**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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### **FORM10-K**

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| (Mark One)                                        |                                                                                          |
|---------------------------------------------------|-----------------------------------------------------------------------------------------------|
|                                              |                                                                                          |
| **x**                                             | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**     |
| ** **                                        | ** **                                                                                    |
| **FOR THE  FISCAL YEAR ENDED DECEMBER 31,  2006** |
| **or**                                            |
| ** **                                        |
| **o**                                             | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                   |                                                                                               |  |

 

**FOR THETRANSITION PERIOD FROM                   TO                   **

Commission FileNumber **333-57201**

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**Advanstar Communications Inc.**

(Exact name ofregistrant as specified in its charter)

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

Registrant’stelephone number, including area code: **(212)951-6600**

Securities registeredpursuant to Section 12(b) of the Act: None

Securities registeredpursuant to Section 12(g) of the Act:  None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.  Yes  o  No  x.

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act. Yes  o  No  x.

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

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-Kis not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form10-K.   **x**

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

 

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

As of June 30, 2006,none of the registrant’s common stock was held by non-affiliates of theregistrant.

Asof April 2, 2007, the registrant had 1,000,000 shares of common stock issuedand outstanding.

DOCUMENTS INCORPORATED BYREFERENCE

None.

 

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**Explanatory Note**

Advanstar.com, Inc. (“Advanstar.com”) legally mergedwith us in December 2006. Prior to the merger, Advanstar.com was our affiliate,wholly owned by our parent. As a result of the legal merger, the operations ofAdvanstar.com were consolidated into ours and all prior periods have beenrestated (“As Adjusted”) to reflect the merger. On January 1, 2005, we beganconsolidating the operations of Advanstar.com with our operations upon theadoption of Financial Accounting Standards Board (“FASB”) Interpretation No.46R, *Consolidation of Variable Interest Entities*(“FIN46R”).  As a result of the adoption ofFIN 46R, we recorded a gain, which was recorded as a cumulative effect ofaccounting change in the first quarter of 2005. This gain was subsequentlyeliminated upon the legal merger with us in December 2006.

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**PART I**

**Item I — *BUSINESS***

Unless otherwise noted herein,disclosures in this Annual Report on Form 10-K relate only to our continuingoperations. Our discontinued operations consist of properties sold anddiscontinued. See “Item 7.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations —Presentation of Financial Information — Acquisitions, Divestitures,Dispositions and Merger” for further information on discontinued properties.

**FORWARD-LOOKING STATEMENTS**

THIS ANNUALREPORT, OTHER REPORTS, AND COMMUNICATIONS TO SECURITY HOLDERS, AS WELL AS ORALSTATEMENTS MADE BY THE DIRECTORS, OFFICERS OR EMPLOYEES OF ADVANSTARCOMMUNICATIONS INC. (“ADVANSTAR” OR “THE COMPANY”) MAY CONTAIN FORWARD-LOOKINGSTATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, ASAMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIESLITIGATION REFORM ACT OF 1995.  AFORWARD-LOOKING STATEMENT IS USUALLY IDENTIFIED BY OUR USE OF CERTAINTERMINOLOGY INCLUDING “BELIEVES,” “EXPECTS,” “MAY,” “WILL,” “SHOULD,” “SEEKS,” “PROFORMA,” “ANTICIPATES” OR “INTENDS” OR BY DISCUSSIONS OF STRATEGY ORINTENTIONS.  THESE STATEMENTS MAY RELATETO, AMONG OTHER THINGS, ADVANSTAR’S FUTURE REVENUE, OPERATING INCOME, EBITDAAND THE PLANS AND OBJECTIVES OF MANAGEMENT. ALL FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE MADE AS OF THE DATEHEREOF, BASED ON INFORMATION AVAILABLE TO ADVANSTAR AS OF THE DATE THEREOF, ANDADVANSTAR ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENT OR TOCONFORM ANY FORWARD-LOOKING STATEMENT TO ACTUAL RESULTS.  THESE FORWARD-LOOKING STATEMENTS ARE NEITHERPROMISES NOR GUARANTEES AND INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTSCOULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKINGSTATEMENTS.  FACTORS THAT MAY CAUSE SUCHVARIATION ARE DISCUSSED IN THIS ANNUAL REPORT, PARTICULARLY UNDER THE HEADING “RISKFACTORS,” AND IN ADVANSTAR’S OTHER REPORTS AND REGISTRATION STATEMENTS FILEDWITH THE SECURITIES AND EXCHANGE COMMISSION.

**INDUSTRY AND MARKET DATA**

Industry and market data for the business-to-business(“B-to-B”) media industry and our market share and relative industry positionsused throughout this annual report were obtained through company research,internal company surveys and studies conducted by third parties, independentindustry publications and other publicly available information.  We have not independently verified market andindustry data from third-party sources. In addition, while we believe internal company surveys are reliable andwe believe that we define markets appropriately, none of such surveys nor suchmarket definitions have been verified by any independent sources.

In particular:

·                                          *Industry overview:* Except where otherwise specificallyreferenced, we have based our discussion of the B-to-B communications industryon publications by Veronis Suhler Stevenson and reports and studies by theB-to-B trade association, including Business Information Network (BIN), aninformation source of American Business Media.

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·                                          *Tradeshows:* We rank our tradeshows against the tradeshows ofour competitors based on an internally conducted analysis of net square footageof exhibition space.  This data istypically reported by tradeshow organizers and published in the *Tradeshow Week Quarterly Report*, a quarterly publicationthat lists tradeshows grouped by show date. We include both direct and indirect competitors in suchcomparisons.  Direct competitors are thetradeshows within the same industrial classification code and geographic regionas our tradeshows, although we only include tradeshows within the sameindustrial classification code that are within the same subcategory, as definedby us, as our tradeshows.  For example,we only include women’s apparel shows in providing data about our women’sapparel tradeshows, although the relevant industrial classification code coversall apparel shows.  Direct competitorsare also determined in some cases by the time of the year during which atradeshow is held.  Indirect competitorsare subjectively determined by us on a case-by-case basis.  These indirect competitors include:(1) broad-based tradeshows we know from prior experience thatdisplay, among other products, products displayed at our tradeshows and(2) tradeshows identified by our current exhibitors as other tradeshows inwhich they participate.  In determiningour market position in comparison to these broad-based shows, we comparethe square footage of our show against the estimated square footage of thatbroad-based show allocated to the products that are of the same type asthose displayed in our tradeshow.  Someof our tradeshows have insignificant or no direct competition.

·                                          *Trade Publications:* We utilize the industry-standardmethod of ranking our publications against competitors’ publications based onthe number of advertising pages as determined, except where otherwisespecifically referenced, by Inquiry Management Systems Ltd. and PERQ,independent vendors.  For purposes ofthese rankings, we have defined our markets narrowly as the niche of businessesor professionals at which a publication is specifically targeted.

#### **General**

We are a worldwide media company providing integratedmarketing solutions for the Fashion and Licensing, Powersports, and LifeSciences industries.  We serve business professionals and consumers inthese industries with our portfolio of 91 shows and stand-alone conferences, 66publications and directories, 150 electronic publications and Web sites, aswell as educational and direct marketing products and services. Market leadingbrands and a commitment to delivering innovative, quality products and servicesenables us to “Connect Our Customers With Theirs.”

In 2006, most of our shows and stand-aloneconferences were among the leading events in their respective markets based onsquare footage.  For the twelve months ended December 31, 2006, 73% of our 44magazines and journals for which competitive data is available ranked either #1or #2 in their respective markets, based on number of advertising pages.

We had approximately 1,000 employees as of December31, 2006 in 14 U.S. offices and 2international locations in the United Kingdom.

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**Industry Overview**

B-to-B media companies provide marketing solutions fortheir customers through tradeshows and conferences, trade publications,ancillary direct marketing servicesand through electronic applications. Tradeshows play a key role in B-to-B sales and marketing efforts and areutilized in the global economy as a highly cost-effective sales and marketingtool.  Tradeshows provide an opportunityfor industry participants to conduct face-to-face selling efforts, transactbusiness and receive product information from exhibits, conferences, workshopsand other forums.  Tradeshow attendeesinclude executives, manufacturing and operating management, sales and marketingpersonnel, industry analysts, middle-level managers, buyers and otherindustry professionals.  Tradepublications are generally published monthly and provide information about aspecific industry or market segment within an industry.  Advertisers are attracted to B-to-B printmedia by the highly targeted and controlled circulation of publications.  By focusing on targeted audiences, publishersaim to connect advertisers with key purchasing decision-makers.  Controlled distribution assists advertisersin reaching very specific target groups and provides for more efficient use ofadvertising dollars.  The historicalgrowth in B-to-B publishing has been driven primarily by rising levels ofadvertising spending as opposed to growth in subscription revenue.

According to the Veronis Suhler Stevenson***2006**CommunicationsIndustry Forecast*, total spending on B-to-B marketing in the UnitedStates, including magazines and tradeshows, was expected to increase to $23.7billion in 2006, a 6.3% gain over 2005.

Overall business-to-business media expendituresclimbed for the third straight year in 2005 with a 6.6% growth to $22.3billion.  The growth is being driven by surginge-media spending, which grew 27.0% to $1.9 billion in 2005 over 2004 andtradeshow spending growth of 6.3% in 2005. The solid growth in 2005 e-media andtradeshows was tempered by a more modest 4.0% expansion in business-to-businessmagazine spending.

According to Veronis Suhler Stevenson, overallbusiness-to-business media spending was expected to grow in 2006, fueled bysolid gains in tradeshow and a double-digit increase in e-media spending.  Growth in business-to-business magazineexpenditures will be modest, as falling circulation spending offset gains inadvertising spending.  Totalbusiness-to-business media spending growth is expected to continue to mirror orslightly exceed GDP expansion in 2005 through 2010 at a compound annual growthrate of 6.2% from 2005 to 2010, reaching $30.2 billion in 2010. This growth isexpected to be driven by expenditures on tradeshows and e-media. E-media isexpected to continue with its double digit growth with an expected 28.1% growthin 2006 and 21.4% compound annual growth from 2005 through 2010 reaching $4.9billion in 2010.

Total spending on tradeshows, including expenditureson exhibit space and fees, sponsorships and advertising grew 6.3% to $9.7billion in 2005 and is expected to increase another 6.2% in 2006, driven byhealthy corporate profits and increased business-related travel.  Growth was driven by the healthcare, retail,sports, travel and entertainment, and home furnishings industries.

Spending on tradeshows is expected to rise 5.8% on acompound annual basis from 2005 to 2010, driven by a 6.9% rise in fees,sponsorships and advertising and a 5.5% gain in total exhibit spacespending.   Overall spending is expectedto reach $12.9 billion in 2010, surpassing for the first time spending onbusiness-to-business magazines.  Asmeasured by *Tradeshow Week*, the year ended December31, 2006 saw an increase over 2005 in all three primary tradeshow indicators:square footage increased by 3%, exhibiting companies increased by 1% andattendance increased by 5%.

Total spending on business-to-business magazines,including advertising and subscriptions, increased 4.0% to $10.7 billion in2005 and is expected to increase 2.6% in 2006. Advertising expenditures rose 5.0% to $8.8 billion in 2005 due tohealthy growth among healthcare, banking, automotive, and government, educationand defense titles.  Circulation spendingdropped 0.4% in 2005 for the fifth consecutive year driven by decreases in paidcirculation.  Total magazine expendituresare anticipated to grow at a compound annual rate of 2.9% from 2006 to 2010,reaching $12.4 billion in 2010. Industry-wide advertising pages, as measured byAmerican Business Media, increased 1% in 2006 compared to 2005, and grew 4% in2005 from 2004.

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**IndustrySegments**

Weapproach our business by targeting specific industries in North America andEurope and structuring our organization and product portfolio based on thesethree “core market” segments: Fashion and Licensing; Powersports; and Life Sciences.  We believe that by focusing on marketsegments in addition to products, we better identify and service a broad arrayof our customers’ marketing needs.  Thisfocus allows us to cross-sell our products and services and captures a largershare of our customers’ marketing budgets. In each of the markets we serve many of our customers advertise in ourpublications, exhibit at our shows, use our direct marketing products and ourelectronic products to reach their target audience.  We have expanded our show, conference andpublication offerings within each market segment through new productintroductions and selective acquisitions, which we believe maximize ourexisting marketing and customer service infrastructure and industry expertise.

LifeSciences accounted for 48%, 51% and 54% of total revenue in 2006, 2005 and2004.  Fashion & Licensing accountedfor 34%, 31% and 30% of total revenue in 2006, 2005 and 2004.  Powersports accounted for 14%, 14% and 13% oftotal revenue in 2006, 2005 and 2004, while Other operations accounted for 4%,4%, and 3% of total revenue in 2006, 2005 and 2004.

In 2006, we undertook a strategicchange in the monitoring and management of the business to better reflectmanagement’s focus and commitment to its three industry-focused segments:Fashion & Licensing, Life Sciences, and Powersports.  This change was prompted as a result of asubstantial change in the business organization following the divestiture ofthe Portfolio Group. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations — Presentation of Financial Information — Acquisitions,Divestitures, Dispositions and Merger” for further information on discontinuedproperties.  Segment information is setforth in Note 11 to our consolidated financial statements included in thisannual report.

**Products**

*Shows andConferences*

As ofDecember 31, 2006, we owned and managed 40 shows and 51 standalone conferencesfor business, professional and consumer audiences worldwide, most of which wereamong the leading events in their respective markets based on squarefootage.  Our largest shows are listed inthe April 2006 issue of *Tradeshow Week 200*’slist of the top 200 tradeshows as measured by total square footage.  These included MAGIC Marketplace Spring,MAGIC Marketplace Fall, International Powersports Dealer Expo and LicensingInternational.  Collectively, these fourshows represented 2.7 million of the 4.4 million total square footage forall of our shows for the year ended December 31, 2006.

Our showand conference revenue is derived primarily from the sale of exhibit space,show-specific advertising, sponsorships and conference attendance.  Show and conference revenue accounted for45%, 42% and 40% of our revenue in 2006, 2005 and 2004.

Showsare a long-established effective forum to conduct business.  As new products and services are introduced,buyers and sellers within specific industries need efficient settings tointeract and conduct business.  Shows canalso include conference programs, which provide additional learning andpresentation opportunities.

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*Publications*

We area leading B-to-B trade publisher in the United States.  As of December 31, 2006, we published 53specialized business magazines and professional journals,****13directories, one consumer magazine,continuing education products, custom publications and other projects.  Of our 44 magazines and journals for whichcompetitive data is available, 73% ranked either #1 or #2 in their respectivemarkets, based on the number of advertising pages in the twelve months endedDecember 31, 2006.

Ourtrade publications are generally distributed free-of-charge to targeted,qualified, professional recipients and generate revenue predominantly fromadvertising.   Publications revenueaccounted for 48%, 51% and 55% of our revenue in 2006, 2005 and 2004.  Our largest publications based on ad pagesinclude:*  MedicalEconomics, Pharmaceutical Technology, Dental Products Report, Dealernews, LCGC,Contemporary Pediatrics, Pharmaceutical Executive, Dermatology Times, Motor Age*and*Auto Body Repair News.*Collectively, these 10 magazines represented39% of publication pages for the year ended December 31, 2006.

Webelieve that our targeted circulation lists for our U.S. and internationalpublications provide our advertising customers with a highly cost-effectivemethod of reaching their target market’s decision-makers.  We seek to increase advertising revenue byintroducing existing advertisers to new titles, by attracting new advertiserswho target our readership and by developing new reader and advertisingcategories.

*OtherProducts*

Weprovide a comprehensive set of marketing products, services and support gearedto a variety of industries’ marketing and communications needs.  These services include direct mail anddatabase marketing programs, reprint services, reference books and otherservices to facilitate our clients’ marketing programs.  These services are incremental to shows andpublications and are utilized either independently or to supplement our customers’show and publication marketing plans.

Inaddition, we provide electronic based products and services to complement ourdelivery of show, publishing and direct marketing products to ourcustomers.  We have 150 electronic based products including webadvertising, e-newsletters, education and web seminars.  Other products accounted for 7%, 7% and 5% ofour revenue in 2006, 2005 and 2004.

**Business Strategy**

Ourbusiness strategy is to provide products and services to facilitate “ConnectingOur Customers With Theirs.”  Ourobjective is to concentrate on our strategy to achieve sustainable, profitable,long-term growth.  We will accomplishthis by (1) focusing on markets where we can leverage our strengths, (2)delivering innovative, quality products based on customer and market needs, (3)maximizing our operational efficiencies and (4) selective acquisitions.

*FocusOn Markets and Customers Where We Can Leverage Our Strengths*

Wefocus on owning and building leading product offerings that are the importantsources of information for businesses and professionals in large, dynamic orgrowing markets.  The combination of ourselected markets, our leading products and focused industry teams providesstrategic and operational clarity along with deep insight into well definedcustomer segments within each selected market.

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*DeliverInnovative, Quality Products Based On Customer and Market Needs*

Wediversify our revenue streams by developing products that provide solutionsalong an industry’s “communications supply chain.”  We seek to identify specific gaps in existingmarkets or opportunities in adjacent markets where we can effectively addvalue.  We are able to address evolvingmarket needs through multiple means, including:

·                                          adaptingexisting shows and magazines to reflect industry trends and attracting newcategories of buyers and sellers;

·                                          developingnew product extensions based on the marketing needs of the industry and keycustomers in the buying and selling community; and

·                                          identifyingfill-in acquisition and joint venture opportunities based on continuinginteraction within the market.

*MaximizeOperating Efficiencies*

Weoperate effective back office production and Company support operations.  We strive to continuously improve oureffectiveness through the employment of state of the art information systems tomaximize operating efficiencies and provide relevant, timely, fact basedmanagement information to our operating teams and senior management.  Our operating teams are evaluated based onextensive use of defined operating metrics designed to focus attention andbehavior on key drivers of performance success.

