 2002 and 2001, respectively. In all years, cash was used
to fund additional earn-out payments for acquisitions made in prior years. In
2001, initial cash payments were also made to acquire Moore ($1,100,000) and
Alliance ($100,000). In 2003, the Company realized proceeds of $503,300 from
the sale of its Dallas office facility. Capital expenditures were $51,900,
$51,600, and $376,200 in 2003, 2002 and 2001, respectively, and represent
primarily replacements of computer equipment. Cash used in financing activities was $664,000, $511,800, and $794,100 for
2003, 2002, and 2001, respectively, resulting primarily from the net payment of
bank and acquisition debt and from the 2001 purchases of treasury shares
pursuant to the Companys stock repurchase program. No shares were repurchased
in 2002 or 2003. Contractual Obligations Future
minimum annual commitments under bank and other debt agreements,
non-cancelable operating leases and employment obligations as of December 31, 2003, are as follows: Payments Due By PeriodLess Than 1
    
    
    
    
    
    3 - 5
    
    More Than 5Contractual Obligations
    
    Total
    
    Year
    
    1 - 3 Years
    
    Years
    
    YearsLong-term
debt - bank and other
    
    $
    5,175,000
    
    
    $
    2,105,500
    
    
    $
    2,971,800
    
    
    $
    97,700
    
    
    $
    Operating leases
    
    
    1,576,400
    
    
    
    740,900
    
    
    
    787,200
    
    
    
    46,100
    
    
    
    2,200Employment obligations
    
    
    4,656,200
    
    
    
    1,900,000
    
    
    
    2,056,200
    
    
    
    700,000
    
    
    
    Total
    
    $
    11,407,600
    
    
    $
    4,746,400
    
    
    $
    5,815,200
    
    
    $
    843,800
    
    
    $
    2,200
 Capital expenditures will be focused on equipment replacements and are not
expected to be significant. Other Recently Issued Accounting Standards. In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Instruments with Characteristics of Both
Liabilities and Equity, which establishes standards on the classification and
measurement of financial instruments entered into or modified after May 31,
2003. The adoption of SFAS 150 in fiscal 2003 did not have a material impact on
the financial position or results of operations of the Company. 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Impact of Interest Rate Changes The Companys market risk relates to interest rate exposure on short-term
borrowings. The Company does not use financial instruments for trading or
other speculative purposes. Borrowings on the Companys bank credit facility
are at variable interest rates. All other borrowings are at fixed rates. At
December 31, 2003, the interest on the Companys bank credit facility
was 4.68%. Management believes that a hypothetical
adverse movement in the interest rates of ten percent of such recent rates
would not have a material effect on the Companys consolidated financial
position, results of operations or cash flows. 15




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following financial statements required by this item are filed
herewith: PAGEReports of Independent Certified Public Accountants
    
    
    17Consolidated Balance Sheets as of December 31, 2003 and 2002
    
    
    19Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001
    
    
    20Consolidated Statements of Stockholders Equity for the years ended December 31, 2003, 2002 and 2001
    
    
    21Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
    
    
    22Notes to Consolidated Financial Statements
    
    
    23Schedule II
 Valuation and Qualifying Accounts
    
    
    37
 16




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##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of DirectorsTBA Entertainment
CorporationEncino, California We have audited the accompanying consolidated balance sheets of TBA
Entertainment Corporation (a Delaware corporation) and subsidiaries as of
December 31, 2003 and 2002 and the related consolidated statements of
operations, stockholders equity and cash flows for each of the two years in
the period ended December 31, 2003. We have also audited the schedule listed in the
accompanying index. These financial statements and schedule are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits. The consolidated
statements of operations, stockholders equity and cash flows of TBA Entertainment Corporation and subsidiaries
for the year ended December 31, 2001 (before revision) were audited by
other auditors, who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements in their report dated April
16, 2002. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement and schedule presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TBA Entertainment
Corporation and subsidiaries as of December 31, 2003 and 2002 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein. As discussed above, the financial statements of TBA Entertainment Corporation
and subsidiaries as of December 31, 2001, and for the year then ended, were
audited by other auditors, who have ceased operations. As described in Note 4,
these financial statements have been revised to include the transitional
disclosures required by Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and other Intangible Assets, which was adopted by the Company
as of January 1, 2002. Our audit procedures with respect to the disclosures
in Note 4 with respect to 2001 included (i) agreeing the previously reported
net income in the previously issued financial statements and the adjustments to
reported net income representing amortization expense (including any related
tax effects) recognized in those periods related to goodwill, to the Companys
underlying records obtained from management, and (ii) testing the mathematical
accuracy of the reconciliation of adjusted net income to reported net income,
and the related earnings per share amounts. In our opinion, the disclosures
for 2001 in Note 4 are appropriate. However, we were not engaged to audit,
review, or apply any procedures to the 2001 consolidated financial statements
of the Company other than with respect to such disclosures and, accordingly, we
do not express an opinion or any other form of assurance on the 2001
consolidated financial statements taken as a whole. The quarterly financial data in Note 13 contain information that we did not
audit, and, accordingly, we do not express an opinion on that data. We did not
review the quarterly data for the three month period ended
March 31, 2002 in
accordance with standards established by the American Institute of Certified
Public Accountants because we were not engaged to do so. /s/ BDO SEIDMAN, LLP  Los Angeles, California
March, 11, 2004, except for Notes 5 and 11 which are as of April 14,
2004 17




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##### Table of Contents



This report is a conformed copy of the report previously issued by Arthur
Anderson LLP and has not been reissued. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To TBA Entertainment Corporation: We have audited the accompanying consolidated balance sheets of TBA
Entertainment Corporation (a Delaware corporation) and subsidiaries as of
December 31, 2001 and 2000 and the related consolidated statements of
operations, stockholders equity and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TBA Entertainment
Corporation and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States. ARTHUR ANDERSEN LLP  Los Angeles, California
April 16, 2002 18




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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2003 AND 2002 2003
    
    2002Current assets:Cash and cash equivalents
    
    $
    2,620,900
    
    
    $
    1,527,800Accounts receivable, net of allowance for doubtful
accounts of $165,600 and $378,900, respectively
    
    
    3,242,200
    
    
    
    1,993,800Asset held for sale, net
    
    
    
    
    
    
    548,700Deferred charges and other current assets
    
    
    1,882,200
    
    
    
    1,105,800Total current assets
    
    
    7,745,300
    
    
    
    5,176,100Property and equipment, net
    
    
    377,000
    
    
    
    653,600Other assets, net:Goodwill
    
    
    12,295,100
    
    
    
    21,706,100Other
    
    
    238,900
    
    
    
    272,000Total assets
    
    $
    20,656,300
    
    
    $
    27,807,800
 LIABILITIES AND STOCKHOLDERS EQUITY 2003
    
    2002Current liabilities:Accounts payable and accrued liabilities
    
    $
    4,008,500
    
    
    $
    3,289,600Deferred revenue
    
    
    5,366,800
    
    
    
    3,560,200Notes payable and current portion of long-term debt
    
    
    2,105,500
    
    
    
    1,617,200Net short-term liabilities from discontinued operations
    
    
    211,800
    
    
    
    211,800Total current liabilities
    
    
    11,692,600
    
    
    
    8,678,800Long-term debt, net of current portion
    
    
    3,069,500
    
    
    
    3,562,300Total liabilities
    
    
    14,762,100
    
    
    
    12,241,100Commitments and contingencies (Note 10)Stockholders equity:Preferred stock, $.001 par value, authorized 1,000,000 shares,
2,000 shares of Series A convertible preferred stock
outstanding, liquidation preference $100
    
    
    100
    
    
    
    100Common stock, $.001 par value, authorized 20,000,000 shares, 8,857,200
shares issued, 7,375,400 and 7,368,100 shares outstanding, respectively
    
    
    8,900
    
    
    
    8,900Additional paid-in capital
    
    
    30,688,300
    
    
    
    30,577,200Retained deficit
    
    
    (18,775,500
    )
    
    
    (8,961,900
    )Less treasury stock, at cost, 1,481,800 and 1,489,200
shares, respectively
    
    
    (6,027,600
    )
    
    
    (6,057,600
    )Total stockholders equity
    
    
    5,894,200
    
    
    
    15,566,700Total liabilities and stockholders equity
    
    $
    20,656,300
    
    
    $
    27,807,800
 The accompanying notes are an integral part of these consolidated balance sheets. 19




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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,2003
    
    2002
    
    2001Revenues
    
    $
    47,932,200
    
    
    $
    49,131,800
    
    
    $
    60,404,800Costs related to revenues
    
    
    32,977,500
    
    
    
    33,010,100
    
    
    
    40,999,200Gross profit margin
    
    
    14,954,700
    
    
    
    16,121,700
    
    
    
    19,405,600Selling, general and administrative expenses
    
    
    13,623,200
    
    
    
    16,491,000
    
    
    
    19,764,100Depreciation and amortization expense
    
    
    324,100
    
    
    
    677,600
    
    
    
    2,898,100Goodwill impairment
    
    
    10,400,200
    
    
    
    
    
    
    
    Other income, net
    
    
    (88,400
    )
    
    
    (478,400
    )
    
    
    (335,200
    )Interest expense, net
    
    
    566,000
    
    
    
    466,900
    
    
    
    548,300Loss from continuing operations before income taxes
and cumulative effect of change in accounting principle
    
    
    (9,870,400
    )
    
    
    (1,035,400
    )
    
    
    (3,469,700
    )Benefit for income taxes
    
    
    56,800
    
    
    
    860,000
    
    
    
    189,100Loss from continuing operations before cumulative effect
of change in accounting principle
    
    
    (9,813,600
    )
    
    
    (175,400
    )
    
    
    (3,280,600
    )Discontinued operations (Notes 2 and 7):Loss from operations, net of income tax
benefit of $321,900
    
    
    
    
    
    
    
    
    
    
    (1,260,000
    )Loss on disposition of discontinued operations,
net of income tax benefit of $42,100
    
    
    
    
    
    
    
    
    
    
    (2,390,800
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (3,650,800
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1,988,600
    )
    
    
    Net loss
    
    $
    (9,813,600
    )
    
    $
    (2,164,000
    )
    
    $
    (6,931,400
    )Loss per
common share - basic:Loss from continuing operations
    
    $
    (1.33
    )
    
    $
    (0.02
    )
    
    $
    (0.45
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.49
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (0.27
    )
    
    
    Net loss per common share  basic
    
    $
    (1.33
    )
    
    $
    (0.29
    )
    
    $
    (0.94
    )Loss per
common share - diluted:Loss from continuing operations
    
    $
    (1.33
    )
    
    $
    (0.02
    )
    
    $
    (0.45
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.49
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (0.27
    )
    
    
    Net loss per common share  diluted
    
    $
    (1.33
    )
    
    $
    (0.29
    )
    
    $
    (0.94
    )
 The accompanying notes are an integral part of these consolidated statements. 20




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##### Table of Contents



TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY FOR THE YEARS ENDED
DECEMBER 31, 2003, 2002 AND 2001 PREFERRED STOCK
    
    COMMON STOCK
    
    ADDITIONALPAID-INSHARES
    
    AMOUNT
    
    SHARES
    
    AMOUNT
    
    CAPITALBALANCES,
January 1, 2000
    
    
    2,200
    
    
    $
    100
    
    
    
    8,857,100
    
    
    $
    8,900
    
    
    $
    30,600,700Issuance of treasury stock for
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,400
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of preferred
stock into common stock
    
    
    (200
    )
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BALANCES, December 31, 2001
    
    
    2,000
    
    
    
    100
    
    
    
    8,857,200
    
    
    
    8,900
    
    
    
    30,589,300Issuance of treasury stock for
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,100
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BALANCES, December 31, 2002
    
    
    2,000
    
    
    
    100
    
    
    
    8,857,200
    
    
    
    8,900
    
    
    
    30,577,200Issuance of treasury stock for
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,300
    )Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,400Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BALANCES, December 31, 2003
    
    
    2,000
    
    
    $
    100
    
    
    
    8,857,200
    
    
    $
    8,900
    
    
    $
    30,688,300
   [Continued from above table, first column(s) repeated] RETAINED
    
    TREASURY STOCK
    
    TOTALEARNINGS
    
    
    
    
    
    
    
    
    
    STOCKHOLDERS(DEFICIT)
    
    SHARES
    
    AMOUNT
    
    EQUITYBALANCES,
January 1, 2000
    
    $
    133,500
    
    
    
    1,349,500
    
    
    $
    (5,500,700
    )
    
    $
    25,242,500Issuance of treasury stock for
employee stock purchase plan
    
    
    
    
    
    
    (10,000
    )
    
    
    40,800
    
    
    
    29,400Repurchase of common stock
    
    
    
    
    
    
    155,300
    
    
    
    (620,600
    )
    
    
    (620,600
    )Conversion of preferred
stock into common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (6,931,400
    )
    
    
    
    
    
    
    
    
    
    
    (6,931,400
    )BALANCES, December 31, 2001
    
    
    (6,797,900
    )
    
    
    1,494,800
    
    
    
    (6,080,500
    )
    
    
    17,719,900Issuance of treasury stock for
employee stock purchase plan
    
    
    
    
    
    
    (5,600
    )
    
    
    22,900
    
    
    
    10,800Net loss
    
    
    (2,164,000
    )
    
    
    
    
    
    
    
    
    
    
    (2,164,000
    )BALANCES, December 31, 2002
    
    
    (8,961,900
    )
    
    
    1,489,200
    
    
    
    (6,057,600
    )
    
    
    15,566,700Issuance of treasury stock for
employee stock purchase plan
    
    
    
    
    
    
    (7,400
    )
    
    
    30,000
    
    
    
    4,700Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,400Net loss
    
    
    (9,813,600
    )
    
    
    
    
    
    
    
    
    
    
    (9,813,600
    )BALANCES, December 31, 2003
    
    $
    (18,775,500
    )
    
    
    1,481,800
    
    
    $
    (6,027,600
    )
    
    $
    5,894,200
 21




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##### Table of Contents



TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,2003
    
    2002
    
    2001Cash flows from operating activities:Net loss
    
    $
    (9,813,600
    )
    
    $
    (2,164,000
    )
    
    $
    (6,931,400
    )Adjustments
to reconcile net loss to net cash provided by
continuing operations:Cumulative effect of change in accounting principle
    
    
    
    
    
    
    1,988,600
    
    
    
    Impairment loss associated with goodwill
    
    
    10,400,200
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    3,650,800Depreciation and amortization
    
    
    324,100
    
    
    
    677,600
    
    
    
    2,898,100Loss on disposal of assets
    
    
    6,600
    
    
    
    176,200
    
    
    
    300Bad debt expense
    
    
    70,000
    
    
    
    250,000
    
    
    
    216,000Reversal of interest expense related to reduction of
acquisition notes
    
    
    
    
    
    
    (591,400
    )
    
    
    Changes in operating assets and liabilities, net of acquisitions(Increase) decrease in accounts receivable
    
    
    (1,318,400
    )
    
    
    (669,500
    )
    
    
    2,376,600(Increase) decrease in deferred charges and other current assets
    
    
    (1,132,300
    )
    
    
    1,721,500
    
    
    
    (242,200
    )Decrease (increase) in other assets
    
    
    244,100
    
    
    
    (373,100
    )
    
    
    (144,000
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    1,537,200
    
    
    
    298,900
    
    
    
    (1,195,800
    )Increase in deferred revenue
    
    
    1,750,100
    
    
    
    225,700
    
    
    
    1,018,300Net cash provided by continuing operations
    
    
    2,068,000
    
    
    
    1,540,500
    
    
    
    1,646,700Cash flows from investing activities:Acquisition of and investment in businesses, net of cash acquired
    
    
    (762,300
    )
    
    
    (1,585,500
    )
    
    
    (1,435,900
    )Expenditures for property and equipment
    
    
    (51,900
    )
    
    
    (51,600
    )
    
    
    (376,200
    )Proceeds from sale of Dallas building and land
    
    
    503,300
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (310,900
    )
    
    
    (1,637,100
    )
    
    
    (1,812,100
    )Cash flows from financing activities:Net (repayments) borrowings on credit lines
    
    
    (92,500
    )
    
    
    612,000
    
    
    
    629,500Proceeds from borrowings
    
    
    751,900
    
    
    
    1,000,000
    
    
    
    1,050,000Repayments of long-term debt
    
    
    (1,328,000
    )
    
    
    (2,134,600
    )
    
    
    (1,882,500
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (620,500
    )Issuance of treasury stock for employee stock purchase plan
    
    
    4,600
    
    
    
    10,800
    
    
    
    29,400Net cash used in financing activities
    
    
    (664,000
    )
    
    
    (511,800
    )
    
    
    (794,100
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (15,000
    )
    
    
    (640,400
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,093,100
    
    
    
    (623,400
    )
    
    
    (1,599,900
    )Cash and cash equivalents  beginning of year
    
    
    1,527,800
    
    
    
    2,151,200
    
    
    
    3,751,100Cash and
cash equivalents - end of year
    
    $
    2,620,900
    
    
    $
    1,527,800
    
    
    $
    2,151,200Supplemental cash flow information for continuing operations:Cash paid during the year for interest
    
    $
    281,000
    
    
    $
    433,200
    
    
    $
    693,600Cash paid during the year for income taxes
    
    
    111,900
    
    
    
    58,200
    
    
    
    344,500Cash refunds received during the year for income taxes
    
    
    195,900
    
    
    
    2,114,400
    
    
    
    Supplemental non-cash investing and financing activities for
continuing operations:Reversal of goodwill related to reduction of acquisition notes
    
    $
    
    
    
    $
    3,518,400
    
    
    $
    
 The accompanying notes are an integral part of these consolidated statements. 22




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##### Table of Contents



TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003  1.
    
    Company Description and Proposed Sale of Company TBA Entertainment Corporation and subsidiaries (the Company) is a
diversified communications and entertainment company that produces a broad
range of business communications, meeting productions and entertainment
services for corporate meetings, develops and produces integrated music
marketing programs, manages music industry artists and develops content and
entertainment programs for its nationwide network of fairs and festivals.
The Company was incorporated in Tennessee in June 1993 and reincorporated in
Delaware in September 1997. The Company primarily operates within the United
States. On April 8, 2004, The Company signed definitive merger documents for the
proposed sale of 100% of the common stock of the Company. See footnote 11
Subsequent Event  Proposed Sale of the Company for further discussion.  2.
    
    Basis of Financial PresentationPrinciples of Consolidation The consolidated financial statements include the accounts of the
Company and its wholly owned and majority owned subsidiaries. All
significant inter-company accounts and transactions have been eliminated in
consolidation.  Discontinued Operations During the first quarter of 2002, the Company approved a formal plan to
discontinue its merchandising operations in order to better focus on its core
business as a strategic communications and entertainment company. The
disposition of the merchandising operations represents the disposal of a
business segment under Accounting Principles Board (APB) Opinion No. 30.
Accordingly, this former segment is accounted for as a discontinued
operation.  3.
    
    Significant Accounting PoliciesRevenue Recognition The Company recognizes revenue when an event occurs. For those projects
that provide for multiple events, the contract revenue and costs are
apportioned and revenue and profit are recognized as each event occurs.
Deferred revenue represents customer deposits on future events. Deferred
charges represent Company direct expenditures related to future events.  Costs Related to Revenue Costs related to revenue is comprised of all costs associated with the
production of an event, including talent fees, contracted services, equipment
rentals, costs associated with the production of audio-visual effects and the
cost of internal production labor. Direct out-of-pocket costs are deferred
until the event occurs. Internal production labor costs are expensed as
incurred.  Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash in banks and highly
liquid investments purchased with an original maturity of three months or
less. Cash and cash equivalents carrying amounts approximate fair value.
The Company holds its investments in highly qualified financial
institutions. The Company maintains an aggregate cash balance of
$2,247,800 in excess of federally insured limits at certain financial
institutions as of December 31, 2003. 23




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##### Table of Contents



Property and Equipment Property and equipment consists of the following as of December 31, 2003
and 2002: 2003
    
    2002Leasehold improvements
    
    $
    208,100
    
    
    $
    208,100Furniture, fixtures and equipment
    
    
    2,849,000
    
    
    
    2,867,3003,057,100
    
    
    
    3,075,400Less - accumulated depreciation and amortization
    
    
    (2,680,200
    )
    
    
    (2,421,800
    )Property and equipment, net
    
    $
    377,000
    
    
    $
    653,600
 Property and equipment are recorded at cost and are depreciated or
amortized using the straight-line method, over the following estimated useful
lives: Building and leasehold improvements
    
    3-25 yearsFurniture, fixtures and equipment
    
    3-5 years
 The Company follows the policy of capitalizing expenditures that
materially increase asset lives and charges ordinary maintenance and repairs
to operations as incurred. No depreciation or amortization is included in
Cost Related to Revenue in the accompanying Consolidated Statements of
Operations.  Goodwill and Other Intangible Assets In July 2001, the FASB issued SFAS No. 142 Goodwill and Other
Intangible Assets, which establishes financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, Intangible Assets. The Company adopted SFAS No. 142 beginning with the
first quarter of 2002. SFAS No. 142 requires that goodwill and intangible
assets that have indefinite useful lives not be amortized but, instead,
tested at least annually for impairment while intangible assets that have
finite useful lives continue to be amortized over their respective useful
lives. Accordingly, the Company ceased amortization of all goodwill, which is
its only intangible asset with an indefinite useful life, on January 1, 2002.
The Company has no other identified intangible assets. In accordance with the provisions of SFAS No. 142, the Company performs
its annual review of impairment of goodwill in accordance with the provisions
of SFAS 141 by comparing the carrying value of the applicable reporting unit
to the fair value of the reporting unit. If the fair value is less than the
carrying value, then the Company measures potential impairment by assigning
the assets and liabilities of the Company to the reporting unit and comparing
the implied value of goodwill to its carrying value. The Companys goodwill
and intangibles are discussed further in Note 4.  Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following at
December 31, 2003 and 2002: 2003
    
    2002Accounts payable
    
    $
    906,300
    
    
    $
    1,575,800Accrued payroll and related taxes
    
    
    978,900
    
    
    
    801,800Due to sellers of acquired businesses
    
    
    130,700
    
    
    
    226,500Accrued interest expense
    
    
    88,400
    
    
    
    28,700Other accrued expenses
    
    
    1,904,200
    
    
    
    656,800$
    4,008,500
    
    
    $
    3,289,600
  Accounting for Stock Options The Company has adopted the intrinsic value method of accounting for
employee stock options as permitted by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-based Compensation (SFAS No. 123)
and discloses the pro forma effect on net loss and loss per share as if the
fair value based method had been applied. For equity instruments, including
stock options, issued to non-employees, the fair value of the equity
instruments or the fair value of the consideration received, 24




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##### Table of Contents



whichever is more readily determinable is used to determine the value of
services or goods received and the corresponding charge to operations. The following table illustrated the effect on net loss and loss per
share as if the Company had applied the fair value recognition provision of
SFAS No. 123 to stock-based employee compensation. 2003
    
    2002Net loss: as reported
    
    $
    (9,813,600
    )
    