*SelectiveAcquisitions*

As weexpand deeper into our current industry groups, we explore selectiveacquisitions and joint ventures based on the following criteria:

·                                          theacquisition significantly improves our existing product and franchise position;

·                                          theacquisition adds new and sustainable types of revenue streams to our existingproduct offerings; and

·                                          theacquisition adds to, broadens or deepens existing management talent.

FromJanuary 1, 2004 through December 31, 2006, we purchased five tradeshows andconsumer event businesses and one trade publication business in the fashion,life sciences and powersports segments. See “Item 7. —Management’s Discussion and Analysis of FinancialCondition and Results of Operations — Presentation of Financial Information —Acquisitions and Divestitures.”  We areengaged in ongoing evaluations of potential acquisitions in line with ourbusiness strategy.

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**IndustrySegments**

Thefollowing is a summary of our products and services by industry segment.

*Fashion& Licensing*

OurFashion group serves the men’s, women’s, children’s and product sourcingsections of the apparel industry.  Weoperate in the fashion industry through electronic media and shows, includingour recently acquired POOL and Project groups of events.  Six of these shows are held concurrently inLas Vegas during February and August of each year. Our Licensing group includesa portfolio of products including shows, conferences, publications, andelectronic media.

Keyshows and publications include:

·                  MAGIC,the world’s largest and most widely recognized tradeshow for the men’s apparel,accessories, and footwear industry;

·                  WWDMAGIC,which we believe is the largest women’s apparel and accessory tradeshow in theUnited States;

·                  MAGICKids,which serves the children’s apparel, accessory, and footwear industry;

·                  Sourcingat MAGIC, which we believe is the largest industry trade event formanufacturing sourcing within the fashion industry, including full-packagecontractors, fabric and component suppliers;

·                  Project,a tradeshow for the premium contemporary market for menswear including premiumsportswear and denim apparel and accessories from around the world;

·                  POOL,a tradeshow for the fashion forward designers featuring a range of productsincluding apparel, shoes, books, home furnishings, art and music; and

·                  LicensingInternational, which we believe is the largest tradeshow worldwide for themerchandise licensing industry, Brand License, our complementary event for theEuropean licensing industry and *License! Global*,the #1 publication in the United States for the licensing industry.

The following table sets forth information relating to keyproduct offerings in our Fashion andLicensing segment in the year ended December 31, 2006:

#### **Fashion and Licensing Events and Publications**

| ** **                          | ** ** | **Exhibitions** | ** ** | **Conferences**              | ** ** | **Electronic Products** | ** ** | **Magazines (1)** | ** ** |
|-------------------------------------|------------|-----------------|------------|------------------------------|------------|------------------------------|------------|------------------------|------------|
| **Category**                        | ** ** | **Number**      | ** ** | **Net Square  Footage** | ** ** | **Number**                   | ** ** | **Number**             | ** ** | **Number** | ** ** | **Ad Pages** | ** ** | **Number of  our magazines ranked  #1 or #2 (2)** | ** ** |
|                                |       |            |       |                         |       |                         |       |                   |       |   |   |   |   |   |   |
| Mens (includes POOL  & Project) |       | 9               |       | 1,535,392                    |       | —                       |       | 4                      |       | — |   | — |   | — |   |
| Womens                              |       | 2               |       | 527,350                      |       | —                       |       | —                 |       | — |   | — |   | — |   |
| Kids                                |       | 2               |       | 41,942                       |       | —                       |       | —                 |       | — |   | — |   | — |   |
| Sourcing                            |       | 3               |       | 166,070                      |       | —                       |       | 1                      |       | — |   | — |   | — |   |
| Licensing                           |       | 2               |       | 238,552                      |       | 2                            |       | 9                      |       | 2 |   | 761 |   | 2 of 2 |   |

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(1)                                    Excludes directories.

(2)                                    Ranking based only on measured magazinesfor the twelve months ended December 31, 2006.

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*Powersportsand Automotive*

Weserve the Powersports and Automotive market through shows, publications andelectronic products for both trade and consumer audiences.

Keyshows and publications include:

·                                          InternationalPowersports Dealer Expo, the largest aftermarket accessories tradeshow in theUnited States targeted at powersports dealers, the 13 city tour of consumerInternational Motorcycle shows and *Dealernews*, the#1 magazine targeted at retailers in the powersports market;

·                                          *Motor Age*, the #1 publication for the automotive servicerepair market, and*Aftermarket Business,* the #1aftermarket book in the United States, which provide Advanstar an importantposition in the automotive parts, supplies and services publishing market;

·                                          *Auto Body Repair News*is one of the leading magazines in thecollision repair industry, offering readership to numerous influential buyers;

·                                          *Dirt Sports,* aconsumer magazine covering the off-road racing and motorsports market and *Off-Road Business*, the only publicationexclusively serving the business-to-business component of the off-roadmarketplace;

·                                          Off-RoadExpo, acquired in late 2005, the largest off-road products consumer show in theUnited States, directed to enthusiasts involved in motorsports, rock crawling,dirtbikes, ATVs and other off-road and trail activities; and

·                                          Off-Road.comwhich we believe is the most visited and in-depth website for off-roadenthusiasts with more than 100,000 pages of searchable content available onlineand indexed by leading search engines across the globe.

Thefollowing table sets forth information relating to key product offerings in ourPowersports and Automotive segment in the year ended December 31, 2006:

#### **Powersports and Automotive****Events and Publications**

| ** **              | ** ** | **Exhibitions** | ** ** | **Conferences**              | ** ** | **Electronic Products** | ** ** | **Magazines (1)** | ** ** |
|-------------------------|------------|-----------------|------------|------------------------------|------------|------------------------------|------------|------------------------|------------|
| **Category**            | ** ** | **Number**      | ** ** | **Net Square  Footage** | ** ** | **Number**                   | ** ** | **Number**             | ** ** | **Number** | ** ** | **Ad Pages** | ** ** | **Number of  our magazines ranked  #1 or #2 (2)** | ** ** |
|                    | ** ** | ** **      |       |                         | ** ** | ** **                   | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Automotive  Aftermarket |       | —          |       | —                       |       | —                       |       | 9                      |       | 4 |   | 2,863 |   | 4 of  4 |   |
| Powersports/Motorcycle  |       | 15              |       | 1,505,914                    |       | —                       |       | 19                     |       | 2 |   | 1,348 |   | 1 of  2 |   |
| Off-Road                |       | 4               |       | 295,050                      |       | —                       |       | 6                      |       | 2 |   | 1,055 |   | 2 of 2 |   |

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(1)                                    Excludes directories.

(2)                                    Ranking based only on measured magazinesfor the twelve months ended December 31, 2006.

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*LifeSciences*

Withinour Life Sciences segment, we serve the healthcare, pharmaceutical, science,dental and veterinary markets through providing shows, conferences, publicationsand electronic media.  We serve thehealthcare market in both primary and specialized care areas, such as practicemanagement and managed healthcare, pharmacy, pediatrics, geriatrics,dermatology, and ophthalmology; the pharmaceutical and science market in areassuch as spectroscopy, liquid and gas chromatography, and pharmaceuticalresearch, development, testing, regulatory compliance, manufacturing andmarketing; the dental market in general and specialty dentistry and dentallabs; and the veterinary market in practice management and clinical medicine.

Keyshows, conferences and publications include:

·                                          *Medical Economics*, one of the flagship publications servingphysicians in the United States since its launch in 1923, which informsphysicians about the practice management side of medicine;

·                                          *Pharmaceutical Technology,* the #1 publication targeted atpharmaceutical scientists, engineers and operation managers, and *Pharmaceutical Executive*, the #1 magazine for pharmaceuticalcompany product managers and marketing professionals;

·                                          *LCGC,* the #1 magazine in the United States in liquid and gaschromatography;

·                                          *Drug Topics,* the #1 magazine forpharmacists;

·                                          IVTConferences, a worldwide conference provider of FDA validation and complianceinformation for the pharmaceutical industry;

·                                          *Dental Products Report*, the #1 publication serving theinformation needs of dentists since 1967, focusing on new products, techniquesand trends in general, specialty, cosmetic and restorative dentistry;

·                                          *DVM, Veterinary Medicine, Veterinary Economics,*the #2, #3,and #4 publications in the veterinary market serving all aspects of veterinarypractice including clinical, practice management and industry news; and

·                                          Central Veterinary Conference, aconference and tradeshow for veterinary practice management and clinicalmedicine.

Thefollowing table sets forth information relating to key product offerings in ourLife Sciences segment in the year ended December 31, 2006:

#### **Life Sciences Events****and Publications**

| ** **                    | ** ** | **Exhibitions** | ** ** | **Conferences**              | ** ** | **Electronic Products (3)** | ** ** | **Magazines (1)** | ** ** |
|-------------------------------|------------|-----------------|------------|------------------------------|------------|---------------------------------------|------------|------------------------|------------|
| **Category**                  | ** ** | **Number**      | ** ** | **Net Square  Footage** | ** ** | **Number**                            | ** ** | **Number**             | ** ** | **Number** | ** ** | **Ad Pages** | ** ** | **Number of  our magazines ranked  #1 or #2 (2)** | ** ** |
|                          | ** ** | ** **      |       |                         | ** ** | ** **                            | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Dental                        |       | —          |       | —                       |       | 1                                     |       | 7                      |       | 6 |   | 2,544 |   | 3 of  4 |   |
| Healthcare                    |       | —          |       | —                       |       | —                                |       | 41                     |       | 17 |   | 9,628 |   | 11  of 16 |   |
| Pharmaceutical  & Science |       | —          |       | —                       |       | 48                                    |       | 47                     |       | 14 |   | 6,695 |   | 8 of  10 |   |
| Veterinary                    |       | 3               |       | 78,600                       |       | —                                |       | 7                      |       | 6 |   | 1,806 |   | 1 of 4 |   |

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(1)                                    Excludes directories.

(2)                                    Ranking based only on measured magazinesfor the twelve months ended December 31, 2006.

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**CompanyOperations**

*Showsand Conferences*

Ourbusiness is seasonal, with revenue typically reaching its highest levels duringthe first and third quarters of each calendar year, largely due to the timingof the MAGIC Marketplace tradeshows and our other large tradeshows andconferences.  Because event revenue isrecognized when a particular event is held, we may also experience fluctuationsin quarterly revenue based on the movement of show dates from one quarter toanother.

Thesales cycle for a future show typically begins during the current show.  Pricing information, preliminary floor plansand exhibitor promotion for the future show are made available at the currentshow or shortly after the show so that selling for the future show canbegin.  Typically, this “upfront” sellingincludes floor space reservations with exhibitors executing a contract for thefuture show. At some of our shows, reservations for a large portion of exhibitspace for the next event are reserved by the end of the current event.  The sales cycle continues with selling to newexhibitors and collecting the balance of payments due.  In general, we require exhibitor payments infull prior to a show as a condition to participation.

Inaddition to the sale of exhibit space, we market a wide range of promotionalopportunities to exhibitors to raise their visibility at an event.  These opportunities include directory andpreview advertising, banners, sponsorships of various functions and a widevariety of other products or services. We also produce related conferences and workshops, which represent theeditorial content for an event and can play a strategic role in showdevelopment.  Conferences, workshops andother ancillary forums stimulate interest in the industry and drive attendanceat the show.  While show attendance istypically free for qualified attendees at tradeshows, participation inconferences at these shows can be a significant revenue source.

Eventpromotion is primarily undertaken through direct mail, trade advertising anddirect contact.  In those industry groupsfor which we also have complementary publications, our publications play a keyrole in event promotion by providing lists from circulation files and editorialcoverage for the upcoming show.  Otherindustry magazines may also be involved, as the goal of any event is torepresent the entire industry or market. The “show issue” of an industry magazine for a related event is oftenthe biggest issue of the year, as the advertisers want to reinforce their showpresence.

Inoperating shows and conferences, we function in a capacity similar to a generalcontractor.  We select and manage venues,hotels, and vendors for set-up, registration, travel and housing, audio-visualservices and other services.  In manycases, venue and hotel reservations are made several years in advance,particularly for primary markets such as New York, Chicago and Las Vegas.  While the production of a show may involvehundreds of workers, most workers are employees of our subcontractor vendors.

*Publications*

We operatean efficient publishing infrastructure in the United States and the UnitedKingdom.  Our publications generallyfollow the controlled circulation model and are distributed free-of-charge toqualified recipients.  We buildreadership and maintain the quality and quantity of our circulation based ondelivering high quality, professional coverage of relevant industryinformation.  Because we offer ouradvertisers access to a highly-targeted, industry-specificsubscriber base with potential buying influence, our advertisers place theirads in our publications to reach their customers.  Most of our magazines are published monthly,although some titles are published weekly or semi-monthly.

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Weattract readership and improve the effectiveness of our consumers’ advertisingby maintaining and continuously improving the quality of the editorial contentof our publications.  Recipients of ourpublications are targeted through market research designed to determine themarket coverage and purchasing authority desired by prospectiveadvertisers.  Based on existing andacquired mail lists, the targeted recipient is then solicited throughpromotions offering free subscriptions to the relevant publications.  High-quality circulation is achieved when ahigh percentage of the circulation list is recently qualified, within one ortwo years, and the publication is delivered at the direct request of therecipient.  Recipients are qualified andre-qualified on a regular basis through qualification cards included in thepublication, various direct mail methods and the Internet.

Ouradvertising sales and editorial functions are dispersed throughout the UnitedStates and the United Kingdom. Advertising sales are predominantly conducted by our dedicated salesforce.  Editorial content for ourpublications is either staff-written; contributed or purchased fromfreelance writers; or written by industry or professional participants inselected markets.

Advertisingmaterials and editorial content are integrated in our Duluth, Minnesota andChester, England production facilities, where layout and ad insertion arecompleted.  All printing is outsourced tovendors in various regions, but printing contracts are negotiated and managedcentrally.  We purchase paper centrallythrough a relationship with one of the industry’s largest paper brokers.  Paper is shipped directly from the mills tothe printers at our request.  We maintainour own central U.S. fulfillment operation in Duluth to generate mailing labelsand mailing instructions for the printers. Our production workforce is highly experienced and is based inrelatively low-cost locations in Duluth and Chester.

*OtherProducts*

   We have centrally managed direct marketing which allows our tradeshow and publishingexecutives to dedicate their activities to high value sales.  We also havecentralized telesales and product management to provide professional skills tothese specialized product offerings.  The fulfillment of these sales,including direct mail and database marketing programs, reprint services, andreference books is managed by our publishing operations discussed above.

Wealso have internet and electronic products which is managed by our publishingoperations.  We use internet and electronicproducts and services to complement our delivery of show, publishing and directmarketing and other products to our customers.  We also use the internetas a cost effective method of developing qualifying magazine circulation and toregister show and conference attendees.

## **DiverseCustomer Base**

Our customer base has provided us with stable and diversesources of revenue and cash flow as well as an established foundation fromwhich to further penetrate existing markets and to develop new markets.  We benefit from:

·                  A high level of revenue diversification, primarilyas a result of our business presence in 8 different sectors consisting of approximately 19,000 advertisersand exhibitors, none of which represented more than 1% of our revenue in2006.  This industry diversity helps tomitigate our exposure to economic volatility in particular industries orgeographic markets; and

·                  A strong balance of revenue, with 48% of ourrevenue coming from Life Sciences, 34% from Fashion & Licensing, 14% fromPowersports and 4% from other in 2006.

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**Competition**

Themarkets for our products and services are intensely competitive.  The competition is highly fragmented byproduct and/or service offering and by geography.  On a global level, larger international firmsoperate in many geographic markets and have broad product offerings in shows,conferences, publications and direct marketing products and other.  In several industries, such as healthcare, wecompete with large firms with a single-industry focus.  Many of these large international and single-industryfirms are better capitalized than we are and have substantially greaterfinancial and other resources than we have.

Withineach particular industry group, we also compete with a large number of small tomedium-sized firms.  While mostsmall to medium-sized firms operate in a single geographic market orindustry group, in some cases, our competitors operate in several geographicmarkets and/or sectors.  In the show andconference segment, we compete with trade associations and, in severalinternational markets, with exposition hall owners and operators.  Show and conference competition in eachmarket and country occurs on many levels. The venues and dates of shows play an important competitive role.  Historically, successful shows have been heldat desirable locations and on desirable dates. Given the availability of alternative venues and the ability to defineevents for particular market segments, the range of competition for exhibitordollars, sponsorships, attendees and conferees is extensive.  In the publications segment, we typicallyhave between two and five direct competitors, which target the same industrygroup, and there are also numerous indirect competitors, which defineindustries differently than we do and thus provide alternatives for eitherreaders or advertisers.

**IntellectualProperty**

Wehave developed strong brand awareness for our principal products andservices.  Accordingly, we consider ourtrademarks, trade names, service marks, copyrights, trade secrets and similarintellectual property important to our success, and we rely on trademark,service mark, copyright and trade secret laws, as well as licensing andconfidentiality agreements, to protect our intellectual property rights.  We generally register our material trademarksand service marks in the United States and in certain other key countries inwhich these trademarks and service marks are used.  Trademarks and service marks registered inthe United States typically require periodic renewals, and we typically obtainthese renewals as a routine matter so long as the applicable trademark andservice marks are in use.  Effectivetrademark, service mark and trade secret protection may not be available inevery country in which our products and services are available.

**EnvironmentalMatters**

We aresubject to various foreign, federal, state and local environmental protectionand health and safety laws and regulations. Accordingly, we incur and will continue to incur some costs to complywith these laws and regulations.  We ownor lease real property, and some environmental laws hold current or previousowners or operators of businesses and real property liable for contaminationon, under, or from that property, even if they did not know of and were not responsiblefor the contamination.  In addition, someenvironmental laws hold companies liable for the cleanup of landfills or othersites to which they may have sent waste. Based on available information, we do not believe we are responsible orliable for any such environmental contamination and we do not currentlyanticipate that the costs of complying with environmental laws and regulationswill materially adversely affect us. However, we cannot ensure that we will not incur material costs orliabilities in the future, due to the discovery of new facts or conditions,releases of hazardous materials, or a change in environmental laws andregulations.