    $
    (2,164,000
    )Deduct:
Stock based employee compensation, net of related tax effects,
involved in the determination of net loss as reported
    
    
    
    
    
    
    Add: Total stock based employee compensation expense
determined under fair value method for all awards
    
    
    (143,400
    )
    
    
    (143,400
    )Pro forma loss
    
    $
    (9,957,000
    )
    
    $
    (2,307,400
    )Loss per share basic and diluted:As reported
    
    $
    (1.33
    )
    
    $
    (0.29
    )Pro forma
    
    $
    (1.35
    )
    
    $
    (0.31
    )
 As required by SFAS 123, the Company provides the following disclosure
of estimated values for these awards. The weighted-average grant-date fair
value of options granted during 2001 was estimated to be $1.68. No options
were granted in 2003 or in 2002. The fair value of each option grant was estimated on the date of grant
using a Black-Scholes option-pricing model with the following weighted
average assumptions for 2001: risk free interest rate of 4.64%, expected life
of 3 years; volatility of 47% and no assumed dividends.  Income Taxes The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Deferred income tax assets and liabilities
are recognized based on enacted tax laws for any temporary differences
between financial reporting and tax bases of assets, liabilities and carry
forwards. Deferred tax assets are reduced by a valuation allowance if it is
more likely than not that some or all of the deferred tax asset will not be
realized (see Note 9).  Concentration of Risk One of the Companys customers, SAP, accounted for 21% of revenues in
2001. No customers accounted for more than ten percent of revenues in 2003
and in 2002. The Company had one customer who accounted for more than ten
percent of accounts receivable at December 31, 2003 and none at December 31,
2002. 25




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##### Table of Contents



Earnings per Common Share The following table sets forth the computation of basic and diluted
earnings per common share from continuing operations before
cumulative effect of change in accounting principle for the years ended
December 31, 2003, 2002 and 2001: 2003
    
    2002
    
    2001Basic Earnings Per Common Share:Net loss from continuing operations before cumulative effect
of change in accounting principle
    
    $
    (9,813,600
    )
    
    $
    (175,400
    )
    
    $
    (3,280,600
    )Weighted average common stock outstanding
    
    
    7,371,900
    
    
    
    7,364,700
    
    
    
    7,361,900Basic loss per common share from continuing operations
before cumulative effect of change in accounting principle
    
    $
    (1.33
    )
    
    $
    (0.02
    )
    
    $
    (0.45
    )Diluted Earnings Per Common Share:Net loss from continuing operations before cumulative effect
of
change in accounting principle
    
    $
    (9,813,600
    )
    
    $
    (175,400
    )
    
    $
    ( 3,280,600
    )Weighted average common stock outstanding
    
    
    7,371,900
    
    
    
    7,364,700
    
    
    
    7,361,900Additional common stock resulting from dilutive securitiesPreferred stock
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    Weighted average common stock and dilutive
securities outstanding
    
    
    7,371,900
    
    
    
    7,364,700
    
    
    
    7,361,900Diluted loss per common share from continuing operations
before cumulative effect of change in accounting principle
    
    $
    (1.33
    )
    
    $
    (0.02
    )
    
    $
    (0.45
    )
 Options and warrants to purchase 904,100, 1,354,100, and 1,485,800 shares of common stock in 2003, 2002 and 2001, respectively, were not
considered in calculating diluted earnings per share as their inclusion would
have been anti-dilutive.  Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ materially from those
estimates.  Other Recently Issued Accounting Standards. In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Instruments with Characteristics of Both
Liabilities and Equity, which establishes standards on the classification
and measurement of financial instruments entered into or modified after May
31, 2003. The adoption of SFAS 150 in fiscal 2003 did not have a material
impact on the financial position or results of operations of the Company.  Reclassifications Certain reclassifications have been made to the 2002 consolidated
financial statements to conform with classifications used in 2003.  4.
    
    Goodwill and Other Intangible Assets SFAS No. 142 requires that goodwill and other intangibles be tested
annually for impairment using a two-step process. The first step is to
determine the fair value of the reporting unit and compare this value to its
carrying value. If the fair value exceeds the carrying value, no further work
is required and no impairment loss would be recognized. If the carrying value
exceeds the fair value, a second step is required to determine whether
goodwill has been impaired and if so, measure the amount of the impairment.
The second step is an allocation of the fair value of the reporting unit to
all of the reporting units assets and liabilities under a hypothetical
purchase price allocation. At the time of adoption, based on the first step
evaluation performed to 26




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##### Table of Contents



adopt SFAS No. 142, using a discounted future cash flow methodology, the
Company did not identify any potential goodwill impairment, except for
goodwill associated with its fairs and festivals group. The Company
completed the step two process analyses in the third quarter of 2002. Based
on the estimated fair market value of the reporting unit, the Company
recorded a goodwill impairment loss in the first quarter of 2002 of
$1,988,600 associated with the fairs and festivals reporting unit, which has
been recorded as a cumulative effect of change in accounting principle in the
accompanying Consolidated Statements of Operations. The impairment is the
result of the businesses included in the fairs and festivals reporting unit
not meeting the earnings expectations set by the Company at the time the
businesses were acquired. The Company has elected to perform its annual impairment testing in
November of each year. No further goodwill was identified as impaired in 2002, based on
the annual impairment review process performed as of November 2002. Based on
the annual impairment review process preformed at November 2003, the Company
determined that goodwill for three of its reporting units is impaired. Based
on the estimated fair value of the reporting units, the Company reduced the
recorded goodwill of the artist management, fairs and festivals and corporate
communications reporting units by $6,152,700, $3,184,000 and $1,063,500,
respectively. The decrease in fair value from November 2002 was due to a
decrease in the projected future operating profits and cash flows from these
business segments. The reduction in Artist Management is due primarily to
reduced revenue projections from its artist roster and an increase in the
compensation structure paid to retain senior executives. The reduction in
Fairs and Festivals is due primarily to the projected revenue loss from the
departure of a senior account executive. The reduction in Corporate
Communications is due primarily to reduced revenue projections and gross
margins due to heightened competition and an increase in the compensation
structure paid to retain senior executives. The carrying amount of goodwill for the entertainment marketing, artist
and fairs and festivals client groups was also reduced in the third quarter
of 2002 by $1,100,000, $750,000 and $1,668,400, respectively, to reflect
reduction in purchase price associated with certain acquisitions that
included previously recorded contingent purchase price consideration (see
Note 5). Goodwill was increased in the years ended December 31, 2003 and
2002, by $989,300 and $1,389,200 respectively, reflecting additional
contingent purchase price paid associated with certain prior year acquisitions
(see Note 6). The changes in the carrying amounts of goodwill by reporting unit for
the years ended December 31, 2003 and 2002 are as follows: Balance as of
    
    Annual
    
    Contingent Purchase
    
    Balances as ofDecember 31, 2002
    
    Impairment Losses
    
    Price Adjustments
    
    December 31, 2003Corporate Client Group
    
    $
    10,767,900
    
    
    $
    (1,063,500
    )
    
    $
    
    
    
    $
    9,704,400Entertainment Marketing Client Group
    
    
    1,952,000
    
    
    
    
    
    
    
    189,600
    
    
    
    2,141,600Artist Client Group
    
    
    5,808,600
    
    
    
    (6,152,700
    )
    
    
    735,500
    
    
    
    391,400Fairs and Festivals Client Group
    
    
    3,177,600
    
    
    
    (3,184,000
    )
    
    
    64,100
    
    
    
    57,700Total Goodwill
    
    $
    21,706,100
    
    
    $
    (10,400,200
    )
    
    $
    989,200
    
    
    $
    12,295,100
 Balance as of
    
    Transitional
    
    Contingent Purchase
    
    Balances as ofDecember 31, 2001
    
    Impairment Loss
    
    Price Adjustments
    
    December 31, 2002Corporate Client Group
    
    $
    10,767,900
    
    
    $
    
    
    
    $
    
    
    
    $
    10,767,900Entertainment Marketing Client Group
    
    
    2,975,000
    
    
    
    
    
    
    
    (1,023,000
    )
    
    
    1,952,000Artist Client Group
    
    
    5,246,400
    
    
    
    
    
    
    
    562,200
    
    
    
    5,808,600Fairs and Festivals Client Group
    
    
    6,679,400
    
    
    
    (1,988,600
    )
    
    
    (1,668,400
    )
    
    
    3,177,600Total Goodwill
    
    $
    25,668,700
    
    
    $
    (1,988,600
    )
    
    $
    (2,129,200
    )
    
    $
    21,706,100
 27




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##### Table of Contents



The following table reflects the Companys comparative net loss before
goodwill amortization under SFAS No. 142 for the year ended December 31, 2001
assuming the non-amortization provision of SFAS No. 142 were applied. 2001Loss from continuing operations:Loss from continuing operations
    
    $
    (3,280,600
    )Amortization of goodwill, net of tax
    
    
    2,551,400Adjusted loss from continuing operations
    
    $
    (729,000
    )Net loss:Reported net loss
    
    $
    (6,931,400
    )Amortization of goodwill, net of tax
    
    
    2,551,400Adjusted net loss
    
    $
    (4,380,000
    )Basic and diluted earnings per share:Reported net loss per common share
    
    $
    (0.94
    )Amortization of goodwill, net of tax
    
    
    0.35Adjusted net loss income per common share
    
    $
    (0.59
    )
  5.
    
    Debt Long-term debt of the Company consists of the following as of December
31, 2003 and 2002: 2003
    
    2002Acquisition notes payable, interest at 8% and 10% due in periodic installments
through 2007, $1,189,900 secured by a pledge of the common stock acquired,
remaining $666,800 unsecured
    
    $
    2,389,900
    
    
    $
    2,445,200Note payable
to a bank, interest at banks prime rate or the 30, 60 or
90 day
Libor plus 2.75%
(4.68% at December 31, 2003)
    
    
    2,785,100
    
    
    
    2,734,3005,175,000
    
    
    
    5,179,500Less-current portion
    
    
    (2,105,500
    )
    
    
    (1,617,200
    )Long term portion
    
    $
    3,069,500
    
    
    $
    3,562,300
 Future annual maturities of long-term debt consist of the following as
of December 31, 2003: YEAR ENDING DECEMBER 31,2004
    
    
    2,105,5002005
    
    
    2,746,1002006
    
    
    225,7002007
    
    
    97,700$
    5,175,000
  Bank Credit Facility In October 2001, the Company entered into a bank credit facility, which
provided for maximum borrowings of up to $4,050,000. The credit facility was
comprised of: (a) a $1,050,000 term loan, repayable in monthly principal
installments of $43,750 commencing November 1, 2001, with an original
maturity date of September 30, 2003; and (b) a revolving credit line of up to
$3,000,000, with an original maturity date of June 30, 2003. The credit
facility was initially secured by all accounts receivable (see below) and
bears interest, payable monthly, at the Companys choice of an interest rate
based upon LIBOR or the banks prime rate, plus an incremental percentage
margin, as defined in the loan agreement. At December 31, 2001, the Company was not in compliance with certain
required financial ratios, specifically a debt/EBITDA ratio, a fixed charge
ratio and a minimum net worth ratio. Pursuant to an April 2002
restructuring agreement (2002 Restructuring) with the bank, the Company was
granted a temporary waiver of the financial covenant events of default
provisions under the original loan agreement and the banks forbearance from
exercising its available remedies, which extended through January 2, 2003. In
addition, new financial covenants were established and the Company granted
the bank additional security for the entire restructured bank credit facility
in the form of a pledge of the shares of certain of the Companys
subsidiaries and a first lien deed of trust on the Companys land and
building located in Dallas, Texas, which was sold in 28