**Employees**

Asof December 31, 2006, we had approximately 1,000 full-time equivalentemployees.  Of these full-time employees,approximately 55 employees were located in the United Kingdom with the balancebased in the United States.  None of ourU.S. employees are represented by a labor union. We consider our relationshipswith our employees to be good.

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**Financial Information aboutGeographic Areas**

Financial information relating to our operations bygeographic area is set forth in Note 11to our consolidated financial statements included in this annual report on Form10-K.

**Item 1A. — RISK FACTORS**

**Show exhibit space and ad pages could decline as aresult of an economic slowdown in the United States, terrorist attacks, thethreat of future terrorist attacks, or geopolitical concerns.**

Our customers typically reduce their marketing andadvertising budgets during a general economic downturn or a recession in theUnited States or in any other market where we conduct a significant amount ofbusiness.  The longer a recession oreconomic downturn continues, the more likely it becomes that our customers maysignificantly reduce their marketing and advertising budgets.  Any material decrease in marketing budgetscould reduce the demand for exhibition space and also reduce attendance at ourshows and conferences.  In addition, anymaterial decrease in advertising budgets could reduce the demand foradvertising space in our publications. As a result, our revenue and our cash flow from operations coulddecrease significantly.  In addition, ourintegrated marketing strategy could be materially adversely affected if advertisingrevenue cannot support one or more of our important publications or if declinesin our customers’ marketing and advertising budgets require us to discontinueone or more of our important shows or conferences.

Terrorist attacks or the threat of future terroristattacks and continued geopolitical concerns (including conflict in the MiddleEast) may significantly affect our future results of operations or financialcondition, whether as a result of (1) reduced attendance at, orcurtailment or cancellation of, shows due to travel fears, (2) a potentialreduction in economic activity, which could cause a related reduction inmarketing expenditures on publications or shows, or (3) othercircumstances that could result from such attacks or threat of such attacks.

**We depend on securing desirable dates andlocations for our shows and conferences, which we may not be able to secure.**

The date and location of a show or a conference canimpact its profitability and prospects. The market for desirable dates and locations is highly competitive.  If we cannot secure desirable dates andlocations for our shows and conferences, their profitability and futureprospects would suffer, and our financial condition and results of operationswould be materially adversely affected. In general, we maintain multi-year reservations for our shows andconferences.  Consistent with industrypractice, we do not pay for these reservations, and these reservations are notbinding on the facility owners until we execute a contract with the owner.  We typically sign contracts that guaranteethe right to venues or dates for only one year. Therefore, our multi-year reservations may not lead to binding contractswith facility owners.  In addition,because shows and conferences are held on pre-scheduled dates at specificlocations, the success of a particular show or conference depends upon eventsoutside of our control, such as natural catastrophes, inclement weather, laborstrikes, power outages and transportation shutdowns.

**A significant portion of our revenue andcontribution before general and administrative expenses is generated from ourMAGIC Marketplace tradeshows, so any decline in the performance of these showswould reduce our revenue and operating income.**

For the year ended December 31, 2006, our MAGICMarketplace tradeshows represented 30.4% of our total revenue and 42.8% of ourcontribution margin (defined as revenue less cost of production and selling,editorial and circulation costs).  Weexpect that the MAGIC Marketplace tradeshows will continue to represent asignificant portion of our overall revenue and contribution margin in thefuture.  Therefore, a significant declinein the performance of one or both of the MAGIC Marketplace tradeshows,typically held in the first and third quarters, could have a material adverseeffect on our financial condition and results of operations.

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**We derive significant revenue and contributionmargin before general and administrative expenses from our healthcare andpharmaceutical markets, which are dependent upon pharmaceutical marketingbudgets.**

Our healthcare and pharmaceutical publicationsand products contributed 33.1% of our revenue for the year ended December 31,2006 and 27.3% of our contribution margin (defined as revenue less cost of productionand selling, editorial and circulation costs). A substantial portion of the advertising in these markets is frompharmaceutical companies.  As a result,any material reduction in marketing activities from pharmaceutical companies,which could occur due to general economic conditions or factors specific to theindustry, including a reduction in new drug introductions, a shift in marketingexpenditures by pharmaceutical companies to sources other than publications andany future governmental regulation such as price controls or types of marketingrestrictions, could have a material adverse effect on our results.

**Anysignificant increase in paper or postage costs would cause our expenses toincrease significantly.**

Because of our print products, direct mailsolicitations and product distributions, we incur substantial costs for paperand postage.  We do not use forwardcontracts to purchase paper, and therefore are not protected againstfluctuations in paper prices.  Ingeneral, we use the U.S. Postal Service to distribute our print products andmailings. U.S. Postal Service rates increase periodically.  If we cannot pass increased paper and postagecosts through to our customers, our financial condition and results ofoperations could be materially adversely affected.

**Themarket for our products and services is intensely competitive.**

The intense competition for our products and servicesis highly fragmented by product offering and by geography.  On a global level, larger international firmsoperate in many geographic markets and have broad product offerings in shows,conferences, publications and direct marketing products and other.  In several industries, such as healthcare, wecompete with large firms with a single-industry focus.  Many of these large international and single-industryfirms are better capitalized than we are and have substantially greaterfinancial and other resources than we do.

Within each particular industry group, we also competewith a large number of small to medium-sized firms.  While most small to medium-sized firmsoperate in a single geographic market or industry group, in some cases, ourcompetitors operate in several geographic markets and/or industry group.  Our shows and conferences compete with tradeassociations and, in several international markets, with exposition hall ownersand operators.  Our publicationstypically have between two and five direct competitors that target the sameindustry group, and we also have many indirect competitors that define nichemarkets differently than we do and thus may provide alternatives for readersand/or advertisers.

**We depend in part on new product introductions,and the process of researching, developing, launching and establishingprofitability for a new event or publication is inherently risky and costly.**

Oursuccess depends in part upon our ability to monitor rapidly changing markettrends and to adapt our events and publications to meet the evolving needs ofexisting and emerging target audiences. Our future success will depend in part on our ability to continue toadapt our existing events and publications and to offer new events andpublications by addressing the needs of specific audience groups within ourtarget markets.  The process of researching,developing, launching and establishing profitability for a new event orpublication is inherently risky and costly. We generally incur initial operating losses when we introduce new eventsand publications.  Our efforts tointroduce new events or publications may not ultimately be successful orprofitable.  In addition, costs relatedto the development of new events and publications are accounted for asexpenses, so our year-to-year results may be materially adversely affected bythe number and timing of new product launches.

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**Our growth strategy of identifying andconsummating acquisitions entails integration and financing risk.**

We intend to continue to grow in part throughselective acquisitions and joint ventures. This growth strategy entails risks inherent in identifying desirableacquisition candidates, in integrating the operations of acquired businessesinto our existing operations and risks relating to potential unknownliabilities associated with acquired businesses.  In addition, we may not be able to financethe acquisition of a desirable candidate or to pay as much as our competitorsbecause of our leveraged financial condition or general economicconditions.  Difficulties that we mayencounter in integrating the operations of acquired businesses could have amaterial adverse effect on our results of operations and financialcondition.  Moreover, we may not realizeany of the anticipated benefits of an acquisition, and integration costs mayexceed anticipated amounts.

**We depend on our senior management team, and we donot have employment contracts for many of our senior managers.**

We benefit substantially from the leadership andexperience of members of our senior management team and depend on theircontinued services to successfully implement our business strategy.  The loss of any member of our seniormanagement team or other key employee could materially adversely affect ourfinancial condition and results of operations. Although we have entered into employment agreements with Mr. Loggiaand Mr. Alic, we do not have employment contracts with most other membersof our senior management team or other key employees.  We cannot be certain that we will continue toretain the executives’ services, or the services of other key personnel, in thefuture.  Moreover, we may not be able toattract and retain other qualified personnel in the future.  We do not currently maintain key-manlife insurance policies on any member of our senior management team or otherkey employees.

**Geopolitical conditions and the potential threatof domestic and international terrorist attacks may adversely impact ourresults.**

International geopolitical conditions, exacerbated bythe war in Iraq and the escalating tensions elsewhere have contributed to anuncertain political and economic climate, both in the United States andglobally, which may affect our ability to generate revenue on a predictablebasis.  Terrorist attacks internationallyand the threat of future terrorist attacks both domestically andinternationally could have a negative impact on the worldwide economy.  Customers could defer or reconsiderpurchasing our products and services as a result of these factors.  Accordingly, adverse impacts on our businessdue to these factors could occur at any time.

**Our business is seasonal due largely to higher showrevenue in the first and third quarters.**

Our business is seasonal, with revenue typicallyreaching its highest levels during the first and third quarters of eachcalendar year, largely due to the timing of the MAGIC Marketplace tradeshowsand our other large shows and conferences. In 2006, 33% of our revenue wasgenerated during the first quarter and 30% during the third quarter.  The second quarter accounted for 18% ofrevenue and the fourth quarter accounted for 19% of revenue in 2006.  Because event revenue is recognized when aparticular event is held, we may also experience fluctuations in quarterlyrevenue based on the movement of annual show dates from one quarter to another.

**We maybe required to recognize additional impairment charges.**

Pursuant to GAAP, we are required to periodicallyassess our goodwill, and in certain cases we are required to assess intangiblesand other long-lived assets, to determine if they are impaired.  Disruptions to our business, end marketconditions and protracted economic weakness, unexpected significant declines inoperating results of reporting units and divestitures may result in additionalcharges to goodwill and other asset impairments.  Future impairment charges could substantiallyaffect our reported earnings in the period of such charge.

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**We have a significant amount ofdebt, which could limit our ability to remain competitive or grow our business.**

As of December 31, 2006, wehad (a) total indebtedness of $461.9 million and(b) $48.4 million of borrowings available under our Credit Facility,subject to customary borrowing conditions. In addition, subject to the restrictions in our Credit Facility, theindenture and our other debt instruments, we may incur significant additionalindebtedness from time to time.  Thelevel of our indebtedness may have important consequences, including:

·                                          limiting cash flow available for general corporatepurposes, including capital expenditures and acquisitions, because asubstantial portion of our cash flow from operations must be dedicated toservicing our debt;

·                                          limiting our ability to obtain additional debtfinancing in the future for working capital, capital expenditures oracquisitions; and

·                                          limiting our flexibility in reacting tocompetitive and other changes in our industry and economic conditionsgenerally.

**We may not be able to service ourdebt without the need for additional financing, which we may not be able toobtain on satisfactory terms, if at all.**

Our ability to pay or torefinance our indebtedness will depend upon our future operating performance,which will be affected by general economic, financial, competitive,legislative, regulatory, business and other factors beyond our control.  We cannot assure you that our business willgenerate sufficient cash flow from operations, that currently anticipatedrevenue growth and operating improvements will be realized or that futureborrowings will be available to us in amounts sufficient to enable us to payour indebtedness or to fund our other liquidity needs.  If we are unable to meet our debt serviceobligations or fund our other liquidity needs, we could attempt to restructureor refinance our indebtedness or seek additional equity capital.  We cannot assure you that we will be able toaccomplish those actions on satisfactory terms, if at all.

**Our parent company will likelyneed to rely upon distributions from us to service its debt and we may not beable to make distributions in amounts sufficient to satisfy such debt service.**

In addition to our debt serviceneeds, our parent company, Advanstar, Inc., will need to rely upondistributions from us to service its 15% Senior Discount Notes due 2011, whichwe refer to as “parent company notes,” including for the payment of interestwhich must be paid in cash.  Our abilityto generate sufficient cash from operations to make distributions to Advanstar,Inc. will depend upon our future operating performance, which will be affectedby general economic, financial, competitive, legislative, regulatory, businessand other factors beyond our control.  Inaddition, our ability to make distributions to Advanstar, Inc. is subject torestrictions in our various debt instruments. For example, our second priority senior secured notes and our seniorsubordinated notes limit the amount of “restricted payments,” includingdividends that we can make.  See “Liquidityand Capital Resources” for additional information on indebtedness.  Generally,we can pay dividends only if our leverage ratio (as defined) is 6.0 to 1 orbetter and only from the amount by which our cumulative EBITDA (as defined)since January 1, 2001 exceeds 150% of our cumulative interest expense in thatsame period.  As described above, ourability to generate EBITDA will depend upon various factors that may be beyondour control.  We may not generatesufficient cash flow from operations or be permitted by the terms of our debtinstruments to pay dividends or distributions to Advanstar, Inc. in amountssufficient to allow it to pay cash interest on the parent company notes.   If Advanstar, Inc. is unable to meet itsdebt service obligations, it could attempt to restructure or refinance itsindebtedness or seek additional equity capital. We cannot assure you thatAdvanstar, Inc. will be able to accomplish these actions on satisfactory termsor at all. A default under the parent company notes could result in anacceleration of all outstanding loans under our Credit Facility which, in turn,would trigger a cross-default under both our second priority seniorsecured notes and our senior subordinated notes.  See “Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations - Liquidity andCapital Resources.”

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**Restrictive covenants in our debtinstruments may limit our ability to engage in a variety of transactions andcould trigger defaults that would accelerate all of our debt.**

We have no financiallyrestrictive covenants, however, our second priority senior secured notes,senior subordinated notes, the parent company notes and our Credit Facilitycontain covenants that limit our ability to engage in a variety of transactionsand contain other restrictivecovenants.  Our ability to meet suchcovenants can be affected by events beyond our control, and we cannot assureyou that we will meet them.  A breach ofany of these covenants or other provisions in the agreement governing theCredit Facility, our senior subordinated notes, the parent company notes and/orour second priority senior secured notes could result in a default under ourCredit Facility, our senior subordinated notes, the parent company notes,and/or our second priority senior secured notes.  Upon the occurrence of an event of defaultunder our Credit Facility, the lenders could elect to declare all amountsoutstanding under our Credit Facility to be immediately due and payable andterminate all commitments to extend further credit.  If we were unable to repay those amounts, thelenders could proceed against the collateral granted to them to secure that indebtedness.  We have pledged substantially all of ourassets, other than assets of our foreign subsidiaries, as security under ourCredit Facility on a first-priority basis.  If the lenders under our Credit Facilityaccelerate the repayment of borrowings, we cannot assure you that we will havesufficient assets to repay our Credit Facility and our other indebtedness.

**We are dependent upon dividends from our subsidiaries to meet our debtservice obligations.**

We conduct a significant portionof our operations through our subsidiaries. Our ability to meet our debt service obligations will be dependent onreceipt of dividends from our direct and indirect subsidiaries.  Subject to the restrictions contained in theindentures governing our debt instruments, future borrowings by oursubsidiaries may contain restrictions or prohibitions on the payment ofdividends by our subsidiaries to us.  Inaddition, under applicable state law, our subsidiaries may be limited inamounts that they are permitted to pay as dividends to us on their capitalstock.

**We are controlled by principal stockholders whoseinterests may differ from the interests of the holders of our debt.**

Circumstances may occur in which the interests of ourprincipal stockholders could be in conflict with the interests of the holdersof our debt.  In addition, thesestockholders may have an interest in pursuing transactions that, in theirjudgment, enhance the value of their equity investment in our company, eventhough those transactions may involve risks to the holders of our debt.

Substantially all of the outstanding shares of commonstock of our ultimate parent company are held by the DLJ Merchant Bankingfunds.  As a result of their stockownership, the DLJ Merchant Banking funds control us and have the power toelect a majority of our directors, appoint new management and approve anyaction requiring the approval of the holders of common stock, includingadopting amendments to our certificate of incorporation and approvingacquisitions or sales of all or substantially all of our assets.  The directors elected by the DLJ MerchantBanking funds have the ability to control decisions affecting our capitalstructure, including the issuance of additional capital stock, theimplementation of stock repurchase programs and the declaration of dividends.

The general partners of each of the DLJ MerchantBanking funds are affiliates or employees of Credit Suisse Securities (USA)LLC, which is also an affiliate of (1) Credit Suisse, the arranger,syndication agent and a lender under our Credit Facility, to which we haveobtained amendments in the past to avoid future potential covenant defaults,and (2) the general partners of each of the DLJ Investment Partners funds,which own a substantial portion of our parent Company notes.

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# **You maynot be able to rely on forward-looking statements, as our actual results may be materially different.**

The information contained in this annual reportincludes some forward-looking statements that involve a number of risksand uncertainties. A forward-looking statement is usually identified byour use of certain terminology including “believes,” “expects,” “may,” “will,” “should,”“seeks,” “pro forma,” “anticipates” or “intends” or by discussions of strategyor intentions. A number of factors could cause our actual results, performance,achievements or industry results to be very different from the results,performance, achievements or industry results expressed or implied by thoseforward-looking statements. These factors include, but are not limitedto:

·                                          thecompetitive environment in our industry;

·                                          economicconditions in general and in the industry in which we compete;

·                                          changesin or our failure to comply with federal, state, local or foreign laws andgovernment regulations;

·                                          liabilityand other claims asserted against our company;

·                                          changesin operating strategy or development plans;

·                                          theability to attract and retain qualified personnel;

·                                          oursignificant indebtedness;

·                                          changesin our acquisition and capital expenditure plans; and

·                                          otherfactors we refer to in this “Risk Factors” section and elsewhere in this annual report on Form 10-K.

In addition, forward-looking statements dependupon assumptions, estimates and dates that may not be correct or precise andinvolve known and unknown risks, uncertainties and other factors. Accordingly,a forward-looking statement is not a prediction of future events orcircumstances and those future events or circumstances may not occur. Giventhese uncertainties, you are cautioned not to place undue reliance on theforward-looking statements. We are not undertaking any obligation toupdate these factors or to publicly announce the results of any changes to ourforward-looking statements due to future events or developments.