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##### Table of Contents



February 2003 with the banks consent. The maturity date for both the
term loan and revolving credit line was extended to April 30, 2003. The bank also agreed to provide the Company $500,000 of additional
financing (New Bank Loan). The New Bank Loan was conditioned upon the
funding of a second loan of $500,000 (Affiliate Loan) from an entity
controlled by the Chief Executive Officer of the Company (Heritage). The
New Bank Loan and the Affiliate Loan were repaid in June 2002, upon receipt
of the Companys federal income tax refund. In addition, the Company repaid
$659,400 on the revolving credit line with proceeds from the Companys
federal income tax refund. In order to provide the Affiliate Loan, Heritage obtained a $500,000
loan from an independent third party finance company (Pass-Through Loan).
The Pass-Through Loan was secured by 950,336 shares of common stock held by
the Chief Executive Officer (772,876 shares) and President (177,460 shares)
of the Company and a personal guaranty of the President of the Company. The
Pass-Through Loan was repaid concurrently with the repayment of the Affiliate
Loan. As a condition to obtaining the Pass-Through Loan, Heritage paid a fee
of $5,000 and interest accrued at 12% per annum. These costs were
passed-through to the Company as part of the Affiliate Loan. At December 31, 2002, the Company was not in compliance with the revised
financial covenants under the 2002 Restructuring. Accordingly, in February
2003, the bank required the Company to use the proceeds from the sale of its
Dallas facility, to repay the outstanding balance of the term loan ($393,700)
and a portion of the revolving credit line ($92,500). After this repayment,
there was $2,248,000 outstanding under the revolving credit line. In April
2003, the Company and the bank negotiated a further restructuring of the bank
credit facility (2003 Restructuring). Pursuant to the 2003 Restructuring,
the Company was granted a new waiver of the financial covenant events of
default and the banks continued forbearance from exercising its available
remedies, which extended through January 1, 2004. In addition, the Company
was granted the right to re-borrow up to $750,000 under the revolving credit
line through May 31, 2003, for the purpose of making scheduled principal and
interest payments and additional earn-out payments under the acquisition
notes as well as for working capital purposes. Upon borrowing the $750,000
in May 2003, the outstanding balance of the bank revolving credit line of
$3,000,000 was converted to a term loan (2003 Term Loan). The Company was
required to make seven equal monthly principal payments of $107,400 from June
30, 2003 through December 31, 2003, with all remaining amounts outstanding
due April 30, 2004. The 2003 Restructuring provided for new financial
covenants and reporting requirements and included provisions for an
accelerated maturity date upon the occurrence of certain events including,
among other things, an Event of Default (as defined) or the sale or change of
control of a material amount of the Companys assets. In consideration for
entering into the 2003 Restructuring and for providing the first $500,000 of
re-borrowings, the Company issued 177,645 warrants to purchase shares of
common stock of the Company at an exercise price of $0.75 per share. In
consideration for providing the remaining $250,000 of re-borrowings, the
Company issued 125,000 warrants to purchase shares of common stock of the
Company at an exercise price of $0.01 per share. The Company valued the
302,645 warrants at $136,400 using the Black-Scholes Model of valuation,
which amount was fully amortized to interest expense in 2003. From June 30, 2003 to October 31, 2003, the Company made only two
payments of $107,400 to the bank. In November 2003, March 2004 and April
2004, the bank and the Company negotiated further restructurings of the terms
of the 2003 Term Loan (2004 Restructuring), under which the bank has agreed
to temporarily forebear from exercising its available remedies resulting from
the current payment defaults through January 1, 2005. Pursuant to the 2004
Restructuring, the Company was required to make $75,000 principal payments to
the bank on January 31, 2004, February 28, 2004 and March 31, 2004.
Beginning June 30, 2004, the Company will be required to make monthly
principal payments of $55,000. The Company will be
required to make additional principal payments if its operating cash flows
exceed certain levels for 2004. Interest continues to be paid monthly on the
outstanding principal balance of the 2003 Term Loan. All remaining principal
and accrued but unpaid interest will be due on March 31, 2005.
The proposed sale of the Company (see Note 11) would qualify as
a termination event under the bank credit agreement and would cause
the bank credit facility to become due and payable.  Acquisition Notes In 2002, the Company restructured the payment terms of certain of the
Companys acquisition notes payable. The restructured notes provided for
interest only payments through December 2002 and monthly principal and
interest payments beginning January 2003 and continuing through August 2004.
The interest rate on certain of these acquisition notes was increased from 8%
to 10%. Beginning in June 2003, in order to better manage the Companys
ongoing cash requirements, the Company elected to forego making some of the
restructured principal payments on certain of its acquisition notes payable.
As a result, the Company was in default of substantially all its acquisition
notes payable at December 31, 2003. In March and April 2004, the Company
restructured the terms of these acquisition notes payable. The restructured
notes now provide for monthly 29




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##### Table of Contents



payments of principal and interest. Aggregate principal payment on
acquisition notes payable for 2004 will be approximately $1,495,500. During the years 1999-2001, the Company acquired four companies pursuant
to agreements whereby the sellers of those businesses would receive payments
under promissory notes that were subject to principal reduction should the
post-acquisition annual earnings of the acquired businesses be less than
designated earnings targets set forth in the notes (see Note 6). At the time
of the acquisitions, the Company recorded the promissory notes, totaling
$4,225,000, as a liability and corresponding increase in purchase price, as
it believed that payment of the promissory notes was probable beyond a
reasonable doubt. In addition, the Company accrued interest expense on the
promissory notes at 8%, calculated from the respective acquisition dates.
From the date of acquisition, scheduled principle payments on certain of the
promissory notes have been reduced to reflect post-acquisition earn-out
adjustments. As a result, payment of the entire principal balance of these
promissory notes is no longer considered probable, although it is anticipated
that some portion of the principal amount of the notes will, in fact, be
paid. Pursuant to SFAS No. 141, Business Combinations, contingent
consideration should not be recorded as a liability unless payment of the
contingent consideration is determinable beyond a reasonable doubt.
Accordingly, in September 2002, the Company reduced its recorded debt and
corresponding purchase price (see Note 4) by $3,518,400, representing the
remaining principal amount outstanding on the promissory notes issued in
connection with these four acquisitions. In addition, the Company reversed
$591,400 of accrued interest payable on these promissory notes, which amounts
are reflected first as a reduction of the related Interest Expense recorded
in 2003 and then as Other Income in the accompanying Consolidated Statements
of Operations. Any future payments of principal and interest under these
promissory notes, as a result of those businesses achieving their respective
target earnings, will be recorded as additional purchase price at the time
the payment is determined.  6.
    
    Acquisitions The Company did not make any new acquisitions in 2003 and 2002. During
2001, the Company completed the following acquisitions: CASHCOMPANY
    
    DATE ACQUIRED
    
    CONSIDERATION2001 Acquisitions:Moore Entertainment, Inc (Moore)
    
    
    February 2001
    
    
    $
    1,100,000Alliance Artists, Ltd (Alliance)
    
    
    July 2001
    
    
    
    400,000
 Certain of the Companys acquisitions made in prior years provide for
additional sales price consideration based on the earnings of those
businesses during each respective earn-out period. The following table
lists, for each acquired company, the date of acquisition, the applicable
earn-out period, the maximum additional sales price consideration available
and the total additional sales price consideration, excluding any related
interest expense, recorded as of December 31, 2003: Additional SalesPrice ConsiderationEarned as ofCompany
    
    Date of Acquisition
    
    Earn-out Period
    
    Maximum
    
    December 31, 2003Alliance Artists, Ltd. (Alliance)
    
    July  2001
    
    August 2001  December  2007
    
    $
    400,000
    
    
    $
    68,300Moore Entertainment, Inc. (Moore)
    
    February 2001
    
    January 2003  December 2006
    
    
    550,000
    
    
    
    175,600Romeo Entertainment Group, Inc.
    
    January 2000
    
    January 2000  December 2003
    
    
    2,025,000
    
    
    
    525,600Mike Atkins Management Company(Atkins)
    
    December 1999
  
        December 1999  November 2003
    
    
    700,000
    
    
    
    700,000TKS Marketing, Inc. (TKS)
    
    December 1998
    
        December 1998  November
2003
    
    
    625,000
    
    
    
    610,900Titley Spalding & Associates, LLC
(TS)
    
    June  1998
    
    July 1998  June 2003
    
    
    5,755,000
    
    
    
    3,112,400
 As of December 31, 2003, only the Moore and Alliance acquisitions had
continuing earn out provisions. The maximum additional sales price
consideration for the Moore and Alliance acquisitions is in the form of
promissory notes, each requiring annual payments of principal over the term
of the earn-out period, plus 8% interest from the date of acquisition until
paid (see Note 5). The amount of the annual principal payment is subject to
reduction based on the earnings of those businesses during each respective
earn-out period. These reductions in principal payments can be recovered
over the remaining term of the earn-out period if the operations of these
businesses achieve specified levels of operations. For each company, the applicable
principal payment is calculated at the end of each calendar year in the
earn-out period, with payment to be made in the following year. 30




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##### Table of Contents



At the January 2001 acquisition date of Moore, the maximum additional
sales price consideration was $1,100,000 and the earn-out period commenced
January 2001 and extended through December 2004. In 2002, the maximum
additional sales price consideration was reduced to $550,000 and the earn-out
was amended to commence January 2003 and extend through December 2006.The accounting for the above-mentioned acquisitions is in accordance
with the purchase method of accounting. The operations of the acquired
businesses are included in the accompanying consolidated statements of
operations from their respective acquisition dates. The purchase price,
including the additional sales price consideration, for each acquisition has
been allocated to the assets acquired and liabilities assumed based on their
estimated fair values on the respective acquisition date. Substantially the
entire purchase price has been allocated to goodwill, as the net tangible
assets of the companies acquired were not significant at the date of the
acquisition (see Note 4)  7.
    
    Dispositions During the first quarter of 2001, the Company approved a formal plan to
sell its merchandising operations in order to better focus on its core
business as a strategic communications and entertainment company. The
disposition of the merchandising operations represents the disposal of a
business segment under Accounting Principles Board (APB) Opinion No. 30.
Accordingly, this segment is accounted for as a discontinued operation and
amounts in the financial statements and related notes for all periods shown
have been reclassified to reflect discontinued operations accounting. There
were no discontinued operations for 2003. The following is a summary of the operating results of the discontinued
merchandising operations: DECEMBER 312001Revenues
    
    $
    3,924,600Net loss from discontinued operations before
income taxes
    
    
    (4,014,700
    )Income tax benefit
    
    
    410,000Net loss from discontinued operations
    
    $
    (3,604,700
    )
 The following is a summary of the components of assets and liabilities
of the discontinued merchandising operations: DECEMBER 31,2003
    
    2002Current assets:Cash and cash equivalents
    
    $
    86,100
    
    
    $
    147,200Accounts receivable
    
    
    
    
    
    
    Inventories
    
    
    
    
    
    
    Other current assets
    
    
    
    
    
    
    Current liabilities:Accounts payable and accrued liabilities
    
    
    (297,900
    )
    
    
    (359,000
    )Net current liabilities
    
    $
    (211,800
    )
    
    $
    (211,800
    )
  8.
    