**Item 1B. — UNRESOLVED STAFFCOMMENTS**

Not applicable.

**Item 2. — *PROPERTIES***

**Properties**

We have executive, marketing, sales and editorialoffices in several cities in the United States, including Woodland Hills, LosAngeles and Santa Ana, California; Woodcliff Lake and Iselin, New Jersey; Ft.Lauderdale, Florida; Northfield, Illinois; Lenexa, Kansas; New York City, NewYork; Cleveland, Ohio; and Concord, Massachusetts.   In addition, we have offices in Chester andLondon, United Kingdom.  Our finance,show registration, call center, circulation, fulfillment, production and othernecessary operational support facilities in the United States are located inDuluth, Minnesota.

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We generally lease our officesfrom third parties.  However, we own ouroffices in Duluth and Cleveland We have classified our Cleveland officeas held for sale, as we are attempting to sell the building and related land.We have granted mortgages on the Clevelandproperty to the lenders under our Credit Facility and, on a second prioritybasis, for the benefit of the holders of the second priority senior securednotes.  We believe that our propertiesare in good operating condition and that suitable additional or alternativespace will be available on commercially reasonable terms for future expansion.

**Item 3. — *LEGALPROCEEDINGS***

We are not a party to any legalproceedings which would be material to our business, financial condition orresults of operations other than ordinary course, routine litigation.

**Item 4. — *SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS***

None

**PART II**

**Item 5. — *MARKET FORREGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**AND ISSUER PURCHASES OF EQUITY SECURITIES***

There is no established public trading market for the registrant’s common equity. As of April 2, 2007, we had one holder of our common stock. For the year ended December 31, 2006, the following dividends were declared and paid in 2006:
| **(in thousands)**                    | ** ** | **2006** | ** ** |
|--------------------------------------------|------------|----------|------------|
|                                       |       |     |       |
| March 2006                                 |       | $        | 12,940     |   |
| July 2006                                  |       | 3,289    |       |
| October 2006                               |       | 12,884   |       |
| Total dividends  paid and declared in 2006 |       | $        | 29,113     |   |

 

No dividends were declared or paid on our common stock in 2005.

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**Item 6. — *SELECTEDFINANCIAL DATA***

The following table presents selected consolidatedfinancial data for Advanstar Communications Inc. (“Advanstar”) for each of theperiods indicated.  The consolidatedbalance sheet data as of December 31, 2002, 2003, and 2004 and theselected historical consolidated financial data for Advanstar for the yearsended December 31, 2002 and 2003 have been derived from the auditedconsolidated financial statements and the notes thereto of Advanstar which arenot included herein.  The selectedconsolidated financial data for Advanstar for the years ended December 31,2004, 2005 and 2006 have been derived from Advanstar’s audited financialstatements and the notes thereto included herein.  The selected historical consolidatedfinancial data should be read in conjunction with Item 7. “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” andthe consolidated financial statements and notes thereto included elsewhere inthis Annual Report.

All historical amounts have beenreclassified to reflect the results and any gains or losses of sold anddiscontinued properties as discontinued operations. For further information ondiscontinued properties, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations — Presentation of Financial Information — Acquisitions,Divestitures, Dispositions and Merger.”

Historical amounts have been adjustedto reflect the merger of Advanstar.com, Inc. into Advanstar Communications,Inc. For further information see “Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations — Presentation of Financial Information — Acquisitions,Divestitures, Dispositions and Merger.”

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| ** **                                                                                      | ** ** | ** ** | ** ** | **Year Ended**    | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------|------------|------------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | ** ** | ** ** | **December 31,**  | ** ** | ** ** | ** ** |
| **(in thousands, except for per share data)**                     | ** ** | **2006**   | ** ** | **2005**               | ** ** | **2004**   | ** ** | **2003 (8)** | ** ** | **2002 (8)** | ** ** |
| ** **                                                                                      | ** ** | ** ** | ** ** | **(As Adjusted)** | ** ** |
| **Income Statement Data:**                                                                      |       |       |       |                   |       |       |       |   |   |   |   |
| Revenue                                                                                         |       | $          | 323,722    |                   | $          | 288,913    |       | $ | 271,066 |   | $ | 191,535 |   | $ | 156,315 |   |
| Cost of production and  selling (excluding depreciation)                                        |       | 193,651    |       | 168,699                |       | 158,177    |       | 105,065 |   | 78,847 |   |
| General and  administrative expenses (excluding depreciation) (1)                               |       | 75,141     |       | 40,916                 |       | 40,633     |       | 30,907 |   | 31,004 |   |
| Restructuring charge  (benefit) (2)                                                             |       | 2,325      |       | 4,771                  |       | (4,015     | )          | 2,692 |   | — |   |
| Depreciation and  amortization                                                                  |       | 32,265     |       | 37,755                 |       | 43,089     |       | 46,107 |   | 54,842 |   |
| Operating income (loss)                                                                         |       | 20,340     |       | 36,772                 |       | 33,182     |       | 6,764 |   | (8,378 | ) |
| Other income (expense):                                                                         |       |       |       |                   |       |       |       |   |   |   |   |
| Interest expense                                                                                |       | (54,751    | )          | (63,058                | )          | (70,991    | )          | (59,111 | ) | (53,169 | ) |
| Interest income                                                                                 |       | 1,810      |       | 1,476                  |       | 468        |       | 470 |   | 1,455 |   |
| Loss on  extinguishment of debt (3)                                                             |       | (599       | )          | (12,581                | )          | —     |       | (11,324 | ) | — |   |
| Other (expense)  income, net                                                                    |       | (240       | )          | 80                     |       | 826        |       | 893 |   | 1,044 |   |
| Loss from continuing  operations before income taxes and cumulative effect of accounting change |       | (33,440    | )          | (37,311                | )          | (36,515    | )          | (62,308 | ) | (59,048 | ) |
| Provision (benefit) for  income taxes                                                           |       | 8,334      |       | (2,732                 | )          | 6,518      |       | (6,724 | ) | (13,797 | ) |
| Loss from continuing  operations before cumulative effect of accounting change                  |       | (41,774    | )          | (34,579                | )          | (43,033    | )          | (55,584 | ) | (45,251 | ) |
| Income (loss) from  operations of discontinued businesses, net of tax                           |       | 81         |       | 38,536                 |       | (2,155     | )          | 4,165 |   | 8,479 |   |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| (Loss) income before  cumulative effect of accounting change                                    |       | (41,693    | )          | 3,957                  |       | (45,188    | )          | (51,419 | ) | (36,772 | ) |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| Cumulative effect of  accounting change, net of tax (4)                                         |       | —     |       | —                 |       | —     |       | — |   | (62,729 | ) |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| Net (loss) income                                                                               |       | $          | (41,693    | )                      | $          | 3,957      |       | $ | (45,188 | ) | $ | (51,419 | ) | $ | (99,501 | ) |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| **Cash flows provided by (used  in):**                                                          |       |       |       |                   |       |       |       |   |   |   |   |
| Operating activities                                                                            |       | $          | 36,294     |                   | $          | 8,235      |       | $ | 18,901 |   | $ | 46,194 |   | $ | 24,431 |   |
| Investing activities                                                                            |       | (14,338    | )          | 148,959                |       | 4,996      |       | (145,655 | ) | (31,388 | ) |
| Financing activities                                                                            |       | (30,966    | )          | (152,635               | )          | (12,515    | )          | 110,236 |   | (15,388 | ) |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| **Balance sheet data (at end of  period):**                                                     |       |       |       |                   |       |       |       |   |   |   |   |
| Cash and cash  equivalents                                                                      |       | $          | 36,918     |                   | $          | 46,609     |       | $ | 41,296 |   | $ | 29,338 |   | $ | 18,970 |   |
| Working capital (5)                                                                             |       | (97,912    | )          | (62,365                | )          | (70,604    | )          | (78,866 | ) | (69,836 | ) |
| Total assets                                                                                    |       | 740,368    |       | 766,836                |       | 913,984    |       | 988,288 |   | 869,568 |   |
| Total debt                                                                                      |       | 461,868    |       | 461,987                |       | 614,219    |       | 626,069 |   | 557,700 |   |
| Total stockholder’s  equity                                                                |       | 103,251    |       | 171,608                |       | 165,480    |       | 207,936 |   | 186,764 |   |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| **Other Data:**                                                                                 |       |       |       |                   |       |       |       |   |   |   |   |
| Capital expenditures                                                                            |       | $          | 14,046     |                   | $          | 9,564      |       | $ | 9,576 |   | $ | 7,930 |   | $ | 7,449 |   |
| Ratio of earnings to  fixed charges (6)                                                         |       | —     |       | —                 |       | —     |       | — |   | — |   |
|                                                                                            |       |       |       |                   |       |       |       |   |   |   |   |
| Cash dividends per share (7)                                                                    |       | $          | 29.11      |                   | $          | —     |       | $ | — |   | $ | — |   | $ | — |   |

 

21

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| (1)    | We recorded $30.0 million as compensation expense in  2006 relating to the POOL and Project acquisitions and the settlement of  certain claims and termination of our obligations under the respective  purchase agreements and terminated the former owners’ employment with us. See  “Management’s Discussion and Analysis of  Financial Condition and Results of Operations — Presentation of Financial  Information — Acquisitions, Divestitures, Dispositions and Merger” for  further discussion of these transactions.

Additionally in 2006,  management estimated that the fair value of Advanstar Holdings, Corp’s' common  stock underlying all stock option awards exceeded the exercise price.  Accordingly, compensation expense of $3.6 million ($0.4 million  selling, editorial and circulation and $3.2 million general and  administrative) relating to the intrinsic value of stock option awards was  recorded as compensation expense for the year ended December 31, 2006. See  “Management’s Discussion and Analysis of Financial Condition and Results of  Operations — Presentation of Financial Information — Significant Accounting  Policies and Estimates-Stock-Based Compensation” for further discussion. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (2)    | In September 2003, we consolidated our midtown  New York leased office space from two floors to one and sublet the excess  space. In December 2003, we consolidated our Chester, U.K. leased office  space and vacated two of our four floors. These activities resulted in a  charge for the present value of future rental payments, net of estimated  sublease income, of $2.3 million, and other relocation costs and expenses  of $0.4 million. We will continue to pay facility lease costs, net of  sublease income, associated with the previously used facilities through  August 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | In 2001 our  parent more tightly focused the activities of Advanstar.com, Inc.  (Advanstar.com) and us. These plans had the effect of more closely  integrating many of the sales, marketing, technology and operating functions  of Advanstar.com with us and our core activities. The restructuring  activities were completed in 2001, except for facility lease costs, which  were to continue through June 2010. In April 2004, the remaining facility  lease commitment was settled for a total of $1.9 million, resulting in an  offset to operating expense of $4.0 million as we released the remaining  accrual.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | In 2005, related  to the sale of the Portfolio Group, (see “Management’s Discussion and  Analysis of Financial Condition and Results of Operations — Presentation of  Financial Information — Acquisitions, Divestitures, Dispositions and  Merger”), we ceased use of certain leased office space in New York, NY,  Milford, CT, Santa Ana, CA and Chicago, IL. These activities resulted in charges to our operations in 2005 of $2.5 million.  In  the first quarter of 2006, the Company vacated additional leased office space  in New York, NY, and revised its estimate of expected future sublease income  for this space, resulting in  additional charges during 2006. These  charges consist of the discounted remaining future minimum lease payments due  under non-cancelable leases, net of estimated future sublease income. These  lease commitments expire at various dates through 2010.                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | During 2005 we terminated 117  employees in connection with the sale of the Portfolio Group and the  reorganization of our operating and support department management team. We  recorded a charge to operations of $2.3 million during the year ended  December 31, 2005 for severance and other  termination costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | We entered into a lease  modification and surrender agreement for approximately 60% of our vacated  office space in New York, NY in June 2006. Under the terms of the agreement,  we paid the lessor $2.8 million in cash, the lease covering the surrendered  space was terminated and we will have no further future lease obligations for  the portion of the space surrendered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3)    | In 2006, we incurred $0.6 million in costs related  to the write off of unamortized deferred finance costs related to the  amendment and restatement of the Credit Facility and repayment of floating  rate notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | In 2005, we incurred $12.6 million in costs related  to the repurchase of a part of our fixed and floating rate senior secured  debt. These costs include $8.6 million in tender offer premium and consent  fees, $3.5 million in unamortized deferred financing costs, and $0.5 million  in legal fees and expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | See  “Liquidity and Capital Resources —  Credit facility amendment and restatement” and “Liquidity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

22

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|        | and Capital Resources — Credit facility and second  priority secured and floating rate notes repayment” for further information.                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (4)    | Upon adoption of Statement of Financial Accounting  Standards No. 142, “Goodwill and Other Intangible Assets,” we  discontinued the amortization of goodwill beginning January 1, 2002 and  recorded a cumulative effect of accounting change in 2002 for the impairment  of goodwill using the transitional impairment test.                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (5)    | Working capital is defined as current assets,  excluding cash, of $34.7 million, $34.4 million, $38.6 million,  $47.3 million, and $34.6 million as of December 31, 2006, 2005, 2004,  2003 and 2002 less current liabilities, excluding the current portion of long-term  debt, of $132.8 million, $96.8 million, $109.2 million,  $126.2 million and $104.4 million as of December 31, 2006, 2005,  2004, 2003, and 2002.                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (6)    | For purposes of determining the ratio of earnings to  fixed charges, earnings are defined as pretax income from continuing  operations plus fixed charges. Fixed charges consist of interest expense and  one-third of rental expense, which is considered by management to be  representative of the interest component of rental expense. Earnings were  insufficient to cover fixed charges in the years ended December 31,  2006, 2005, 2004, 2003, and 2002 by $33.4 million, $37.3 million,  $36.5 million, $62.3 million, and  $59.0 million. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (7)    | Cash dividends were paid to our parent in 2006 to  fund their required cash interest payments, and to fund a repurchase of a  former Chief Executive Officer’s stock of Advanstar Holdings Corp. See “Liquidity  and Capital Resources — Cash flows from financing activities” for further  information.                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (8)    | In October 2003, we completed a significant  acquisition of a healthcare properties portfolio. The pro forma unaudited  results as if the acquisition had taken place on January 1, 2002 are as  follows:                                                                                                                                                                                                                                                                                                                                                           |

 
| **(in thousands of dollars - unaudited)**             | ** ** | **2003**               | ** ** | **2002** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------|------------|----------|------------|
| ** **                                                                     | ** ** | **(As Adjusted)** | ** ** |
| Revenue                                                                        |       | $                      | 254,934    |     | $          | 243,817 |   |
| Loss from  continuing operations before cumulative effect of accounting change |       | (68,937                | )          | (53,998  | )          |
| Net loss                                                                       |       | (64,772                | )          | (108,248 | )          |
|                                                                                |            |                        |            |          |            |  |  |

 

23

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**Item 7. — *MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS***

*The following discussionshould be read in conjunction with our consolidated financial statements,including the notes to those statements, included elsewhere in this annualreport.*

*This discussion contains forward-lookingstatements, which are neither promises nor guarantees and involve risks anduncertainties.  Our actual results maydiffer significantly from the results discussed in the forward-lookingstatements.  Factors that might causethose differences include, but are not limited to, those discussed in Item 1A.”RiskFactors.”*

**Overview**

During the firstquarter of 2006, we undertook a strategic change in the monitoring andmanagement of our business to better reflect our focus and commitment to ourthree industry-focused segments.  Thischange was prompted as a result of a substantial change in our businessorganization following the divestiture of the Portfolio Group. See “Presentationof Financial Information — Acquisitions, Divestitures, Dispositions and Merger.”

We report our business in thesethree industry focused segments:

·                                          Fashion& Licensing, which serves the men’s, women’s, children’s and productsourcing sectors of the apparel industry as well as the merchandise licensingindustry through industry tradeshows and conferences; publishing targetedmagazines and directories; and offering a broad range of marketing support andelectronic products;

·                                          LifeSciences, which serves the healthcare, dental, veterinary, pharmaceutical, andscience fields through publishing primary and specialty care magazines andprofessional journals; organizing conferences and other events; developing continuing medical education (“CME”)products; and the creation of a wide variety of custom marketing projects andelectronic products; and

·                                          Powersports,which serves the motorcycle, off-road and automotive aftermarket industriesthrough publishing trade and consumer magazines, shows, and electronicproducts.

In addition to our three segments described above, wecombine our European, market development and costs to support our e-mediaoperations into “Other.”

Unlessotherwise noted, disclosures herein relate only to our continuing operations.All historical amounts have been restated to exclude results and gains orlosses from discontinued operations. For further information on discontinuedproperties, see “Presentation of Financial Information — Acquisitions,Divestitures, Dispositions and Merger.”

The percentage of our totalrevenue by segment for the years ended December 31, 2006, 2005 and 2004 is asfollows:

 
| ** **               | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|----------|------------|
| Life Sciences            |       | 48       | %          | 51       | %          | 54       | %          |
| Fashion &  Licensing |       | 34       | %          | 31       | %          | 30       | %          |
| Powersports              |       | 14       | %          | 14       | %          | 13       | %          |
| Other                    |       | 4        | %          | 4        | %          | 3        | %          |

 

24

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Our revenue reaches its highest levelsduring the first and third quarters of the year due to the timing of the MAGICMarketplace tradeshows and our other large tradeshows and conferences.  Because show and conference revenue isrecognized when a particular event is held, we may experience fluctuations inquarterly revenue based on the movement of show dates from one quarter toanother.

**Trends and Developments**

Results for 2006 reflectthe successful execution of our strategy to focus on markets where we canleverage our strong market positions, customer relationships and managementteams.  We continue to drive growth incore markets and develop new revenue streams in adjacent markets through avariety of initiatives.  In addition, weare constantly striving to improve operating efficiency driven by standardizingprocesses and metrics.

In addition to theexpansion and development of new categories and trend areas in MAGICMarketplace, the recent acquisitions of POOL and Project have been integratedinto the overall MAGIC Marketplace and contributed to the expansion of ourfashion offerings to our exhibitors and attendees during the February andAugust MAGIC Marketplace events.

The recent launches inPowersports in the off-road market continue to develop, including *Dirt Sports* and *Off-Road Business*magazines, Off-Road Impact tradeshow and the Off-Road Expo consumer eventacquired in October 2005.

We continue to attractinternational exhibitors to our tradeshows with the growth of the Sourcing Zoneat the MAGIC Marketplace and the International Pavilion at Dealer Expo.

In Life Sciences ourhealthcare projects business continues to develop through the strengthening ofour sales efforts and effectively addressing our pharmaceutical customers’needs.  We continued our growthinitiatives including the launch of five new publications and seven newconferences and the development of several new web seminars and otherelectronic media. In the first quarter of 2006 we established a dedicatedelectronic media group to focus on developing opportunities for electronicproducts to meet our customers’ evolving marketing and informationrequirements.

On May 24, 2006, we amended and restated our existingCredit Facility. The amended Credit Facility reduced the revolving loan from$60.0 million to $50.0 million, added****a $10.0million Term Loan, modified or eliminated certain restrictive covenants andextended the maturity date from April 2007 to May 2009 for the entire CreditFacility.  See “Liquidity and CapitalResources — Credit facility amendment and restatement.”

**RecentDevelopments - Subsequent Event**

 

On March 28, 2007, the Board of Directors ofAdvanstar Holdings Corp. (“Holdings”), our ultimate parent, unanimouslyapproved, and Holdings entered into, a definitive merger agreement (the “MergerAgreement”) among Holdings, VSS-AHC Consolidated Holdings Corp. (“Buyer”), VSS-AHCAcquisition Corp. (“Merger Sub”), being a wholly owned subsidiary of the Buyer,and DLJ Merchant Banking III, Inc., as the stockholders’ representative. Pursuant to the Merger Agreement and subject to the terms and conditions setforth therein, as of the closing of the merger, the Merger Sub will be mergedwith and into Holdings, with Holdings being the surviving corporation.

 

The aggregate purchase price isapproximately $1.142 billion subject to deductions for costs of the outstandingdebt of Holdings and its subsidiaries, certain transaction expenses, change ofcontrol payments and certain other liabilities of Holdings and itssubsidiaries.  Additionally, the purchaseprice is subject to post-closing adjustment specified in the Merger Agreementbased on the working capital of Holdings upon the closing of the merger. As a result of the merger, Holding’s shares of common stock will be convertedinto the right to receive the applicable merger consideration in cash at theclosing, subject to the post-closing working capital adjustment.  The outstandingoptions of Holdings, including those issued to our employees and directors,will be cancelled at closing and option holders will receive the same per sharemerger consideration in cash as the holders of common stock receive, net of theexercise price of the option, and subject to the post-closing workingcapital adjustment.  

 

Under the Merger Agreement, as soon as practicable after signing, Holdingshas agreed to cause us to commence a tender offer and consent solicitation forour outstanding 10-3/4% Second Priority Senior Secured Notes due 2010 and our12% Senior Subordinated Notes due 2011 and to cause Advanstar, Inc. to commencea tender offer for its outstanding 15% Senior Secured Discount Notes due 2011.

 

25

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**Presentationof Financial Information**

*Acquisitions.Divestitures, Dispositions and Merger*

Wecontinue to look for opportunities to execute our strategy of buildingsignificant positions in targeted markets, through the acquisition ofidentified assets. In 2005 and 2004 we completed six acquisitions as follows:

·                  On September12, 2005, we purchased an off-road consumer event business from Peterson EventsCorporation (‘Off-Road Expo”) for $2.2 million in cash. We paid $0.1 million inadditional cash consideration in 2006 to the former shareholders based on theactual 2006 operating revenue from the acquired assets. This contingentconsideration was recorded as goodwill on the consolidated balance sheet.

·                  On August 23, 2005, we purchased twofashion industry tradeshows based in Las Vegas from the owner of the POOLTradeshow (‘‘POOL”) for $3.0 million in cash.  The originalpurchase agreement provided for additional contingent cash consideration to bepaid to the former owner based on the 2007 and 2008 operating results of POOLand required the owner’s continued employment with us.  In July 2006, weand the former owner of POOL entered into an agreement which terminated theformer owner’s employment with us, terminated the former owner’s right toreceive additional contingent payments and eliminated our obligations under thePOOL asset purchase agreement and the employment agreement.  Upon execution of this agreement, we made aninitial payment of $1.5 million to the former owner, and will make a finalpayment of $0.5 million in 2007.  Werecorded the $2.0 million as compensation expense in 2006.

·                  On August 19, 2005, we purchased ProjectGlobal Tradeshow, Inc. (‘‘Project”), a producer of tradeshows serving thefashion industry, for $9.9 million in cash. The original Project purchase agreement provided for additionalcontingent cash consideration to be paid to the former owners based on the 2007and 2008 operating results of Project and required the principal former owner’scontinued employment with us.  In December 2006, we agreed to amend thepurchase agreement with the former owners of Project in order to terminate theprincipal former owner’s employment with us, terminated the former owners’right to receive additional payments and eliminated our obligations under theProject stock purchase agreement and the employment agreement. Under the termsof the amended agreement, we paid $28.0 million to the former owners in January2007.  The $28.0 million considerationwas recorded as compensation expense in 2006.

·                  In 2005, we completed two acquisitions ofconsumer shows in our Powersports group with an aggregate purchase price of$0.5 million in cash. Based on 2006 operating results, we accrued an additional$0.2 million in contingent consideration based on 2006 operating resultspayable to the former owners, resulting in an adjustment to goodwill.

·                  On March 8, 2004, we purchased aportfolio of pharmaceutical industry specific magazines and conferences fromthe Institute of Validation Technology, Inc. (“IVT”) for $7.9 million incash.  In addition, we accrued additionalcontingent consideration based on 2004 and 2005 operating results of theacquired assets and the continued employment of the former shareholders withus. The contingent consideration of $1.5 million and $0.7 million was recorded ascompensation expense in 2004 and 2005.  The contingent consideration based on2005 results is an estimate and is subject to further negotiation with theformer shareholders.  Weexpect the final payout to the former shareholders to be made in 2007.

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

In addition, non-core divestitures and discontinuedoperations in 2005 and 2004 include:

·                  On December 31, 2005, we sold ourArenacross Championship Series (“Arenacross”) for a total selling price of $0.2million. We recorded a loss on the sale of $0.6 million.** **Arenacross 2005 revenue andcontribution loss was $0.9 million and $1.6 million. Arenacross had no revenueor contribution margin in 2004.

·                  In the secondquarter of 2005, we discontinued the remaining East Coast Fashion tradeshowbusiness acquired in 1999 from Larkin-Pluznik-Larkin, LLC (the “East CoastFashion Group”) as part of our new strategy. We recorded a $2.3 million impairment charge for the remainingintangible assets of this business in 2005. Revenue and contribution margin through the second quarter of 2005 forEast Coast Fashion Group were $0.9 million and $0.1 million.  East Coast Fashion Group revenue andcontribution loss for 2004 were $6.1 million and $0.3 million.

26

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·                  On May 23, 2005, we completed the sale ofour business assets and liabilities associated with our tradeshows and conferences,trade publications and direct marketing products servicing the information,technology, telecommunications, travel, beauty, home entertainment, andportfolio markets, including the shares of our Hong Kong subsidiaries.  The shares of our Brazilian subsidiary weresold in July 2005 after receipt of final regulatory approval. Collectively,these assets and shares are referred to as the “Portfolio Group.” The saleprice for the Portfolio Group was $185.0 million less $11.2 million in workingcapital adjustments and expenses.  Werecorded a gain on the sale of $52.9 million. Revenue and contribution margin from January 1, 2005 to May 23, 2005were $49.0 million and $14.9 million. Revenue and contribution margin in 2004 were $102.5 million and $26.8million.

·                  Inthe third quarter of 2004, we sold our *Post*business trade publication (“Post”) for $1.0 million in cash. We recorded aloss after taxes on the sale of $1.3 million. Post revenue and contribution margin from January 1, 2004 to July 2,2004 were $0.7 million and $0.1 million. We also sold our 65% ownership in our French joint venture (“SeCA”),which consisted of one tradeshow, for $3.1 million in cash.  In conjunction with our sale of SeCA werecorded a goodwill impairment charge of $9.4 million, net of minority interestin 2004.  Total revenue and contributionmargin for SeCA, net of minority interest, were $2.9 million and $1.4 millionin 2004.  Also in the third quarter of 2004, we sold our German tradeshow business (“DMS”)for $1.7 million in cash.  As a result ofthe sale of DMS we recorded a goodwill impairment charge of $6.2million.   Total revenue and contributionloss in 2004 were $0.1 million and $0.3 million.

·                  In the firstquarter of 2004, we sold our art industry tradeshows and magazines for a total sales price of $19.6 million incash (“Art Group”).  We recorded again after taxes on the sale of $3.4 million. Art Group revenue andcontribution margin from January 1, 2004 to March 12, 2004 were $8.5 millionand $3.4 million.

The financial results of the businesses included indiscontinued operations in the accompanying consolidated statements ofoperations for the years ended December 31 are as follows:
| **(in thousands)**                       | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| (Loss) income  before income taxes (including |       |     |       |     |       |     |       |
| goodwill impairment charge and gain on sale)  |       | $        | (162       | )        | $          | 55,961   |       | $ | (977 | ) |
| Income tax  (benefit) provision               |       | (243     | )          | 16,859   |       | 5,442    |       |
| Minority  interests                           |       | —   |       | (566     | )          | 4,264    |       |
|                                          |       |     |       |     |       |     |       |
| Income (loss)  from discontinued businesses   |       | $        | 81         |     | $          | 38,536   |       | $ | (2,155 | ) |

 

In December 2006, our management completed our legalmerger with Advanstar.com, Inc. (“Advanstar.com”). Prior to the merger,Advanstar.com was our affiliate, wholly owned by our parent. Because we wereunder common control, this transaction was accounted for as a combination ofentities under common control and, accordingly, we did not establish a newbasis of accounting in the assets or liabilities of Advanstar.com. Our reportedresults from prior periods have been restated to include the financial resultsof Advanstar.com.

On January 1, 2005, we began consolidating theoperations of Advanstar.com with our operations upon the adoption of FinancialAccounting Standards Board (“FASB”) Interpretation No. 46R, *Consolidation of Variable Interest Entities*(“FIN 46R”).  As a result of the adoption of FIN 46R, werecorded a $4.6 million gain, which was reported as a cumulative effect ofaccounting change in the first quarter of 2005. As a result of the legal mergerdescribed above, our 2005 consolidated statement of operations no longerreflect this cumulative effect.

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Prior to adoption of FIN 46R, we recorded advances andnotes issued in support of Advanstar.com operations as an operating expense inour consolidated statement of operations. These advances and notes were used by Advanstar.com in support of itsoperations, including the purchase of depreciable assets.  Accordingly, there was a difference in thetiming of when the advances and notes resulted in expenses reflected in ourconsolidated statements of operations and Advanstar.com.  As a result of the merger accountingdescribed above, this difference resulted in an adjustment to reduce ourconsolidated net loss for the year ended December 31, 2004.

The merger of Advanstar.com resulted in an adjustmentto net income as reported for the years ended December 31, 2005 and 2004 asfollows:
| **(in thousands)**                              | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
| Net income  (loss) as previously reported            |       | $        | 8,575      |     | $          | (51,163 | ) |
| Prior period  adjustment for merger of Advanstar.com |       | (4,618   | )          | 5,975    |       |
| Net income (loss) as  adjusted                       |       | $        | 3,957      |     | $          | (45,188 | ) |

 

Our legal merger with Advanstar.com was immaterial toour consolidated statement of cash flows for the years ended December 31, 2005and 2004.

**Sources of Revenue by Product**

###### *Shows and Conferences*

Revenue from our events isprincipally from the sale of exhibit space and conference attendancefees.  In 2006, 83% of our show and conference revenue was from the sale of exhibitspace.  Events are generally held inmajor metropolitan or convention areas such as New York City and LasVegas.  The sale of exhibit space isgenerally impacted by the ongoing quality and quantity of attendance, venueselection and availability, industry cycles and general market conditions.  Revenue and related direct event expenses arerecognized in the month in which the event is held.  An event is billed and cash is collected inadvance and is presented on our consolidated balance sheet as deferred revenueuntil the event has been held.

*Publications*

Revenue from publications is principally generatedfrom the sale of advertising in our trade magazines.  Additionally, certain publications deriverevenue from paid subscriptions and custom publishing and projects.  Paid subscriptions comprise 4% of total publishing revenue for theyear ended December 31, 2006.  Most ofour publications are produced monthly with advertising sold on either ascheduled or single insertion basis.  Thesale of advertising is generally impacted by new product releases, circulationquality, readership, and general market conditions.  Advertising revenue is recognized when thepublication with the respective advertisement is issued, and subscriptionrevenue, if any, is recognized ratably over the subscription period as thepublications are issued.  Revenue fromcustom projects containing multiple product elements is recognized as eachelement is delivered if sufficient evidence of fair value exists for theundelivered elements.  If sufficientevidence of fair value does not exist, revenue is deferred and not recognizeduntil all elements are delivered. Customer advances are recorded in other liabilities when cash isreceived in anticipation of future advertising unrelated to a specificpublication issue.

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*Other Products*

Other product revenue sources include the sale ofvalue-added marketing products such as print and internet basedclassified advertising, direct mail services, reprints, database marketing,directories, guides, reference books and electronic based products.  These products complement and utilize thecontent or databases generated by our shows, conferences and publications.  The sale of these products is generallyimpacted by the success of the event or publication from which these productsare derived, the quality of the sales team and general market conditions.  Revenue is recognized when the applicableproduct is shipped or otherwise delivered.

**Components of Expenses byProduct**

*Shows and Conferences*

Costs incurred for shows and conferences includefacility rent, attendee and exhibitor sales and marketing, as well as on-siteservices such as registration, security and set-up.  Exhibitors generally contract directly withthird parties for on-site services such as electrical services and boothset-up.  Staff salaries and relatedpayroll expenses are treated as monthly period expenses.  All other direct costs are expensed when theevent occurs.

###### *Publications*

Costs incurred for publications include printing,paper and postage; selling and promotion; editorial and prepress; andcirculation acquisition and fulfillment. Additionally, publisher and sales staff costs, production, editorial andcirculation staff costs, with related payroll taxes and benefits, are chargedto the publications segment.  Weoutsource the actual printing of our publications.  Printing, paper and postage costs are chargedto operations at the time of publication issuance.  All other direct costs are charged tooperations when incurred.

###### *Other*

Costs for other products include printing anddistribution costs, database administration fees and selling and productdevelopment staff costs.  Productspecific costs are charged to operations when the product is delivered.  All other direct costs are charged tooperations when incurred.

**Significant Accounting Policiesand Estimates**

The discussion and analysis of our financial conditionand results of operations are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these financial statements requires management tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenue and expenses.  On anongoing basis, we evaluate these estimates, including those related to baddebts, restructuring accruals, realizability of goodwill and intangible assetsand recoverability of deferred income tax assets.  We base these estimates on historicalexperience and on various other assumptions that are believed to be reasonableunder the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from these estimates under different assumptionsor conditions.

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We apply the following critical accounting policies inthe preparation of our consolidated financial statements:

*Revenue Recognition*

Revenue is recognized as discussed in the “Sources ofRevenue” section above.  The balance ofdeferred revenue at December 31, 2006 was $41.4 million for shows and $9.8million for publications.  On a relativebasis, our deferred revenue reaches its highest levels during the second andfourth quarters of the year largely due to the timing of the MAGIC Marketplace tradeshows and ourother large shows and conferences.

*Allowance for Doubtful Accounts*

We maintain an allowance for doubtful accounts forestimated losses resulting from the inability of our customers to make requiredpayments.  The balance of the allowancefor doubtful accounts at December 31, 2006 and 2005 was $1.0 million and$1.1 million.  If the financialcondition of our customers were to deteriorate, resulting in an impairment oftheir ability to make payments, additional allowances may be required.

The allowance for doubtful accounts is an estimatebased on specifically identified accounts as well as non-specific reserves based on our historical experience.  We evaluate specific accounts where we haveinformation that the customer may be unable to meet its financial obligations.  In these cases, management uses judgment,based on the best available facts and circumstances, to determine if a specificreserve for that customer’s receivable is warranted.   These specific reserves are reevaluated andadjusted as additional information is received. We also establish anon-specific reserve for all customers based on historical percentages appliedto customer balances depending on the age of the amount due.  This percentage is based on historical collectionand write-off experience.  If circumstanceschange, our estimates of the recoverability of amounts due us could be reducedor increased by a material amount.  Sucha change in estimated recoverability would be accounted for in the period inwhich the facts that give rise to the change become known.

*Deferred Taxes*

Pursuant to the requirements of SFAS No. 109, werecord a valuation allowance to reduce our deferred tax assets to the amountthat we determine is more likely than not to be realized.  At December 31, 2006, and 2005, we have recordeda valuation allowance to offset the deferred tax benefit associated with all ofour U.S. and foreign net operating loss carryforwards because the realizationof these benefits is not considered likely based upon our history of notgenerating taxable income to utilize these tax benefits.  We have considered future taxable income andongoing prudent and feasible tax planning strategies in assessing the need forthe valuation allowance.  In the event wewere to subsequently determine that we would be able to realize our deferredtax assets in excess of our net recorded amount, a reduction in the valuationallowance would result in an income tax benefit and would increase net incomeor reduce net loss in the period such determination was made.  In addition to the deferred tax assets, whichare fully reserved, we have established a deferred tax liability based upon theexcess of the carrying value of our goodwill for financial reporting purposesover the tax basis of this goodwill.  Weestablished this liability because we do not amortize goodwill for financialreporting purposes but we do amortize goodwill for tax reporting purposes.