    Stockholders EquityPreferred Stock The Company is authorized to issue 1,000,000 shares of $.001 par value
preferred stock. The Company has designated 557,100 shares of the authorized
preferred stock as Series A Convertible Preferred Stock (Series A Preferred
Stock), of which 334,300 shares were previously issued and are non-voting.
The shares are convertible into common stock on a one-for-one basis.
In 2001, 100 shares of Series A Preferred Stock were converted into shares of common
stock. As of December 31, 2003, 2,000 shares of Series A Preferred Stock
remain outstanding. Series A Preferred Stock has a liquidation preference of
$0.03 per share and has no preference in payment of dividends. 31




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##### Table of Contents



Common Stock Repurchase Program In August 1998, the board of directors authorized the repurchase, at
managements discretion, of up to 1,000,000 shares of the Companys common
stock until August 1999, which was later extended to December 31, 1999. In
2000, the board of directors increased the number of shares authorized to be
purchased to 2,000,000 and extended the stock repurchase program until
December 31, 2000. As of December 31, 2001, the Company had repurchased
1,729,900 shares of common stock pursuant to the stock repurchase program for
a total consideration of $7,145,700. No common stock repurchases were made
in 2002 and 2003. The Companys repurchases of shares of common stock are
recorded as treasury stock and result in a reduction of stockholders equity.  Stock Options In 1995 and 1996, the Company granted 80,000 non-qualified options to
key employees and directors of which 40,000 remain outstanding as of December
31, 2002. In 1997, 1998, and 2000 the Company established three stock option
plans that provide for the granting of either incentive stock options or
non-qualified stock options to key employees, officers and directors of the
Company. Under the three plans, the Company may grant a total of 1,400,000
stock options at prices not less than the fair market value on the date of
grant, with expiration dates not exceeding ten years. As of December 31,
2003, the Company has 897,100 outstanding incentive stock options pursuant to
the three plans. Information relating to stock options is as follows: SHARES UNDER
    
    WEIGHTED-AVERAGEOPTIONS
    
    EXERCISE PRICEOptions outstanding at December 31, 2000
    
    
    1,355,800
    
    
    $
    4.28Cancelled
    
    
    (75,000
    )
    
    
    4.44Granted
    
    
    93,300
    
    
    
    3.57Options outstanding at December 31, 2001
    
    
    1,374,100
    
    
    
    4.14Cancelled
    
    
    (20,000
    )
    
    
    3.85Options outstanding at December 31, 2002
    
    
    1,354,100
    
    
    
    4.20Cancelled
    
    
    (457,000
    )
    
    
    4.16Options outstanding at December 31, 2003
    
    
    897,100
    
    
    
    4.23Options exercisable at December 31, 2001
    
    
    1,106,200
    
    
    
    4.16Options exercisable at December 31, 2002
    
    
    1,197,800
    
    
    
    3.71Options exercisable at December 31, 2003
    
    
    821,800
    
    
    
    3.88
 As of December 31, 2003, the exercise price of options outstanding
ranged from $2.50 to $5.50 and the weighted average remaining contractual
life of the options was 5.3 years.  9.
    
    Income Taxes The (benefit) provision for income taxes consists of the following: FOR THE YEARS ENDED DECEMBER 31,2003
    
    2002
    
    2001CurrentFederal
    
    $
    (168,400
    )
    
    $
    (875,800
    )
    
    $
    (886,800
    )State
    
    
    111,600
    
    
    
    15,800
    
    
    
    (156,500
    )DeferredFederal
    
    
    
    
    
    
    
    
    
    
    416,800State
    
    
    
    
    
    
    
    
    
    
    73,500Total
    
    $
    (56,800
    )
    
    $
    (860,000
    )
    
    $
    (553,000
    )
 32




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##### Table of Contents



A reconciliation of the difference between the statutory federal tax
rate and the Companys effective tax rate is as follows: FOR THE YEARS ENDED DECEMBER 31,2003
    
    2002
    
    2001Income taxes at statutory federal rate
    
    $
    (3,342,100
    )
    
    $
    (1,028,000
    )
    
    $
    (2,544,700
    )State income tax, net of federal tax benefit
    
    
    (625,200
    )
    
    
    (192,000
    )
    
    
    (449,000
    )Non-deductible goodwill amortization
    
    
    52,100
    
    
    
    802,600
    
    
    
    511,900Change in
impairment valuation allowance
    
    
    3,752,800
    
    
    
    (421,000
    )
    
    
    1,881,400Other
    
    
    105,600
    
    
    
    (21,600
    )
    
    
    47,400Income tax provision
    
    $
    (56,800
    )
    
    $
    (860,000
    )
    
    $
    (553,000
    )
 The Company has federal and state operating loss carry forwards of
approximately $3,189,000 and $9,240,000, respectively. These net operating
losses expire from 2005 to 2023. These carryforwards of federal and
state net operating losses, may be available, in part, to reduce
future taxable income. However, due to potential adjustments to the
net operating loss carry forwards as provided by the Internal
Revenue Code with respect to future ownership changes, future
availability of the tax benefits is not assured. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Companys ability to generate
taxable income within the net operating loss carry forward period.
Management has considered these factors in reaching its conclusion as to the
valuation allowance for financial reporting purposes. The income tax effect
of temporary differences comprising the deferred tax assets and liabilities
as of December 31, 2003 and 2002 are as follows: 2003
    
    2002Deferred tax assets:Net operating loss carry forwards
    
    $
    1,161,800
    
    
    $
    1,042,000Accrued payroll related costs
    
    
    72,000
    
    
    
    182,600Accelerated depreciation for tax
    
    
    215,200
    
    
    
    (6,100
    )Goodwill
    
    
    4,140,300
    
    
    
    Other
    
    
    (336,100
    )
    
    
    181,2005,253,200
    
    
    
    1,399,700Deferred tax liabilities:Accrued professional fees
    
    
    
    
    
    
    100,700Net deferred tax asset
    
    
    5,253,700
    
    
    
    1,500,400Valuation allowance
    
    
    (5,253,200
    )
    
    
    (1,500,400
    )$
    
    
    
    $
    
  10.
    
    Commitments and ContingenciesOperating Leases The Company leases office space under non-cancelable operating lease
agreements expiring in various years through 2007.
Commitments for operating leases: 2004
    
    $
    740,9002005
    
    
    476,7002006
    
    
    310,5002007
    
    
    43,2002008
    
    
    2,900Thereafter
    
    
    2,200$
    1,576,400
 The Company incurred rent expense of approximately $1,365,800,
$1,079,500 and $956,800 and for the years ended December 31, 2003, 2002 and
2001, respectively. 33




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##### Table of Contents



Contingencies The Company, from time to time, is a party to legal proceedings
incidental to its business. Management believes that there are no
proceedings that could have a material adverse effect on its financial
position or results of operations other than as discussed below. As of December 31, 2003, the Company was in default on substantially all
of its bank debt and acquisition notes payable (see Note 5). On March 18,
2004, a Verified Complaint was filed against the Company by Richard S. Smith
in the Circuit Court of Cook County, Illinois, seeking payment in full under
one of acquisition notes payable by the Company. The suit seeks payment in
full of all $566,751 of outstanding principal amount due under the note, plus
all accrued but unpaid interest and all costs for enforcing the note,
including attorneys fees and expenses. On March 29, 2004, the plaintiff
agreed to a modification to the payment terms of the acquisition note payable
and an extension of the due date until March 31, 2005. In addition, the
plaintiff agreed to withdraw the Verified Complaint, without prejudice, at
the request of the entity proposing to acquire the Company (see
Note 11). As of April 14,
2004, such request has not been made and the Verified Complaint had not been
withdrawn.  11.
    
    Subsequent Event  Proposed Sale of the Company On April 8, 2004, the Company signed definitive merger documents for the
proposed sale of 100% of the capital stock of the Company in an all cash
transaction. The proposed sale of the Company, which requires shareholder
approval, is likely to close in the second quarter of 2004. The proposed
terms of the transaction provide for cash consideration in the amount of
$6,150,000, which, after deductions of certain transaction expenses, results
in net consolidation of $0.67 per share of common stock and $0.70 per share
of preferred stock, subject to downward adjustment based on certain of the
Companys other expenses incurred in connection with the transaction. It is
anticipated that the transaction will result in the Company no longer being a
publicly traded entity.  12.
    
    Business Segment and Geographic Information Segment information has been prepared in accordance with SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information. The
Company classifies its continuing operations according to four major client
segments within the entertainment services industry: corporate clients,
entertainment marketing clients, artist clients and fairs & festivals
clients. For corporate clients, the Company creates innovative business
communications programs delivered via a broad range of business
communications, meeting production, entertainment and event production
services. For entertainment marketing clients, the Company develops and
executes integrated entertainment marketing and special event initiatives
including music tours, television broadcasts and syndicated radio specials.
For artist clients, the Company manages the negotiation of recording,
touring, merchandising and performance contracts, and the development of
long-term career strategies for music industry artists. For fairs and
festivals clients, the Company develops content and entertainment programs
for its nationwide network of fairs and festivals. Substantially all
revenues and long-lived assets of the Company for 2003, 2002, and 2001 were
derived from United States based companies. The Company does not internally report separate identifiable assets by
client group. The Company evaluates performance of each segment based on
several factors, of which the primary financial measure is EBITDA, including
other income. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization and goodwill impairment cumulative
effect of change in accounting principle and reversal of prior
years accrued interest. Unaudited summarized
financial information concerning the Companys reportable segments (and
excluding discontinued operations discussed in Note 7) is shown in the
following table for 2003, 2002, and 2001. 34




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##### Table of Contents



ENTERTAINMENT
    
    
    
    
    
    FAIRS &CORPORATE
    
    MARKETING
    
    ARTIST
    
    FESTIVALSCLIENTS
    
    CLIENTS
    
    CLIENTS
    
    CLIENTS
    
    CORPORATE
    
    TOTAL2003:Revenues
    
    $
    30,389
    
    
    $
    2,987
    
    
    $
    4,635
    
    
    $
    9,922
    
    
    $
    
    
    
    $
    47,933EBITDA, including equity in
earnings of joint ventures
    
    $
    2,370
    
    
    $
    (159
    )
    
    $
    604
    
    
    $
    661
    
    
    $
    (2,056
    )
    
    $
    1,420Goodwill impairment
    
    
    (1,063
    )
    
    
    
    
    
    
    (6,153
    )
    
    
    (3,184
    )
    
    
    
    
    
    
    (10,400
    )Depreciation and amortization
    
    
    (124
    )
    
    
    (29
    )
    
    
    (34
    )
    
    
    (9
    )
    
    
    (128
    )
    
    
    (324
    )Net interest income (expense)
    
    
    3
    
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    (569
    )
    
    
    (566
    )Income (loss) from continuing
operations before
income taxes
    
    $
    1,186
    
    
    $
    (188
    )
    
    $
    (5,584
    )
    
    $
    (2,531
    )
    
    $
    (2,753
    )
    
    $
    (9,870
    )2002:Revenues
    
    $
    29,967
    
    
    $
    4,116
    
    
    $
    4,673
    
    
    $
    10,376
    
    
    $
    
    
    
    $
    49,132EBITDA, including equity in
earnings of joint ventures
    
    $
    361
    
    
    $
    (554
    )
    
    $
    1,546
    
    
    $
    684
    
    
    $
    (2,293
    )
    
    $
    (256
    )Reversal of accrued interest
included in other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    365
    
    
    
    365Depreciation and amortization
    
    
    (442
    )
    
    
    (49
    )
    
    
    (46
    )
    
    
    (20
    )
    
    
    (120
    )
    
    
    (677
    )Net interest income (expense)
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    1
    
    
    
    (474
    )
    
    
    (467
    )Income (loss) from continuing
operations before income
taxes and before cumulative
effect of change in
accounting principle
    
    $
    (78
    )
    
    $
    (600
    )
    
    $
    1,500
    
    
    $
    665
    
    
    $
    (2,522
    )
    
    $
    (1,035
    )2001:Revenues
    
    $
    42,194
    
    
    $
    4,871
    
    
    $
    3,660
    
    
    $
    9,680
    
    
    $
    
    
    
    $
    60,405EBITDA, including equity in
earnings of joint ventures
    
    
    (2,893
    )
    
    
    (564
    )
    
    
    693
    
    
    
    466
    
    
    
    (3,512
    )
    
    
    (24
    )Depreciation and amortization
    
    
    (1,137
    )
    
    
    (357
    )
    
    
    (642
    )
    
    
    (422
    )
    
    
    (340
    )
    
    
    (2,898
    )Net interest income (expense)
    
    
    5
    
    
    
    24
    
    
    
    (4
    )
    
    
    (18
    )
    
    
    (555
    )
    
    
    (548
    )Income (loss) from continuing
operations before
income taxes
    
    $
    1,761
    
    
    $
    (897
    )
    
    $
    47
    
    
    $
    26
    
    
    $
    (4,407
    )
    
    $
    (3,470
    )
  13.
    
    Quarterly Financial Data (unaudited) Summary data relating to the results of continuing operations for each
quarter of the years ended December 31, 2003 and 2002 follows: First
    
    Second
    
    Third
    
    Fourth
    
    TotalQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Year(in thousands  except per share amounts)December 31, 2003Revenues
    
    $
    8,030
    
    
    $
    10,342
    
    
    $
    15,355
    
    
    $
    14,205
    
    
    $
    47,932Gross profit margin
    
    
    2,625
    
    
    
    3,175
    
    
    
    4,956
    
    
    
    4,199
    
    
    
    14,955Net (loss) income
    
    
    (916
    )
    
    
    230
    
    
    
    972
    
    
    
    (10,100
    )
    
    
    (9,814
    )Earnings (loss) per share:Basic
    
    
    (0.12
    )
    
    
    (0.03
    )
    
    
    0.13
    
    
    
    (1.31
    )
    
    
    (1.33
    )Diluted
    
    
    (0.12
    )
    
    
    0.03
    
    
    
    0.13
    
    
    
    (1.31
    )
    
    
    (1.33
    )December 31, 2002:Revenues
    
    $
    7,971
    
    
    $
    12,844
    
    
    $
    18,923
    
    
    $
    9,394
    
    
    $
    49,132Gross profit margin
    
    
    2,799
    
    
    
    4,774
    
    
    
    6,019
    
    
    
    2,530
    
    
    
    16,122Net (loss) income before cumulative effect
of change in accounting principle
    

    
    (1,333
    )
    
    
    243
    
    
    
    1,626
    
    
    
    (711
    )
    
    
    (175
    )Earnings before cumulativeEffect of change in accounting principle per shareBasic
    
    
    (0.18
    )
    
    
    0.03
    
    
    
    0.22
    
    
    
    (0.10
    )
    
    
    (0.02
    )Diluted
    
    
    (0.18
    )
    
    
    0.03
    
    
    
    0.22
    
    
    
    (0.10
    )
    
    
    (0.02
    )Net (loss) income
    
    
    (3,521
    )
    
    
    243
    
    
    
    1,626
    
    
    
    (1,119
    )
    
    
    (2,164
    )Earnings (loss) per share:Basic
    
    
    (0.45
    )
    
    
    0.03
    
    
    
    0.22
    
    
    
    (0.10
    )
    
    
    (0.29
    )Diluted
    
    
    (0.45
    )
    
    
    0.03
    
    
    
    0.22
    
    
    
    (0.10
    )
    
    
    (0.29
    )
 35




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During the fourth quarter of 2003, the Company recorded a goodwill
impairment loss of $10,400,200 pursuant to its annual test for goodwill
impairment in accordance with SFAS No. 142. During the first quarter of 2002, the Company recorded a goodwill
impairment loss of $1,988,600 upon the adoption of SFAS No. 142, Goodwill
and Other Intangible Assets. This loss was recorded as a Cumulative Effect
of Change in Accounting Principle. During the third quarter of 2002, in accordance with the provisions of
SFAS No. 141, Business Combinations, the Company reduced its recorded debt
and corresponding purchase price (goodwill) by $3,518,400 related to
contingent purchase price consideration for certain acquisitions made in
prior years. In addition, the Company reversed $591,400 of accrued interest
payable previously recorded, with $226,600 reflected as a reduction of
Interest Expense recorded in 2002, and the remaining $364,800 reflected in
Other Income. During the third quarter of 2002, the Company increased its allowance
for doubtful accounts by $250,000 to reflect an account receivable from a
customer in bankruptcy proceedings. During the third quarter of 2002, the Company expensed $280,000 of costs
associated with the termination of certain transactional discussions. During the fourth quarter of 2002, the Company recorded a $481,600
accrual for termination costs associated with closed offices. 36




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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 AdditionsBalance at
    
    Charged to
    
    
    
    
    
    
    
    
    
    Balance atBeginning of
    
    Costs &
    
    Charges to Other
    
    
    
    
    
    End ofDescription
    
    Period
    
    Expenditures
    
    Accounts
    
    Deductions
    
    PeriodAllowance for doubtful accounts:Year Ended December 31, 2003
    
    $
    398,400
    
    
    
    
    
    
    
    
    
    
    
    213,200
    *
    
    $
    165,600Year Ended December 31, 2002
    
    
    378,900
    
    
    
    250,000
    
    
    
    
    
    
    
    269,500
    *
    
    
    378,900Year Ended December 31, 2001
    
    
    182,400
    
    
    
    282,700
    
    
    
    
    
    
    
    66,700
    *
    
    
    398,400
  *Write-off of uncollectible accounts, net of recoveries. 37




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On August 6, 2002, the Company dismissed its independent certified public
accountants, Arthur Andersen LLP (the Former Accountants). The decision to
change accountants was recommended and approved by the Audit Committee of the
Companys Board of Directors. During the period of January 1, 2002 through August 6, 2002, there were no
disagreements with the Former Accountants on any matter of accounting principle
or practice, financial statement disclosure or auditing scope of procedure,
which disagreements, if not resolved to their satisfaction, would have caused
them to make reference in connection with their opinion to the subject matter
of the disagreement. The Former Accountants report on the Companys financial
statements for the period of January 1, 2002 through August 6, 2002 did not
contain an adverse opinion or disclaimer of opinion or qualification or
modification as to uncertainty, audit scope or accounting principles. On August 16, 2002, the Company engaged BDO Seidman, LLP (BDO), as its
independent certified public accountants. During the period of January 1, 2002
through August 16, 2002, neither the Company (nor anyone on behalf of the
Company) consulted BDO regarding the application of accounting principles to a
specified transaction, either completed or proposed, the type of audit opinion
that might be rendered on the Companys financial statements, or any matter
that was the subject of a disagreement or a reportable event and such matters
were not an important factor considered by the Company in reaching a decision
to engage BDO as the Companys independent certified public accountants. The Company has not been able to obtain Arthur Andersens consent to
incorporate by reference the audited financial statements for the fiscal year
ended December 31, 2001 into the Companys existing registration statements. 
 ITEM 9A. CONTROLS AND PROCEDURES The Company has designed and maintains disclosure controls and procedures
to ensure that information required to be disclosed in its reports filed or
submitted under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms. These controls and procedures are also
designed to ensure that such information is communicated to the Companys
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow them to make timely decisions about required
disclosure. The Companys management, with the participation of the Chief Executive
Officer and Chief Financial Officer, has conducted an evaluation of the
effectiveness of disclosure controls and procedures pursuant to Exchange Act
Rule 13a  15 (b). Based on that evaluation, which was conducted at the end of
the period covered by this report on Form 10-K, the Chief Executive Officer and
Chief Financial Officer concluded that disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company and its consolidated subsidiaries that is required to be included in
its periodic filings with the Securities and Exchange Commission. There have been no significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the
date of the Chief Executive Officers and Chief Financial Officers most recent
evaluation. 38




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##### Table of Contents



PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth certain information regarding the directors
and executive officers of the Company: Name
    
    Age
    
    Position
    
    Held SinceThomas J. Weaver III
    
    
    46
    
    
    Chairman of the Board, Chief Executive Officer
    
    
    1993Frank Bumstead
    
    
    62
    
    
    Director
    
    
    1993Charles Flood
    
    
    59
    
    
    Director
    
    
    1995W. Reid Sanders
    
    
    54
    
    
    Director
    
    
    2000Frank A. McKinnie Weaver, Sr.
    
    
    43
    
    
    Director, Secretary
    
    
    1993Greg Janese
    
    
    45
    
    
    President
    
    
    2001Bryan J. Cusworth
    
    
    44
    
    
    Executive Vice President, Chief Financial
Officer and Treasurer
    
    
    1996, 1999
 Thomas J. Weaver III has served as Chairman of the Board and Chief
Executive Officer of the Company since its inception. Mr. Weaver also served
as President until January 2001. From 1986 to 1988, Mr. Weaver served as
president of Hard Rock International plc, an English public company whose
securities traded on the London Stock Exchange and the American Stock Exchange.
Since 1988 he has been the President of Heritage Trust Company, a corporation
with investments in numerous public and private companies. Mr. Weaver devotes
his full-time efforts to the business operations of the Company. Mr. Weaver is
the brother of Frank A. McKinnie Weaver, Sr. Frank Bumstead, since 1989, has been President or Chairman and a
principal stockholder of Flood, Bumstead, McCready & McCarthy, Inc., a business
management firm which represents the financial interests of artists, song
writers and producers in the music industry. From 1986 to December 1990, Mr.
Bumstead was President of Bumstead Co., a financial consulting company. He is
also lead director of American Retirement Corp. and a director of Syntroleum,
Inc. Charles Flood, since 1989, has been a principal stockholder of Flood,
Bumstead, McCready & McCarthy, Inc., a business management firm which
represents the financial interests of artists, song writers and producers in
the music industry. Prior to that time, Mr. Flood worked at Capitol Records in
Nashville as the Director of Artist Relations and later as Director of Talent
Acquisition. W. Reid Sanders is a director of Harbor Global Co., Ltd. and Chairman of
the Regional Selection Committee for the Jefferson Scholarship at the
University of Virginia and on the Universitys National Advisory Board, a
member of the Advisory Board of the University of Tennessee at Memphis, a
Trustee of the Hugo Dixon Foundation, and serves on the Board of Trustees of
The Dixon Gallery and Gardens and is on the Board of Trustees, Rhodes College. Mr.
Sanders also serves on the Advisory Board of SSM Venture Partner Funds, L.P.
From 1976 to 2000, Mr. Sanders was President of Long Leaf
Partners Funds. Frank A. McKinnie Weaver, Sr. serves as Senior Vice President, FTN
Financial, a subsidiary of First Tennessee National Corporation (FTN) located
in Memphis, Tennessee. In his capacity at FTN, Mr. Weaver focuses on
Correspondent Banking, Corporate Finance, and the delivery and creation of
financial products and services for institutional clients. Prior to joining
FTN. Mr. Weaver served as First Vice President, Correspondent Banking at
National Bank of Commerce (NBC), Memphis, Tennessee. Mr. Weaver served at
NBC for five (5) years prior to joining FTN. Prior to NBC, Mr. Weaver served
The Whiteville Bank from 1985 to 1994, leaving that institution as Vice
President and Director to join NBC in Memphis, Tennessee. Mr. Weaver is also a
Director of Heritage Trust Company and President of Heritage Plantation
Company. Mr. Weaver is the brother of Thomas J. Weaver III. Greg
M. Janese currently serves as President of the Company and served as an Executive Vice President from
April 1997 until January 2001. He has led the Companys Corporate
Communications and Entertainment division since April 1997, when the Company
acquired Avalon Entertainment Group, Inc. (AEG). Mr. Janese has over 20
years of experience in the entertainment industry. From 1993 to 1997, he
served as President of AEG. He co-founded The Entertainment Group, a Nashville
based concert promotion and production company and the predecessor to AEG, in
1989. In 1987, Mr. Janese founded World Class Productions, a corporate
production firm partnered with Barbara Mandrell. Prior to that, Mr. Janese was
involved in various capacities with artist promotions, public relations, and
booking and producing talent for corporate meeting and special events. 39