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*Amortization of Intangible Assets*

Intangible assets related to trade exhibitor andadvertiser lists are amortized using a double-declining balance methodover 6 years and 5 years, respectively.  Intangible assets related to trade names andtrademarks are amortized using a straight-line method over 20 years.  Intangible assets related to subscriber listsand other intangible assets are amortized using a straight-line method over 3to 10 years.  We amortize intangibleassets on a basis which corresponds to our projections of future cash flowsdirectly related to these intangible assets. A change in circumstances could result in a determination that assetlives should be changed or that the related assets are impaired and impairmentcharges to reduce the carrying value of intangible assets may benecessary.  The effect of any changes inuseful lives or a determination that the carrying value of an intangible assetis impaired would be accounted for in the period that such determination wasmade.

*Impairment of Long-Lived Assets*

We evaluate the carrying value of long-lived assets,including identifiable intangibles, for impairment when events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable.  If impairment indicatorsare present and the estimated future undiscounted cash flows are less than thecarrying value of the assets, the carrying value is reduced to the estimatedfair value as measured by the associated discounted cash flows.

In accordance with the provisions of SFASNo. 142, we evaluate goodwill for impairment using a two-step test basedupon a fair value approach.  The firststep is used to identify a potential impairment by comparing the carrying valueof the net assets of each reporting unit to an estimate of the fair value ofeach of our reporting units (as defined by SFAS No. 142), while the secondstep calculates the amount of impairment, if any.  Additionally, goodwill will be tested forimpairment between annual tests if an event occurs or circumstances change thatwould more likely than not reduce the fair value of an entity below its carryingvalue.  We determine the fair value ofour reporting units by application of a discounted cash flow analysis.  If circumstances change, our estimates offair value will also change and could result in a determination that additionalimpairment charges to reduce the carrying value of goodwill are necessary.  We completed our annual goodwill impairmenttest for each of our reporting units as of July 1, 2006.  Based on this first step test, there was noimpairment of goodwill indicated.

*Stock-BasedCompensation*

We account for stock options awarded to employees asliability awards under SFAS No. 123R, *Accounting for Stock-BasedCompensation* (“FAS 123R”). Accordingly, compensation expense and a relatedliability is recorded only if the fair value of the shares underlying our share-basedawards are greater than the awards’ exercise price as of the end of theapplicable reporting period.  We adoptedFAS 123R using the modified prospective transition method.  Our adoption of FAS 123R did not resultin any cumulative effect from the change in accounting method.

As of December 31, 2006, management estimated that thefair value of Holdings' common stock underlying all stock option awards exceededthe exercise price.  Accordingly, compensationexpense of $3.6 million ($0.4 million selling, editorial and circulation and $3.2million general and administrative) relating to the intrinsic value of stockoption awards was included in the consolidated statement of operations for theyear ended December 31, 2006.

As of December 31, 2006, the aggregate intrinsicvalue of all stock options outstanding was $5.5 million. Any change in theaggregate intrinsic value of vested stock options will be included inoperations in the period of the change. As of December 31, 2006, the aggregateintrinsic value of unvested stock options was $1.9 million, which, subjectto any changes in the intrinsic value of the options, will be charged tooperations as the options vest.  As ofDecember 31, 2006 the weighted-average remaining vesting term of unvested optionswas 2.4 years, although earlier vesting may occur based upon terms of thePlan.

Prior to January 1, 2006, weaccounted for our stock options and awards to employees under theprovisions of Accounting Principles Board (“APB”) Opinion No. 25, *Accounting for Stock Issued to Employees*, and relatedinterpretations.  No compensation expenserelating to stock options was recorded in the consolidated statement ofoperations for the years ended December 31, 2005 and 2004.

*Future Contingent Cash Obligations fromAcquisitions*

Upon execution of purchase agreements of new business,we may agree to pay additional contingent cash consideration to the formershareholders based on future operating results of the acquired assets. Ifcontinued employment with us is a condition of the agreement, any contingentconsideration paid will be recorded as compensation expense in the consolidatedstatement of operations.   If continuedemployment is not a condition of the agreement, any contingent considerationpaid will be recorded as goodwill.

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**Results of Operations**

2006COMPARED TO 2005

# *Revenue*

Total revenueincreased $34.8 million, or 12.0%, to $323.7 million in 2006 from $288.9million in 2005.

Life Sciences revenue of $155.7 million in 2006increased 6.0% or $8.8 million from $146.9 million in 2005.  Revenue from healthcare custom projectsincreased $5.1 million or 38.9% from 2005 primarily due to more focused sellingefforts and our ability to meet our customer delivery expectations. Strongperformances also were achieved from several specialty care and dentalpublications. In addition, our launches of *Firstline*and*Modern Hygienist*magazines and two veterinary conferencesgenerated $3.3 million of additional revenue in 2006.  Ad page growth for all publications in theLife Sciences segment was 4.1% in 2006 over 2005 primarily due to strongperformances from our dental and veterinary publications.  These revenue gains were partially offset bya revenue decline of $1.8 million from our IVT pharmaceutical conferences aswell as a $1.1 million decline due to the effect of the sale of our *Pharmaceutical Discovery* publication in late 2005.

Fashion andLicensing revenue of $110.6 million in 2006 increased 22.9% or $20.6 millionfrom $90.0 million in 2005.  Revenue fromour 2006 MAGIC Marketplace Las Vegas spring and fall events increased acombined $13.2 million or 16.8% over 2005 due to an increase in square feetsold, yields and sponsorships. Total exhibit space for both events increased by12.0% to 2.1 million square feet. The August 2005 acquisitions of POOL andProject expanded our presence in the contemporary and boutique fashionmarkets.  The spring POOL and Projectevents, which were integrated into MAGIC Marketplace in Las Vegas, along withthe Project and POOL New York events, contributed $12.7 million of revenue and260,000 square feet in the first and third quarters of 2006.  Revenue in 2006 also benefited from asuccessful Licensing International event held in New York and 19.7% growth inrevenue from *License!**Global*magazine.

Powersports revenue of $44.7 million in 2006 increased 13.1% or $5.2million from $39.5 million in 2005. The International Motorcycle Show eventsand Dealer Expo experienced an increase in square feet of 10.4% and revenue of$2.4 million or 12.2% in 2006 over 2005. In the off-road market we held a strong Off-Road Impact Expo trade eventand held our first Off-Road Expo-Salt Lake City and Off-Road Expo-Houston,consumer off-road events launched in 2006, contributing to an increase inrevenues of $0.6 million. Ad revenue for this segment’s publications grew 14.7%or $2.2 million and ad pages grew 10.0% primarily due to strong performancefrom our automotive publications as well as the continued development of ourOff-Road publications, *Dirt Sports* and*Off-Road Business*.

Revenue from ourOther operations in 2006 was$12.7 million, compared to $12.5 million reported in 2005.

# *Cost of production and selling*

Cost of production and selling expense increased $25.0 million, or 14.8%,to $193.7 million in 2006 from $168.7 million in 2005.

Life Sciencesexpenses in 2006 increased by 5.0%, or $4.9 million, to $102.5 millionfrom $97.6 million in 2005.  The increaseis primarily due to $4.3 million in product launch costs for new conferencesand publications, a $4.1 million increase in healthcare special projects costsrelated to the growth in the number of delivered projects, and increased costsassociated with our base publications’ ad page growth. These increases werepartially offset by elimination of $1.1 million in costs related to *Pharmaceutical Discovery* and $1.9 million in cost reductionsdue to improved operating efficiencies from the restructuring program weimplemented at the end of the second quarter of 2005.

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Fashion &Licensing expenses in 2006 increased by 32.9%, or $12.4 million, to $50.0million from $37.6 million in 2005, primarily due to our program to expand ourMAGIC Marketplace spring and fall and our POOL and Project New York events.  Expenses to support our first spring LasVegas POOL and Project events, included in MAGIC Marketplace, and our firstProject and POOL New York events were $7.6 million for 2006.

Powersportsexpenses in 2006 increased by 10.1%, or $2.7 million, to $29.5 millionfrom $26.8 million in 2005.  Expensesincreased in 2006 primarily due to increased direct costs resulting from anincrease in publication ad pages and square feet in our tradeshows.  Expenses also increased due to the 2006launch of our Off-Road Expo — Salt Lake and Houston events.

Expenses of ourOther operations in2006 were $11.6 million, comparedto $6.6 million in 2005.  Thisincrease is primarily due to a $1.9 million vendor contract termination paymentaccrued in the fourth quarter of 2006 and payable in 2007.  The increase is also driven by $1.8 millionin costs relating to the renegotiation of certain tradeshow vendor agreements,investments in the development of our e-media product offerings and launch costsfor *Ophthalmology Times Europe*.

# *General and administrative*

General and administrative expenses increased $34.2million, or 83.6%, to $75.1 million in 2006 from $40.9 million in 2005.  Expenses increased primarily due to the $30.0million of compensation expense incurred in 2006 for our 2005 Project and POOLacquisitions. In addition, 2006 includes $3.2 million in compensation expense related to the intrinsic value ofstock options, unclaimed property obligations of $2.6 million and a $1.0 million charge for theimpairment on our Cleveland office building to write down the carrying value toits fair value less estimated selling costs. These increases were partiallyoffset by foreign exchange gains due to favorable foreign exchange rates,reduced employee medical costs and operating efficiencies achieved due to 2005restructuring actions.

# *Restructuring charge*

In May 2005, we ceased use ofcertain leased office space in New York, NY, Milford, CT, and Santa Ana, CArelated to the sale of the Portfolio Group (see —”Presentation of Financial Information — Acquisitions,Divestitures, Dispositions and Merger”).  In 2005, we vacated additionalleased office space in Milford, CT and Chicago, IL. These activities resulted incharges to our operations during 2005.  In 2006, we vacated additional leased office space in New York, NY, andrevised our estimate of expected future sublease income for this space, resulting inadditional charges. These charges consist of the discountedremaining future minimum lease payments due under non-cancelable leases, net ofestimated future sublease income. These lease commitments expire at variousdates through 2010.

In 2006, we entered into a leasemodification and surrender agreement for approximately 60% of our vacatedoffice space in New York, NY.  Under theterms of the agreement, we paid the landlord $2.8 million in cash, the leasecovering the surrendered space was terminated and we will have no furtherfuture lease obligations for the portion of the space surrendered.  At the same time, we adjusted our remainingliability accrued for this space and recorded a gain of $0.1 million.

During 2005 we notified certainemployees that they would be severed from the Company in connection with thesale of the Portfolio Group and the reorganization of our operating and supportdepartment management team.

In 2001, we integrated many ofthe internet sales, marketing, technology and operating functions ofAdvanstar.com with us and our core activities in publishing, shows and directmarketing products.  These restructuringactivities were completed by the end of 2001, except for facility lease costs,which continued through June 2010, including leasehold improvements from thefacility Advanstar.com vacated.  Thefacility lease obligation was settled in May 2004 for less than amounts owedunder the lease.  A $4.0 millionfavorable settlement (net of fees and related expenses) of the lease obligationwas recognized as an offset to operating expenses in 2004.

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Pre-tax restructuring chargesincurred are as follows:
| **(in thousands)**                         | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**          | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted)** | ** ** |
| Facility exit costs                             |       | $          | 2,339      |       | $          | 2,499             |       | $ | — |   |
| Advanstar.com lease  settlement                 |       | —     |       | —     |       | (4,015            | )          |
| Employee severance and  other termination costs |       | (14        | )          | 2,272      |       | —            |       |
| Restructuring charge (benefit)                  |       | $          | 2,325      |       | $          | 4,771             |       | $ | (4,015 | ) |

 

Thechange in restructuring accruals is as follows (in thousands):
| **(in thousands)**                 | ** ** | **Facility  Exit Costs** | ** ** | **Employee  Severance** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|-------------------------------|------------|-------------------------|------------|-----------|------------|
| Balance at  December 31, 2004 |       | $                             | 1,827      |                    | $          | —    |       | $ | 1,827 |   |
| Restructuring  charge                   |       | 2,499                         |       | 2,272                   |       | 4,771     |       |
| Utilized-cash                           |       | (914                          | )          | (1,465                  | )          | (2,379    | )          |
| Balance at  December 31, 2005 |       | 3,412                         |       | 807                     |       | 4,219     |       |
| Restructuring  charge                   |       | 2,339                         |       | (14                     | )          | 2,325     |       |
| Utilized-cash                           |       | (4,585                        | )          | (766                    | )          | (5,351    | )          |
| Balance at December 31, 2006  |       | $                             | 1,166      |                    | $          | 27        |       | $ | 1,193 |   |

 

# *Depreciation and amortization*

Depreciation andamortization expense declined $5.5 million to $32.3 million in 2006 from $37.8million in 2005 primarily due to no amortization expense being recorded on$129.6 million and $27.7 million of intangible assets which became fullyamortized in 2006 and 2005 and the effect of the double declining balancemethod of accelerated amortization on our exhibitor and advertiser lists,partially offset by a full year of accelerated amortization expense related tothe businesses acquired in 2005.

# *Interest expense and loss onextinguishment of debt*

Interest expense in 2006 declined $8.3 million, or13.2%, to $54.8 million from $63.1 million in 2005 due to the decrease of $59.6million in our weighted-average debt outstanding during the year. We repaid$20.4 million of our term loans, $8.7 million of our fixed rate notes, and$117.8 million of our floating rate notes in the second quarter of 2005 withthe proceeds from the sale of the Portfolio Group. See “Liquidity and Capital Resources — Second priority secured andfloating rate notes repayment.”

We incurred $0.6million in costs related to the write off of unamortized deferred finance costsrelated to the amendment and restatement of the Credit Facility in May 2006 andrepayment of floating rate notes in August 2006. See “Liquidity and CapitalResources —**Credit facility amendment and restatement.”

In 2005, we incurred $12.6 million in costs related tothe repurchase of a part of our fixed and floating rate senior secureddebt.  These costs include $8.6 millionin tender offer premium and consent fees, $3.5 million in unamortized deferredfinancing costs, and $0.5 million in legal fees and expenses. See “Liquidityand Capital Resources — Credit facility and second priority secured andfloating rate notes repayment.*”*

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At December 31,2006, $451.9 million, or 98% of our total debt is at a fixed rate with thebalance of our debt subject to interest rate fluctuations.   We currently have no plans to hedge our interestexpense related to our remaining floating or fixed rate debt.

# *Interest income*

Interest incomeincreased to $1.8 million in 2006 from $1.5 million in 2005 due to an increasein our average cash balance in 2006 compared to 2005.

# *Provision (benefit) for income taxes*

The provision forincome taxes was $8.3 million in 2006 compared to a benefit of $2.7 million in2005.  For both 2006 and 2005, theprovision/benefit includes income taxes in certain foreign jurisdictions and adeferred tax provision related to the basis of goodwill for tax purposes beingless than the carrying value of goodwill for financial reporting purposes.  Additionally, the 2005 tax provision includesa tax benefit provided by losses from continuing operations to the extent thatsuch losses offset the income from discontinued operations. This tax benefit isoffset by a tax provision included in discontinued operations resulting fromthe operating income and gain attributable to the sale of the Portfolio Groupbusiness. We recorded no income tax benefit related to the net operating losseswe generated during 2006 and 2005 because we have established a valuationallowance to offset any related tax benefits due to uncertainty aboutrealization of these benefits.

# *Discontinued operations*

In December 2005, we sold our Arenacross ChampionshipSeries for a total selling price of $0.2 million. The loss on the sale of $0.4million was recorded in 2005 and a $0.2 million additional loss was recorded in2006.

In the second quarter of 2005, we discontinued theremaining East Coast Fashion tradeshow business acquired in the 1999 Larkintransaction and recognized a $2.3 million impairment charge for the remainingcarrying value of the intangible assets of this business.

In May and July 2005, we sold certain businesses toQuestex for net cash of $173.8 million. A gain of $52.9 million on the sale of these assets was recorded in2005.

Properties sold in 2004 included Art, Post, SeCA, andDMS for an aggregate of $24.3 million in cash. Total gain on sale of thesebusinesses was $2.1 million, after tax effect. The aggregate goodwillimpairment charge recorded in 2004 relating to these assets was $15.6 million.

See further information regarding divestituresincluded in discontinued operations in “Presentation of Financial Information—**Acquisitions,Divestitures, Dispositions and Merger.” 

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2005 COMPARED TO 2004

# *Revenue*

Total revenueincreased $17.8 million, or 6.6%, to $288.9 million in 2005 from $271.1 millionin 2004.

Life Sciences revenue of $146.9 million increased 0.9%or $1.3 million from $145.6 million in 2004. Revenue from ourIVT conferences increased $1.6 million or 32.1% over 2004 due to the launch of18 new conference tracks to address emerging topics of interest in the FDA drugvalidation process.  Our remaining LifeSciences publishing products revenue increased over 2004, with the pace ofgrowth increasing significantly in the fourth quarter.  This was driven by increased revenue inspecialty care healthcare, and dental publications.  We launched or continued to develop three newpublications and one conference, including*Locum Life*, *Firstline*, *ModernHygienist* and a dental conference and stopped holding one smallconference in the pharmaceutical markets in 2005 compared to 2004. Launches,other than the IVT conferences discussed above, generated $1.7 million inrevenue in 2005.  These revenue increaseswere partially offset by declines inour veterinary and certain primary healthcare publications and healthcarecustom projects of $4.3 million.  Projectshave a significant lead time from proposal to completion.  The revenue decline reflects the impact onthe 2005 sales cycle of marketing and fulfillment problems we experienced in2004 and the restructuring of our operations, including healthcare propertiesand management in 2005.