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##### Table of Contents



Bryan J. Cusworth has served as Executive Vice President and Chief
Financial Officer of the Company since 1996 and Treasurer since 1999. Prior to
joining the Company, Mr. Cusworth was employed by Arthur Andersen LLP from July
1982 to September 1996, where he specialized in the resort, real estate and
entertainment industries. Mr. Cusworth is a certified public accountant. Audit Committee The Company has separately-designated standing Audit Committee of the
Board of Directors established in accordance with section 3(a)(58)(A) of the
Securities Exchange Act of 1934. The members of the Audit Committee are Frank
Bumstead (Chairman), Charles Flood and W. Reid Sanders. None of the members of
the Audit Committee meets the requirements of an audit committee financial
expert as such term is defined in the rules of the Securities and Exchange
Commission. However, the Board of Directors has determined that each Audit
Committee member has sufficient financial expertise to effectively and
competently discharge the responsibilities of such position. In addition, the
Audit Committee has the authority to engage independent accountants, legal
counsel or other experts or consultants as it deems appropriate to carry out
its responsibilities. Accordingly, the Company believes the qualification and
experience of the members of the Audit Committee, and their ability to use
outside advisors as they consider appropriate, affords them sufficient
background and expertise to fulfill their obligations without the necessity of
including an audit committee financial expert at the present time. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that Company directors, executive officers and persons who own more than 10% of
the outstanding Common Stock file initial reports of ownership and reports of
changes in ownership of Common Stock with the Securities and Exchange
Commission (the SEC). Such persons are required by the SEC to furnish the
Company with copies of all Section 16(a) reports they file. Based on a review of such forms, the Company believes that all Section
16(a) filing requirements applicable to its executive officers, directors and
10% stockholders were complied with for the year ended December 31, 2003. Code of Ethics The Company has adopted a code of ethics that applies to its Chief
Executive Officer, President, Chief Financial Officer and any other persons
performing similar functions. The Company will provide to any person, without
charge and upon request, a copy of this code of ethics. All such requests
should be mailed to: TBA Entertainment Corporation, 16501 Ventura Blvd., Suite
601, Encino, California 91436, Attention: Bryan J. Cusworth. 
 ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth the total compensation paid or accrued by
the Company for the years ended December 31, 2003, 2002 and 2001, on behalf of
each of the named executive officers of the Company. Summary Compensation Table Annual Compensation
    
    Long TermCompensationName and Principle Position
    
    Year
    
    Salary
    
    Bonus
    
    Options (#)Thomas J. Weaver, III
    
    
    2003
    
    
    $
    350,000
    
    
    $
    -0-
    
    
    
    -0-Chairman of the Board,
    
    
    2002
    
    
    
    350,000
    
    
    
    -0-
    
    
    
    -0-Chief Executive Officer
    
    
    2001
    
    
    
    350,000
    
    
    
    -0-
    
    
    
    -0-Greg M. Janese
    
    
    2003
    
    
    
    318,750
    
    
    
    -0-
    
    
    
    -0-President
    
    
    2002
    
    
    
    200,000
    
    
    
    50,000
    
    
    
    -0-2001
    
    
    
    200,000
    
    
    
    -0-
    
    
    
    -0-Bryan J. Cusworth
    
    
    2003
    
    
    
    200,000
    
    
    
    -0-
    
    
    
    -0-Executive Vice President
    
    
    2002
    
    
    
    200,000
    
    
    
    -0-
    
    
    
    -0-Chief Financial Officer and Treasurer
    
    
    2001
    
    
    
    200,000
    
    
    
    -0-
    
    
    
    -0-
 40




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The following table sets forth information with respect to stock options
held by the named executive officers of the Company on December 31, 2003. The
closing price for the Companys Common Stock on December 31, 2003 (the last
trading day of the year) was $1.36. None of the executive officers exercised
any stock options during 2003. Aggregated Fiscal Year-End Option Values Number of Securities
    
    Value of UnexercisedUnderlying Unexercised
Options at FY-End
    
    In-the-Money Options at FY-EndName and Principal Position
    
    Exercisable/Unexercisable
    
    Exercisable/UnexercisableThomas J. Weaver III
    
    
    300,000 / -0-
    
    
    $
    -0- /  $-0-Chairman of the Board, Chief Executive OfficerGreg M. Janese
    
    
    75,000 / -0-
    
    
    
    -0- / -0-PresidentBryan J. Cusworth
    
    
    245,000 / -0-
    
    
    
    -0- / -0-Executive Vice President, Chief Financial Officer, Treasurer
 Employment Agreements The Company has entered into an employment agreement with Thomas J. Weaver
III for a term of five years, commencing January 1, 1994. The agreement
provided for an initial annual base salary of $125,000, with increases at the
discretion of the Board of Directors. Pursuant to action taken by the Board of
Directors, Mr. Weavers current annual base salary is $350,000. The agreement
also provides for an annual bonus as determined by the Board of Directors based
on the operating results of the Company. The agreement is automatically
renewed on each anniversary date for an additional five-year term unless it is
terminated by either party prior to the anniversary date. The agreement
provides that Mr. Weaver is entitled to payment for the unexpired portion of
the current term in the event his employment is terminated without cause by the
Company. Under the agreement, cause is defined to include failure to perform
the duties of his office, breach of fiduciary duty to the Company and willful
violation of the confidentiality or non-competition provisions of the
agreement. The Company has entered into an employment agreement with Greg M. Janese,
for an original term commencing on April 21, 1997 and continuing through
December 31, 2002. The term of the agreement was extended to May 31, 2005
pursuant to a modification agreement entered into with Mr. Janese in May 2002.
The agreement provides for an annual base salary of $275,000, with increases at
the discretion of the Board of Directors. In addition, Mr. Janese is entitled
to participate in applicable incentive plans established by the Company. If
the Company terminates the employment of Mr. Janese without cause, or if Mr.
Janese terminates his employment for good reason, he will be entitled to the
greater of $400,000 or Mr. Janeses base salary for the remaining term of the
agreement, plus incentive compensation for the portion of the year in which he
was employed. Cause is defined to include failure to perform his duties to
the Company, breach of the agreement, fraud, embezzlement, conviction of
certain serious crimes, conduct harmful to the Company and failure of Mr.
Janese to achieve certain performance objectives. Good reason is defined to
include a material breach of the agreement by the Company, which remains
uncured for 30 days after receipt of written notice of breach. The agreements
contain certain covenants by Mr. Janese not to compete with the business of the
Company both during the term of employment and for a period of two years
following the termination of employment. Compensation of Directors Directors who are officers and employees of the Company receive no
compensation, as such, for serving as members of the Board. Directors who are
not officers or employees of the Company are entitled to receive $100 for each
Board meeting personally attended, and all Directors are reimbursed for their
out-of-pocket expenses incurred in attending Board and Committee meetings. Compensation Committee Interlocks and Insider Participation During 2003, the members of the Compensation Committee of the Board of
Directors were W. Reid Sanders (Chairman) and Frank Bumstead. Neither Mr.
Sanders nor Mr. Bumstead (i) was an officer or employee of the Company or any
of its subsidiaries during such year, (ii) was formerly an officer of the
Company or any of its subsidiaries or (iii) was a party to any transaction
required 41




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##### Table of Contents



to be set forth under Certain Relationships and Related Transactions
pursuant to the rules of the Securities and Exchange Commission. No executive officer of the Company served as a member of the compensation
or similar committee or board of directors of any other entity, one of whose
executive officers served on the Compensation Committee or Board of Directors
of the Company. 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth as of April 8, 2004 certain information
with respect to the beneficial ownership of the Companys Common Stock by (i)
each person who is known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock of the Company, (ii) each of the
Companys directors, (iii) each of the Companys executive officers and (iv)
all directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the stockholders listed below has sole voting and
investment power with respect to the shares of Common Stock beneficially owned.
In each case, the number of shares includes the beneficial ownership of Common
Stock issuable upon the exercise of options that are exercisable within 60
days. Any shares not outstanding which are subject to such options and
beneficially owned by a person in the table below are deemed to be outstanding
for the purpose of computing the percentage of outstanding securities of the
class owned by such person but are not deemed to be outstanding for the purpose
of computing the percentage of the class beneficially owned by any other
person. None of the stockholders listed below beneficially owns any shares of
the Companys Series A Preferred Stock. For a summary of Common Stock authorized for issuance under the Companys
equity compensation plans, see Market for Common Equity and Related
Stockholder Matters. 42




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##### Table of Contents



Common StockNumber of SharesName and Address(1)
    
    Beneficially Owned
    
    Percent of TotalThomas Jackson Weaver III
    
    
    1,043,443
    (2)(7)
    
    
    13.6
    %Frank Bumstead
    
    
    24,958
    
    
    
    *Charles Flood
    
    
    24,958
    
    
    
    *W. Reid Sanders
    
    
    110,000
    (3)
    
    
    1.5
    %Frank A. McKinnie Weaver, Sr.
    
    
    226,764
    (4)
    
    
    3.1
    %Greg M. Janese
    
    
    252,460
    (5)
    
    
    3.4
    %Bryan J. Cusworth
    
    
    245,000
    (6)
    
    
    3.2
    %TBA Holdings, LLC
    
    
    660,075
    (7)
    
    
    8.9
    %Dimensional Fund Advisors, Inc.(8)
    
    
    492,300
    
    
    
    6.7
    %All executive officers and
directors a group (seven (7)
persons)(2) (3) (4) (5) (6)
    
    
    1,927,583
    
    
    
    24.0
    %
   *
    
    Less than 1%.(1)
    
    The address for Mr. Thomas J. Weaver III is 402 Heritage Plantation Way,
Hickory Valley, Tennessee 38042; the address for Messrs. Bumstead and
Flood is 1700 Hayes Street, Suite 304, Nashville, Tennessee 37203; the
address for Mr. Sanders is 5100 Wheelis Drive, Suite 206, Memphis,
Tennessee 38117; the address for Mr. Frank A. McKinnie Weaver, Sr. is 402
Heritage Plantation Way, Hickory Valley, Tennessee 38042; the address for
Mr. Janese is 300 Tenth Avenue South, Nashville, Tennessee 37203; the
address for Mr. Cusworth is 16501 Ventura Blvd., Suite 601, Encino,
California 91436; and the address for Dimensional Fund Advisors, Inc. is
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401: the address
for TBA Holdings, LLC is 177 Broad Street, Stamford, Connecticut 06901;
(2) Includes (a) 300,000 shares issuable to Mr. Weaver upon the exercise
of outstanding stock options, (b) 77,236 shares held by the Katherine
McKinnie Weaver Trust IV, of which Mr. Weaver is trustee and (c) 83,368
shares held by Heritage Plantation Foundation, Inc., of which Mr. Weaver
and his family members control the board of trustees.(3)
    
    Includes 25,000 shares issuable upon the exercise of outstanding stock
options.(4)
    
    Includes 172,764 shares held by the Katherine McKinnie Weaver VI Ltd., of
which Mr. Weaver controls the sole general partner.(5)
    
    Includes 75,000 shares issuable to Mr. Janese upon the exercise of
existing stock options.(6)
    
    Includes 245,000 shares issuable to Mr. Cusworth upon the exercise of
outstanding stock options.(7)
    
    The Company, TBA Holdings, LLC (TBA Holdings), and a wholly-owned
subsidiary of TBA Holdings have entered into a Merger Agreement, whereby
TBA Holdings will acquire all of the outstanding capital stock of the
Company. In connection with the Merger Agreement, Thomas J. Weaver III
has entered into a Voting Agreement with TBA Holdings, whereby Mr. Weaver
granted an irrevocable proxy to Holdings to vote the 660,075 shares over
which he holds voting power in accordance with the terms of the Voting
Agreement. TBA Holdings may be deemed to share voting power with respect
to these shares. The Voting Agreement will terminate upon the earlier of
the termination of the Merger Agreement or the closing of the merger.(8)
    
    Dimensional Fund Advisors Inc. (Dimensional), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manger to
certain other commingled group trusts and separate accounts. (These
investment companies, trusts and accounts are the Funds.) In its role
as investment advisor or manager, Dimensional possessed voting and/or
investment power over 492,300 shares of Common Stock as of February 6,
2004. The Funds own all securities reported in this table, and
Dimensional disclaims beneficial ownership of such securities. 43




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. In connection with the restructuring of the Companys bank credit facility
in April 2002 (See Note 5 to the consolidated financial statements included in
Item 8 of this Annual Report on Form 10K), an entity controlled by the Chief
Executive Officer of the Company (Heritage), loaned the Company $500,000
(Affiliate Loan). Conditioned upon the funding of the Affiliate Loan, which
occurred on April 15, 2002, the bank agreed to loan the Company an additional
$500,000 (New Bank Loan). The proceeds from both loans were used to make
required payments pursuant to the Companys acquisition notes payable and for
working capital purposes. The New Bank Loan and the Affiliate Loan were repaid
in June 2003, upon receipt of the Companys federal income tax refund. In order to provide the Affiliate Loan, Heritage obtained a $500,000 loan
from an independent third party finance company (Pass-Through Loan). The
Pass-Through Loan was secured by 950,336 shares of TBA common stock held by the
Chief Executive Officer (772,876 shares) and President (177,460 shares) of the
Company and a personal guarantee by the President of the Company. The
Pass-Through Loan was repaid concurrently with the repayment of the Affiliate
Loan. As a condition to obtaining the Pass-Through Loan, Heritage paid a fee
of $5,000 and interest accrued at 12% per annum. These costs were
passed-through to the Company as part of the Affiliate Loan. 
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following represents fees for professional audit services rendered by
BDO Seidman, LLP, the Companys principal accountant, for the audit of the Companys
annual financial statements for the years ended December 31, 2003 and 2002. Audit Fees BDO billed the Company aggregate fees of $109,500 in 2003 and $107,600 in
2002 for professional services rendered for the audit of the Companys annual
financial statements and review of the financial statements included in the
Companys quarterly reports on Form 10-Q. Audit-Related Fees BDO did not bill the Company fees during 2003 or 2002 for assurance and
related services that are reasonably related to the performance of the audit or
review of the Companys financial statements, and that are not reported above
under the caption Audit Fees. Tax Fees BDO billed the Company aggregate fees of $61,500 in 2003 and $56,500 in
2002 for professional services rendered for tax compliance, tax advice and tax
planning. All Other Fees BDO did not bill the Company fees during 2003 or 2002 for products and
services other than the services described above in this Item 14. Before BDO is engaged by the Company to render any audit or non-audit
services, the engagement must be approved by the Companys Audit Committee. 44




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##### Table of Contents



PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) (1) Financial Statements  See page 19 of this Report. (2) Financial Statement Schedules  None. (3) Exhibits. EXHIBITNUMBER
    
    
    
    DESCRIPTION OF DOCUMENT2.1(1)
    
    
    
    Purchase Agreement among TBA Entertainment Corporation, TBA Entertainment Holding
Corporation, Robert R. Titley and Clarence Spalding dated June 18, 1998.2.2(2)
    
    
    
    Stock Purchase Agreement among TBA Entertainment Corporation, Karin Glass &
Associates, Inc., Ink Up, Inc., KGA, Inc., Karin Glass and Kenneth Glass dated March 18,
1999.2.3(3)
    
    
    
    Stock Purchase Agreement among TBA Entertainment Corporation , Robert Romeo and Romeo
Entertainment Group, Inc. dated November 26, 19992.4(4)
    
    
    
    Stock Purchase Agreement among TBA Entertainment Corporation, Mike Atkins and Mike
Atkins Management, Inc. dated December 6, 1999.2.5(5)
    
    
    
    Stock Purchase Agreement by and among TBA Entertainment Corporation, Edward James
Dougherty, Janet L. Dougherty, John F. Dougherty, John F. Dougherty, Eva Dougherty, The
Ed & Jan Dougherty Charitable Remainder Trust and EJD Concert Services, Inc. dated March
31, 2000.2.6(6)
    
    
    
    Stock Purchase Agreement among TBA
Entertainment Corporation. Moore Entertainment, Inc. and Stephen F.
Moore dated February 6, 2001.2.7(7)
    
    
    
    Merger Agreement by and among TBA
Holdings, LLC, TBA Merger Sub, Inc. and TBA
Entertainment Corporation, dated April 8, 2004.3.1(8)
    
    
    
    Certificate of Incorporation of the Company.3.2(9)
    
    
    
    Bylaws of the Company.4.1(10)
    
    
    
    Specimen Common Stock Certificate.4.2
    
    
    
    Article IX of the Certificate of Incorporation of the Company (included in Exhibit
3.1).4.3(11)
    
    
    
    Certificate of Designation of Series A Convertible Preferred Stock of the Company.10.1(12)
    
    
    
    Employment Agreement dated as of January 1, 1994 between the Company and Thomas
Jackson Weaver III.10.2(13)
    
    
    
    Form of Indemnification Agreement between the Company and each of the directors and
executive officers.10.3(14)
    
    
    
    TBA Entertainment Corporation 1995 Stock Option Plan.10.4(15)
    
    
    
    Form of Stock Option Agreement for options granted under the 1995 Stock Option Plan.10.5(16)
    
    
    
    TBA Entertainment Corporation 1997 Stock Option Plan.10.6(17)
    
    
    
    Form of Stock Option Agreement for options granted under the 1997 Stock Option Plan.10.7(18)
    
    
    
    Registration Rights Agreement between the Company, Robert E. Geddes, Greg M. Janese,
Thomas Miserendino, Brian K. Murphy and Marc W. Oswald.10.8(19)
    
    
    
    Employment Agreement between Avalon Entertainment Group, Inc. and Greg M. Janese.10.9(20)
    
    
    
    TBA Entertainment Corporation Employee Stock Purchase Plan10.10(21)
    
    
    
    Loan and Security Agreement among AmSouth Bank and TBA Entertainment Corporation and
its subsidiaries dated October 10, 2001.10.11*
    
    
    
    Sixth Amendment to Loan Documents
and Agreement among AmSouth Bank and TBA Entertainment Corporation
and its subsidiaries, dated April 14, 2004.21*
    
    
    
    Subsidiaries of the Company.23*
    
    
    
    Consent of Independent Certified Public Accountants31.1*
    
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer.31.2*
    
    
    
    Rule 13a-14(a) Certification of Chief Financial Officer.
 45




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##### Table of Contents



EXHIBITNUMBER
    
    
    
    DESCRIPTION OF DOCUMENT32.1*
    
    
    
    Section 1350 Certification of Chief Executive Officer32.2*
    
    
    
    Section 1350 Certification of Chief Financial Officer
   *
    
    Filed herewith.(1)
    
    Incorporated herein by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K dated on June 18, 1998.(2)
    
    Incorporated herein by reference to Exhibit 2.7 to the Companys Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.(3)
    
    Incorporated herein by reference to Exhibit 10.18 to the Companys Annual
Report on Form 10-K, as amended for the fiscal year ended December 31,
1999.(4)
    
    Incorporated herein by reference to Exhibit 10.19 to the Companys Annual
Report on Form 10-K, as amended for the fiscal year ended December 31,
1999.(5)
    
    Incorporated herein by reference to Exhibit 10.20 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.(6)
    
    Incorporated herein by reference to Exhibit 10.21 to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.(7)
    
    Incorporated herein by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K dated April 8, 2004.(8)
    
    Incorporated herein by reference to Exhibit 3.1 to the Companys Current
Report on Form 8-K dated September 8, 1997.(9)
    
    Incorporated herein by reference to Exhibit 3.2 to the Companys Current
Report on Form 8-K dated September 8, 1997.(10)
    
    Incorporated herein by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K dated September 8, 1997.(11)
    
    Incorporated herein by reference to Exhibit 4.3 to the Companys Current
Report on Form 8-K dated September 8, 1997.(12)
    
    Incorporated herein by reference to Exhibit 10.2 to the Companys
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.(13)
    
    Incorporated herein by reference to Exhibit 10.6 to the Companys
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.(14)
    
    Incorporated herein by reference to Exhibit 10.9 to the Companys Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.(15)
    
    Incorporated herein by reference to Exhibit 10.10 to the Companys Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.(16)
    
    Incorporated herein by reference to Exhibit 10.11 to the Companys Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.(17)
    
    Incorporated herein by reference to Exhibit 10.12 to the Companys Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.(18)
    
    Incorporated herein by reference to Exhibit 10.15 to the Companys Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996. 46




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##### Table of Contents



(19)
    
    Incorporated herein by reference to Exhibit 10.19 to the Companys
Current Report on Form 8-K dated June 20, 1997.(20)
    
    Incorporated by reference to Exhibit 10.1 to the Companys Registration
Statement on Form S-8 (Registration No. 333-62284) dated June 5, 2001.(21)
    
    Incorporated herein by reference to Exhibit 4.1 to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.(b)
    
    Reports on Form 8-K.
No reports on Form 8-K were filed during the quarterly period ended December
31, 2003. 47




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##### Table of Contents



SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 14th day of April 2004. TBA ENTERTAINMENT CORPORATIONBy:
    
    /s/ THOMAS JACKSON WEAVER IIIThomas Jackson Weaver IIIChairman of the Board andChief Executive Officer
 In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates stated. SIGNATURE
    
    TITLE
    
    DATE/s/ THOMAS JACKSON WEAVER III

Thomas Jackson Weaver III
    
    Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer)
    
    April 14, 2004/s/ FRANK BUMSTEAD

Frank Bumstead
    
    Director
    
    April 14, 2004/s/ CHARLES FLOOD

Charles Flood
    
    Director
    
    April 14, 2004/s/ W. REID SANDERS

W. Reid Sanders
    
    Director
    
    April 14, 2004/s/ FRANK A. McKINNIE WEAVER, SR.

Frank A. McKinnie Weaver, Sr.
    
    Director
    
    April 14, 2004/s/ BRYAN J. CUSWORTH

Bryan J. Cusworth
    
    Chief Financial Officer
(Principal Accounting and Financial Officer)
    
    April 14, 2004
 48




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##### Table of Contents



EXHIBIT INDEX EXHIBIT NO.
    
    
    
    DESCRIPTION10.11
    
    
    
    Sixth Amendment to Loan Documents
and Agreement among AmSouth Bank and TBA Entertainment Corporation
and subsidiaries, dated April 14, 2004.21
    
    
    
    Subsidiaries of the Company.23
    
    
    
    Consent of Independent Certified Public Accountant31.1
    
    
    
    Rule 13a-14(a) Certification of Chief Executive
Officer.31.2
    
    
    
    Rule 13a-14(a) Certification of Chief Financial
Officer.32.1
    
    
    
    Section 1350 Certification of Chief Executive Officer.32.2
    
    
    
    Section 1350 Certification of Chief Financial Officer.