Fashion and Licensing revenue of $90.0 million increased 12.5% or $10.0million from $80.0 million in 2004.  OurMAGIC Marketplace events increased revenue by **$**9.6 million or13.9% and square footage increased by7.1% over 2004 due to development of new trend areas, the continued expansionof our Sourcing Zone initiative, and the acquisitions of POOL and Project in2005.  Our licensing events in the U.S.and U.K. increased revenue by $0.9million or****11.4% over 2004 due to anincrease in square footage and price per square foot.  Partiallyoffsetting the revenue increases was a decline in revenue from our*License!**Global*publication.

Powersportsrevenue of $39.5 million increased 15.8% or $5.4 million from $34.1 million in2004. Revenue from the Powersports shows and conferences increased 12.5% over2004 due to new category initiatives, product launches and selectedacquisitions. Development of new initiatives continued for American mademotorcycle products in our IMS motorcycle consumer events and the Big Twin Westtradeshow, expanding sales in this category significantly.  Dealer Expo increased revenue through priceincreases and expansion of international exhibitors. Strong revenue growth alsooccurred in our automotive and *Dealernews*publications.  Further contributing toour overall revenue growth was the continued development of *Dirt Sports* and *Off-Road Business,*launchedin 2004.  The 2005 launch of theOff-Road Impact tradeshow and conferences, which complements the two publicationslaunched in 2004, the 2005 launch of*American Big Twin* and the acquisition of the Off-Road Expo alsocontributed to this growth. These launches and acquisitions generated acombined $2.9 million of revenue growth in 2005. We did stop holding two small shows in thePowersports segment during 2005 causing a slight decline in revenue whichserved to partially offset the revenue growth discussed above.

Revenue from our Other operations in 2005 was$12.5 million, compared to $11.4 million reported in 2004.  The gain was primarily driven by launches,including *Ophthalmology Times Europe*and *Contract Services Europe* and**Europeandental and pharmaceutical products.

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# *Cost ofproduction and selling*

Cost of productionand selling expense increased $10.5 million, or 6.7%, to $168.7 million in 2005from $158.2 million in 2004.

Expenses of LifeSciences in 2005 decreased by 2.7%, or $2.8 million, to $97.6 million from$100.4 million in 2004.  This decrease isalso attributable to cost savings associated with the restructuring of certainaspects of our operations, including healthcare publications, and a decline inhealthcare custom projects. These cost reductions were partially offset byinvestments in the properties launched in 2005 as described above, as well asinvestments to actively develop our CME, special projects and electronicofferings.   Staffing and other directcosts increased to support our newly launched IVT and dental conferences,contributing approximately $1.7 million in increased expenses.  Expenses also increased due to strategicinvestments made across our market segments and product lines. There were nosignificant increases in venue pricing during the year.

Expenses ofFashion & Licensing in 2005 increased by 18.5%, or $5.8 million, to $37.6million from $31.8 million in 2004. Staffing and other direct costs to support the operations of therecently acquired POOL and Project contributed approximately $2.1 million ofthis increase.  Expenses also increaseddue to growth of square footage and strategic investments made across our MAGICMarketplace and license events. There were no significant increases in venuepricing during the year.

Expenses ofPowersports in 2005 increased by 24.4%, or $5.2 million, to $26.8 million from$21.6 million in 2004. Staffing and other direct costs to support our 2004 and2005 product launches and acquisitions as discussed above contributed $2.6million of this increase.  Expenses alsoincreased due to growth of square footage from our powersports markets andstrategic investments made across our market segments and product lines.  We also invested in new product areas inDealer Expo.

Expenses of ourOther operations in2005 was $6.6 million, compared to $4.5million in 2004.  The increase wasprimarily driven by launches, including *OphthalmologyTimes Europe* and *ContractServices Europe* and**European dental and pharmaceuticalproducts.

# *Generaland administrative*

General and administrative expenses increased $0.3 million, or 0.7%, to$40.9 million in 2005 from $40.6 million in 2004.  The increase is due to various factors including an increase in earnedincentives of $3.7 million and foreign currency fluctuations of $0.9million.  These increases were partiallyoffset by a reduction in the IVT contingent compensation accrual in 2005 overamounts in 2004 by $0.9 million and a reduction in costs due to restructuringactivities as discussed above.

# *Restructuringcharge*

See informationregarding restructuring activities in “Results of Operations — 2006 Compared to2005-Restructuring charge.”

# *Depreciationand amortization*

Depreciation andamortization expense declined $5.3 million to $37.8 million in 2005 from $43.1million in 2004 primarily due to the effect of the double declining balancemethod of accelerated amortization on our exhibitor and advertiser listspartially offset by additional amortization expense related to the businessesacquired in 2005.

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# *Interest expense and loss onextinguishment of debt*

Interest expense decreased $7.9 million, or 11.2%, to$63.1 million in 2005 from $71.0 million in 2004 primarily due to a decrease of$92.5 million in our weighted-average debt outstanding during the year. Werepaid $20.4 million of our term loans, $8.7 million of our fixed rate notes,and $117.8 million of our floating rate notes in the second quarter of 2005with the proceeds from the sale of the Portfolio Group.  See “Liquidity and CapitalResources —**Second Priority Secured and Floating Rate Notes Repayment.”

See informationregarding loss on extinguishment of debt in “Results of Operations — 2006Compared to 2005 — Interest expense and loss on extinguishment of debt.”

# *Interestincome*

Interest incomeincreased to $1.5 million in 2005 from $0.5 million in 2004 due to an increasein our average cash balance in 2005 compared to 2004.

*Other income (expense), net*

Other incomedecreased $0.7 million to $0.1 million in 2005 from $0.8 million in 2004.  This decrease is attributable to gainsassociated with our interest rate protection agreement, which expired inFebruary 2004.

# *Provision(benefit) for income taxes*

The benefit forincome taxes was $2.7 million in 2005 compared to a $6.5 million provision in2004.  The 2005 and 2004 taxbenefit/provision includes a tax benefit provided by losses from continuingoperations to the extent that such losses offset the income from discontinuedoperations. This tax benefit is offset by a tax provision included indiscontinued operations. This tax benefit in continuing operations is offset bya basis difference resulting from goodwill for tax purposes being less than thecarrying value of goodwill for financial reporting purposes and income taxes incertain foreign jurisdictions.  Werecorded no income tax benefit related to the net operating losses we generatedduring 2005 and 2004 because we have established a valuation allowance tooffset any related tax benefits, due to uncertainty about realization of thesebenefits.

# *Discontinuedoperations*

See further information regarding divestituresincluded in discontinued operations in “Presentation of Financial Information —**Acquisitions,Divestitures, Dispositions and Merger.”

**Liquidity and Capital Resources**

Our principal sources ofliquidity have been, and are expected to be, cash flow from operations andborrowings under our Credit Facility. Our principal uses of cash have been, and are expected to be, the debtservice requirements of our indebtedness described below, dividends toAdvanstar, Inc. to permit funding of its debt service, capital expenditures,investments in our products and selective acquisitions.

*Sources and uses of funds*

Operating cash flows may besignificantly affected by the working capital characteristics of our business.We generally operate with negative working capital, excluding cash and currentmaturities of long-term debt, due to the impact of deferred revenue from shows,which is billed and collected as deposits up to one year in advance of therespective show. Deferred revenue increases on the balance sheet in thequarters immediately preceding our busy first and third quarter show season aswe collect deposits for booth space several months in advance of theshows.  Revenue and contribution marginare recognized in the quarter that the events are held, resulting in thereversal of the deferred revenue.

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We anticipate that our operatingcash flow, together with borrowings under the Credit Facility and other futurefinancings and refinancings, will be sufficient to fund our anticipated futureoperating expenses, capital expenditures, debt service, dividends to ourparent, Advanstar, Inc., to be used for servicing its debt obligations, andother obligations as they become due. However, our ability to make scheduled payments of principal, to payinterest on or to refinance our indebtedness and to satisfy our other debtobligations will depend upon our future operating performance.  Our future performance and continuedcompliance with the covenants contained in our Credit Facility will be affectedby general economic, financial, competitive, legislative, regulatory, businessand other factors beyond our control.  Weexpect to be in compliance with our debt covenants during 2007.

Historically, our financing requirements have beenfunded primarily through cash generated by operating activities and borrowingsunder our revolving Credit Facility. From time to time, we have also raised additional funds through sales ofcommon stock, high yield offerings and term borrowings under our CreditFacility for purposes of completing selective acquisitions.

As of December 31, 2006, we had cash and cashequivalents of $36.9 million and also had $48.4 million in availability underour revolving Credit Facility. The following table shows our cash flow activityfor the years ended December 31, 2006, 2005 and 2004, including the results ofdiscontinued operations, and should be read in conjunction with theconsolidated statements of cash flows:
| **(in thousands)**                               | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net cash  provided by operating activities       |       | $        | 36,294     |     | $          | 8,235    |       | $ | 18,901 |   |
| Net cash (used  in) provided by investing activities  |       | (14,338  | )          | 148,959  |       | 4,996    |       |
| Net cash used in  financing activities                |       | (30,966  | )          | (152,635 | )          | (12,515  | )          |
| Effect of  exchange rate changes on cash              |       | (681     | )          | 754      |       | 576      |       |
|                                                  |       |     |       |     |       |     |       |
| Net (decrease)  increase in cash and cash equivalents |       | $        | (9,691     | )        | $          | 5,313    |       | $ | 11,958 |   |

 

*Cash flows from operatingactivities*

Net cash provided by operationswas $36.3 compared to $8.2 million in 2005.  The$28.1 million increase in cash provided by operating activities in 2006compared to 2005 was due principally to a reduction in cash interest paymentsof $7.0 million, an increase in our outstanding accounts payable and otherliabilities of $25.5 million, which includes $29.6 in contingent consideration payable in 2007, an increase in cash collected in advance of ourfirst quarter 2007 events of $4.7 million and $9.1 million in non-recurringcash fees and expenses related to our repayment of a portion of our outstandingdebt in June 2005, partially offset by declines in operating results andprepaid expenses.

Net cash provided by operationsdecreased $10.7 million to $8.2 million in 2005 compared to $18.9million in 2004.  This decline was dueprimarily to $9.1 million of cash fees and expenses related to our repurchaseof a portion of our outstanding debt in June 2005, severance payments of $1.5 millionassociated with restructuring activities, and the reduction in cash flowattributable to discontinued operations.  During 2005, net cash provided bydiscontinued operations was $1.7 million, which represents approximately 20.4%of total net cash provided by operations. The declines discussed above werepartially offset by a $6.8 million reduction in cash interest payments and a$9.3 million increase in operating income in 2005 compared to 2004.

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*Cash flows from investingactivities*

Net cash used in investingactivities was a usage of $14.3 millionin 2006 compared to $149.0 million provided by investing activities in2005.  In 2005 we received $174.1 million ofproceeds  from the sale of the Portfolio Group. This was partially offset by $15.6 million of cash usedfor the acquisitions of Off-Road Expo, POOL, Project and two other smallacquisitions in 2005.  We also increasedcapital expenditures in 2006 for computer upgrades, applications developmentand for build-outs and furnishing of our new downsized office in New York.  We believethat this amount of capital expenditure will be adequate to grow our businessaccording to our business strategy and to maintain the key tradeshows,publications and business of our continuing operations. We expect our 2007capital expenditures to be approximately $11.5 million.

Net cash provided by investing activities increased $143.9 million to $149.0 million in2005, from $5.0 million in 2004 due primarily to the sale of thePortfolio Group as discussed above. This increase was partially offset by theuse of cash for 2005 acquisitions as discussed above.  In 2004, we used $7.9 million in cash usedfor the acquisition of IVT in 2004.

We did not complete any acquisitions in 2006. In connection with any future acquisitions, as apart of our on-going business strategy, we may require additional funding,which may be provided in the form of additional debt or equity financing or acombination thereof.  There can be noassurance that any additional financing will be available to us on acceptableterms or in a manner that complies with the restrictive covenants in our debtinstruments.  Consistent with ourlongstanding strategy, we continue to pursue potential acquisitions ofcomplementary businesses.

*Cash flows from financing activities*

Cash used in financing activitiesin 2006 was $31.0 millioncompared to $152.6 million in 2005. In 2006, we paid $29.1 million in dividends to our stockholder,Advanstar, Inc., to be used for cash interest payments that commenced in 2006 relating to its 15% senior discount notes and fora stock and to be used to repurchase shares and options of AdvanstarHoldings Corp. (“Advanstar Holdings” or “Holdings”), our ultimate parentcompany, held by a former Chief Executive Officer. We also repaid the remaining $9.8 million of our second priorityfloating rate notes at par in August 2006. We borrowed $10.0 million and incurred financing costs of $1.7 millionin connection with the amendment and restatement of our Credit Facility in May2006 (see “—Credit facility amendment and restatement”).  In March 2005, we repaid $4.6 million of ouroutstanding Term Loan B with the proceeds from the 2004 sale of a tradeshowbusiness.  In June 2005, we repaid ouroutstanding Term Loan B of $20.4 million and repurchased $126.5 million of ourfloating and fixed rate notes, using the proceeds from Portfolio Group sale.

Net cash flowsused in financing activities was $152.6 million in 2005 compared to $12.5million in 2004.  In 2005, we repaid ourTerm B Loan and repurchased a portion of our fixed and floating rate notes asdescribed above. We repaid $11.7 million of debt in 2004, including $8.0million of our revolving Credit Facility borrowings.

*Debt service*

As of December 31, 2006, we had total indebtedness of$461.9 million and $48.4 million of borrowings available under ourrevolving Credit Facility.  Our principaldebt obligations are described below.

*Credit facility amendment and restatement*

On May 24, 2006, we amended and restated our existingCredit Facility. The amended Credit Facility reduced the revolving loancommitment amount from $60.0 million to $50.0 million, added a $10.0 millionTerm Loan, modified certain restrictive covenants and extended the maturitydate from April 2007 to May 2009 for the entire Credit Facility.  The amendment also eliminated the minimum quarterly fixed charge coverage ratiocovenant.

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*Credit facility and second priority secured andfloating rate notes repayment*

As a result of the sale of the Portfolio Group, our second prioritysenior secured notes indenture required that we either use the remaining netproceeds (after repayment of the Credit Facility borrowings) to invest in ourbusiness or to offer to purchase our second priority senior secured notes atpar plus accrued interest.  In June 2005,we offered to purchase up to $140.0 million of the second lien notes.  Holders of the $8.7 million principal amountof the 10.75% Second Priority Senior Secured Notes (the “fixed rate notes”)tendered their notes for purchase, and we purchased all such notes.

Also in June 2005, we completed a cash tender offer for any and all ofour outstanding Second Priority Senior Secured Floating Rate Notes due 2008(the “floating rate notes”).  Holders ofthe $117.8 million aggregate outstanding principal amount of the floating ratenotes tendered their notes for purchase, and we purchased all such notes at aprice equal to 107.3% (including a 3% consent fee) of outstanding principalplus accrued interest.  In connectionwith the tender offer, we received consents to proposed amendments to theindenture governing the notes, resulting in the elimination of substantiallyall of the restrictive covenants and certain default provisions with respect tothe floating rate notes.

InAugust 2006, we used a portion of the proceeds from the Credit Facility TermLoan to redeem all of our remaining $9.8 million ofoutstanding floating rate notes at par.

*Credit facility*

Our Credit Facility consists of a $50.0 millionrevolving credit facility which terminates in May 2009, and a $10.0 millionterm loan which matures in May 2009. Borrowings under the Credit Facility generally bear interest based on amargin over, at our option, the base rate or LIBOR.  The applicable margin for revolving creditloans varies based upon our ratio of consolidated debt to EBITDA, as defined inthe Credit Facility, and is currently 2.5% over LIBOR or 2.5% over the baserate.  The Company incurs a dailycommitment fee of 0.5% and 1.25% per annum for unused revolving loanavailability and standby letters of credit, respectively.

Our obligations under the Credit Facility areguaranteed by Holdings, Advanstar, Inc., our direct parent company, andall of our existing and future domestic subsidiaries.  Our obligations under the Credit Facility arecollateralized by substantially all of the assets of our company and thesubsidiary guarantors, including a pledge of the capital stock of all ourexisting and future domestic subsidiaries, a pledge of no more than 65% of thevoting stock of any foreign subsidiary directly owned by our company or anydomestic subsidiary, a pledge of all intercompany indebtedness in favor of ourcompany and our domestic subsidiaries, a pledge of our company’s capital stockheld by our direct parent company, and a pledge of our direct parent company’scapital stock held by Holdings.  TheCredit Facility contains restrictive covenants, including limitations oncertain asset dispositions, dividends, investments and other restrictedpayments.  Failure to comply with the covenants could causean event of default under the Credit Facility.

*Second priority senior securednotes*

Our $292.0 million of fixed rate notes mature in2010.  The notes are guaranteed by eachof our existing and future domestic restricted subsidiaries and collateralizedby second-priority liens on the assets collateralizing our CreditFacility (other than certain subsidiary stock and assets of our parentcompanies).  The fixed rate notes bearinterest at an annual rate of 10.75%, which is payable semi-annually in cash.  The notes contain restrictive covenants that,among other things, limit our ability to incur debt, pay dividends and makeinvestments.

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*Senior subordinated notes*

Our $160 million 12% senior subordinated notesmature in 2011 and are guaranteed by each of our existing and future domesticrestricted subsidiaries. Interest on the notes is payable semi-annually incash.  The notes contain restrictivecovenants that, among other things, limit our ability to incur debt, paydividends and make investments.

*Parent company notes*

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

The restrictive covenants in our senior secured notesindenture and senior subordinated notes indenture provide that we can paydividends only if our leverage ratio (as defined) is 6.0 to 1.0 or better andonly from a “basket” equal to the amount by which our cumulative EBITDA (asdefined) since January 1, 2001 exceeds 150% of our cumulative interest expensein that same period plus other items, including proceeds from equity offerings.In addition to the basket and notwithstanding the leverage ratio limitation onrestricted payments, we can make additional restricted payments in anaggregate amount of up to $20 million to Advanstar, Inc., none of which has been used as of December 31,2006.   As of December 31, 2006,our leverage ratio under the most restrictive of these indentures was5.5 to 1.0.  Both in March 2006 andOctober 2006, we declared and paid a dividend of $12.9 million to Advanstar,Inc. to be used for servicing its debt obligations.  In February 2007, we declared a dividend of$12.9 million payable to Advanstar, Inc. to be used for servicing its April2007 debt obligations.

Debt service on the discount notes will be $25.8million in 2007.  We expect our resultswill allow us to continue to make dividend payments to Advanstar, Inc. forpurposes of servicing this debt. However, our results are subject to a variety of factors, includinggeneral economic conditions and conditions in our markets.  We may notgenerate sufficient cash flow from operations or be permitted by the terms ofour debt instruments to pay future dividends to Advanstar, Inc. in amountssufficient to allow it to pay cash interest on the parent company notes.   If Advanstar, Inc. is unable to meet itsdebt service obligations, it could attempt to restructure or refinance itsindebtedness or seek additional equity capital.   We cannot assure you that Advanstar, Inc.will be able to accomplish these actions on satisfactory terms or at all.  A default under the parent company notescould result in an acceleration of all outstanding loans under our CreditFacility which, in turn, would trigger a cross-default under both oursecond priority senior secured notes and our senior subordinated notes.

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*Contractual and contingent obligations*

Our contractual obligations (excluding accountspayable and accrued expenses), as of December 31, 2006 are as set forth below:
| ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **After** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|-----------|------------|------------|------------|
| **(in millions)**                        | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2011**  | ** ** | **Total**  | ** ** |
| Indebtedness                                  |       | $          | —     |       | $          | —     |       | $          | 10.0       |       | $          | 291.3     |       | $          | 160.0      |   | $ | — |   | $ | 461.3 |   |
| Interest on  indebtedness (1)                 |       | 51.6       |       | 51.6       |       | 51.1       |       | 42.7       |       | 9.6        |       | —    |       | 206.6      |       |
| Acquisition  related compensation payable (2) |       | 29.6       |       | —     |       | —     |       | —     |       | —     |       | —    |       | 29.6       |       |
| Operating lease  obligations                  |       | 4.7        |       | 4.5        |       | 3.1        |       | 2.7        |       | 2.1        |       | 5.8       |       | 22.9       |       |
| Total  contractual cash obligations           |       | $          | 85.9       |       | $          | 56.1       |       | $          | 64.2       |       | $          | 336.7     |       | $          | 171.7      |   | $ | 5.8 |   | $ | 720.4 |   |

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(1)          Interest on our variablerate debt is calculated using LIBOR of 5.3%, the rate in effect on December 31,2006.  Because our variable rate debtbears interest at a variable rate, actual payments could differ.

(2)          Relates to contingentcompensation obligations relating to acquisitions which had not been paid as ofDecember 31, 2006.

We have no materialcapital lease obligations or purchase obligations.  We have contingent obligations composed of$1.6 million of letters of credit securing our lease facilities.

*Off-balancesheet arrangements.*

Wehave no material off-balance sheet arrangements.

**Recently Issued Accounting Standards**

In July 2006 FASB issued Interpretation No. 48 (“FIN48”) *Accounting for Uncertainty in Income Taxes — aninterpretation of FASB Statement No. 109*.  FIN 48 prescribes arecognition threshold and measurement process for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return.  Additionally, FIN 48 provides guidance on thederecognition, classification, accounting in interim periods and disclosurerequirements for uncertain tax positions.  The accounting provisions ofFIN 48 will be effective for us beginning January 1, 2007.  We have notcompleted our evaluation of FIN 48 and the effect its adoption will have on ourconsolidated financial statements.

In September 2006, the FASBissued Statement of Financial Accounting Standard No. 157, *Fair Value Measurement (“*FAS 157”). FAS157 defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements. This Statement does not require any new fair value measurements.  FAS 157 is effective for us on January 1,2008. We have notcompleted our evaluation of FAS 157 and the effect its adoption will have onits consolidated financial statements.

The FASB also issued in September 2006Statement of Financial Accounting Standards No. 158, *Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans*(“FAS158”). The new standard requires companies to recognize the overfundedor underfunded status of a defined benefit postretirement plan as an asset orliability on the balance sheet and to recognize changes in that funded statusin the year in which the change occurs through comprehensive income. FAS 158provides for adoption effective December 31, 2007 for companies that do nothave publicly traded equity securities. As such, our consolidated balance sheet as of December 31, 2007 willreflect the funded status of our postretirement benefit plans, with the 

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offset reported in other comprehensive income (loss).If we had adopted FAS 158 on December 31, 2006, we would have recorded anadditional $1.2 million of other long term liabilities and other comprehensiveincome on our consolidated balance sheet. We do not expect the actual impactupon adoption on December 31, 2007 to be materially different from this impact.

In September 2006, the Securities and Exchange Commission issued StaffAccounting Bulletin No. 108 (“SAB 108”), *FinancialStatements — Considering the Effects of Prior Year Misstatements whenQuantifying Misstatements in Current Year Financial Statements*. SAB108 provides guidance on how prior year misstatements should be taken intoconsideration when quantifying misstatements in current year financialstatements for purposes of determining whether the current year’s financialstatements are materially misstated. SAB No. 108 had no impact on ourconsolidated financial statements.

# ***Item 7A. — QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKETRISK***

We are exposed to various marketrisks, which are the potential losses arising from adverse changes in marketrates and prices, such as foreign currency exchange and interest rates.  We do not enter into derivatives or otherfinancial instruments for trading or speculative purposes.  We have previously entered into financialinstruments to manage and reduce the impact of changes in interest rates andforeign currency exchange rates. However, we have no such instruments asof December 31, 2006.

#### **Interest Rates**

At December 31, 2006, we hadfixed rate debt of $451.9 million and variable rate debt of $10.0 million.   A change in interest rates of 1% would notbe material to us.

#### **Currencies**

Outside of the United States, we maintain assetsand operations in the United Kingdom. These assets and operations, and ourexposure to any currency gains or losses, are not material to our operatingresults.

**Item 8. — *FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA***

Please refer to Item 15.—Exhibits and Financial Statement Schedules.

**Item 9. — *CHANGES INAND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE***

No events have occurred whichwould require disclosure under this Item.

**Item 9A. — *CONTROLS ANDPROCEDURES***

#### **Evaluationof Disclosure Controls and Procedures**

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

#### **Changes inInternal Controls**

There were no significantchanges during the Company’s fourth fiscal quarter in our internal controlsover financial reporting that have materially affected or are reasonably likelyto materially affect the Company’s internal controls over financial reporting.

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**Item 9B. —** OTHER INFORMATION

None.

**PART III**

**Item 10. — *DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT***

The following table sets forththe name, age and position of each of our executive officers and directors.
| **Name**            | ** ** | **Age** | ** ** | **Position**                                                                    |
|---------------------|------------|---------|------------|---------------------------------------------------------------------------------|
|                |       |    |       |                                                                            |
| Joseph Loggia       |       | 47      |       | Chief Executive Officer and Director                                            |
| James M. Alic       |       | 64      |       | Vice President, Chairman of the Board and Director                              |
| Theodore S.  Alpert |       | 50      |       | Vice President — Finance, Chief Financial Officer  and Assistant Secretary |
| Daniel M.  Phillips |       | 44      |       | Executive Vice President                                                        |
| Laura McConnell     |       | 37      |       | Executive Vice President — Fashion Group                                   |
| Eric I. Lisman      |       | 50      |       | Executive Vice President Corporate Development                                  |
| R. Steven Morris    |       | 55      |       | Vice President                                                                  |
| Rick Treese         |       | 36      |       | Vice President — Chief Technology Officer                                  |
| OhSang Kwon         |       | 38      |       | Director                                                                        |
| Douglas B. Fox      |       | 59      |       | Director                                                                        |
| Charles Pieper      |       | 60      |       | Director                                                                        |
| Kamil Salame        |       |    |       | Director                                                                        |
| Scott Marden        |       |    |       | Director                                                                        |

 

Setforth below is a description of the backgrounds, including business experienceover the past five years, for each of our directors and executive officers.There are no family relationships that exist between any of our directors orexecutive officers. Under our bylaws, our officers are elected by the Board ofDirectors and hold office until their respective successors are duly electedand qualified.

**Executive Officers**

*Joseph Loggia* has served as ChiefExecutive Officer since January 1, 2004, and has served as our President andDirector since May 2002.  Prior to May2002, he served as President and Chief Executive Officer of MAGIC (oursubsidiary). Prior to our acquisition of MAGIC, he served as MAGIC’s Presidentand Chief Executive Officer.  Prior tojoining MAGIC, Mr. Loggia was a manager at the accounting firm ofCoopers & Lybrand.

*James M. Alic* has served asChairman of the Board and Vice President since August 2004.  He previously served as our Vice Chairman andVice President from July 1996 to July 2004.  From June 1995 to June 1996, he wasVice President and Controller of IBM Corporation.  From September 1994 to May 1995, hewas Chairman of Reed Exhibition Companies. From August 1991 to August 1994, he was President of ReedExhibitions North America.

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*TheodoreS. Alpert* has served as our Vice President-Finance, ChiefFinancial Officer, and Assistant Secretary since September 2006. From March2005 to September 2006, he served as Chief Financial Officer of IPSCorporation.  Previously, from October2000 to September 2004, Mr. Alpert was Executive Vice President and ChiefFinancial Officer of Transtar Metal Holdings, Inc and from September 1988 toOctober 2000, he served as Executive Vice President and Chief Financial Officerof Centis Inc. (f/k/a 20th Century Plastics, Inc.).

*Daniel M. Phillips*has served as Executive Vice President of our Powersports and Automotive marketgroup since 2003.  Prior to that, he was Vice President and GeneralManager of Advanstar’s Technology groups.  Mr. Phillips joined Advanstarin 1996 as Group Publisher of America’s Network, Telecom Asia andComunicaciones magazines, and in 1998 was promoted to Vice President andGeneral Manager.  Prior to joining Advanstar, Mr. Phillips was responsiblefor publications and events for EMAP (U.K.) in the area of IT & Telecommunications.

*LauraMcConnell* has servedas Executive Vice President of our Fashion group since June 2006. Starting in2002 through June 2006, she served as Vice President and General Manager ofAdvanstar’s fashion group.  Ms. McConnell was the general manager of WWDMAGICfrom 2000 to 2002.  Since joining Advanstar in 1997, Ms. McConnell servedin a variety of roles before being promoted to Vice President of Marketing andAttendee Development in 1999.

*R.**Steven Morris* currently serves as Vice President responsiblefor the Healthcare, Science and Pharmaceutical markets.  Prior to June 2005, he was Vice President ofthe Market Development Group. Mr. Morris joined Advanstar in 2004.  Prior to joining Advanstar, Mr. Morriswas Chief Operating Officer for Metro International Newspapers for the Americasand Asia from 2002-2004 andPresident and Chief Executive Officer of Profile Weekly Magazine from1999-2002.

*Eric I. Lisman* has served as our Executive Vice President -Corporate Development since November 2001.  He previously served as ourGeneral Counsel from September 1998 to February 2005.  Prior to joiningAdvanstar, Mr. Lisman engaged in a private legal and investment bankingpractice.  He also served from 1987-1997 as Corporate Counsel and GeneralCounsel of Reed Publishing USA, the parent company of Reed Exhibition Companiesand Cahners Publishing Company.

*Rick Treese* has served as our Vice President and Chief Technology Officer sinceMarch of 2002, a role he moved to after two years as the CTO ofAdvanstar.com.  Prior to Advanstar, Mr.Treese was Vice President of Technology at Goldman, Sachs & Company wherehe led the software development effort for the Equity Research Division.

**Directors**

*Joseph Loggia.*  See “Executive Officers.”

*James M. Alic.*  See “Executive Officers.”

*OhSang Kwon* has served as a director since October2000.  Since July 2005, Mr. Kwon has been a partner of Avista CapitalHoldings, LP, a private equity firm. From February 2000 to June 2005, he servedas a Partner, Principal, and Vice President of DLJ Merchant Banking, Inc. Mr. Kwon currently serves on the Board of directors of ACP Phillips InvestmentResources, Professional Career Development Institute and Thompson PublishingGroup.

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*Douglas B. Fox* has served as adirector and chairman of the audit committee since September 2002.  Mr. Fox is a private investor andconsultant.  Prior to his currentactivities, he served as Senior Vice President of Marketing and Strategy atCompaq Computer Company from 2000 to 2001 and Senior Vice President ofMarketing at International Paper Inc. from 1997 to 2000.  He served as President of LandmarkCommunications Inc. from 1994 to 1996 and prior to that from 1987 to 1994he served as President and Chief Operating Officer at Newsday in New York.  Mr. Fox currently serves on the Board ofDirectors of The Vitamin Shoppe, Microban International, Ltd., Browne &Co., Young America, Precision IR, Totes/Isotoner and The Oreck Corporation.

*Charles Pieper*hasserved as a Director since August 2004. Mr. Pieper is a Managing Director of Credit Suisse Securities (USA), LLCin the Asset Management division. He is Vice Chairman of AlternativeInvestments, with oversight responsibility for Diversified Strategies, andheads the AI Business Development Task force. Prior to joining Credit Suisse in2004, Mr. Pieper worked at General Electric for 18 years and served asPresident and Chief Executive Officer of GE Japan, Korea, Taiwan; GE MedicalSystems Asia; Yokogawa Medical Systems; GE Lighting Europe and GE Trading Co.He joined GE in 1981, after five years in the Navy, including service inVietnam. Mr. Pieper was also an Executive Advisor at the Boston ConsultingGroup and an Operating Partner with Clayton, Dubilier & Rice andspearheaded CD&R’s European practice. Mr. Pieper holds a BA from Harvard College and an MBA from HarvardBusiness School, with distinction. Mr. Pieper is a Director of Grohe AG,Jostens, Inc., and Visant. He previously served as Chairman of the Board andActing CEO of Alliant Foodservice, Inc., Chairman of the Board of ItaltelHolding S.p.A. and North American Van Lines, Vice Chairman of Dynatech and heldboard positions in Mueller Holdings Inc., and Safilo S.p.A. and &Wastequip.

*Kamil Salame* has served as a director sinceFebruary 2007.  Mr. Salame is a ManagingDirector and Partner of DLJ Merchant Banking Partners.  Mr. Salame joinedDLJ’s Investment Banking Division in 1995 and DLJ Merchant Banking Partners in 2000. Prior to joining DLJMerchant Banking Partners, Mr. Salame worked at DLJ Real Estate CapitalPartners, DLJ Merchant Banking Partners’ real estate private equity affiliate. He received a B.S. from Georgetown University in 1990, an M.B.A. fromColumbia Business School in 1995, where he was an Editor and Fellow of theColumbia Journal of World Business, and a J.D. from Columbia University Schoolof Law in 1995, where he was a Harlan Fiske Stone Scholar.   Mr.Salame is a director of Aspen Insurance Holdings Limited, Merrill Corporation,Professional Career Development Institute, LLC, US Express Leasing, Inc.,HealthMarkets, Inc. and Peachtree Holdings.

*ScottMarden*has served as a director since February 2007. Mr.Marden is Chairman of Media Partners, DLJ Merchant Banking Partners, and CreditSuisse Alternative Investments, based in New York. He is responsible for DLJMBPartners media related investments.  Mr.Marden joined Credit Suisse in June 2006 from the McGraw-Hill Companies wherehe was President of the Information & Media Segment and a member of themanagement committee. Mr. Marden has over 20 years of investment and managementexperience in the media industry. As a senior executive, in addition toMcGraw-Hill he has served as, President & COO of Marvel Entertainment andCEO of Philips Media, a $1.5 billion unit of Philips Electronics. In media financehe served as Sr. M.D. and head of media investment banking at Bear Stearns,Schroder and Bankers Trust, and was also a founding partner of Compass PartnersL.L.C., a $930 million private equity fund. Mr. Marden holds a B.A. degree from Fordham University and received anA.M. and conducted Ph.D. coursework in economics and social science at theUniversity of Chicago.

All of our directors also serve on the Board ofDirectors of Advanstar, Inc.

**AuditCommittee Financial Expert**

Our Audit Committee iscomprised of two non-management directors who are appointed by the Board ofDirectors:  Mr. Douglas B. Fox, and Mr.OhSang Kwon.  Our Board of Directors hascarefully considered the definition of “audit committee financial expert”adopted by the United States Securities and Exchange Commission and hasdetermined that Mr. Fox is an audit committee financial expert.  Our Board of Directors has determined thatMr. Fox is not independent under Rule 10A-3 of the Exchange Act.

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**Codeof Ethics**

We have adopted a Code ofEthics applicable to our Chief Executive Officer and Chief Financial Officer,which is compliant with Item 406 of Regulation S-K.  Our Code of Ethics is posted on our websiteat http://www.advanstar.com.  Any waiversor amendments to our Code of Ethics that apply to our Chief Executive Officeror our Chief Financial Officer that are required to be disclosed by SEC ruleswill be disclosed on our website within five business days following suchwaiver.

**Item 11. — *EXECUTIVE COMPENSATION***

**Compensation Discussion andAnalysis**

This CompensationDiscussion and Analysis provides a description and explanation of ourcompensation philosophy, policies and practices with respect to our ChiefExecutive Officer and key members of senior management, who are collectivelyreferred to as the named executive officers.

The objectives of ourexecutive compensation philosophy are to attract and motivate key executivepersonnel who possess the talent, experience and skills necessary for us toexecute our strategy and achieve our business plan, to reward those individualsfairly and to retain those individuals who continue to perform at or above ourexpectations.

Our named executiveofficers’ performance-based compensation program has three components: acash-based annual salary, an annual cash incentive bonus award and long-termstock option awards. The incentive components are designed to rewardachievement of measurable company, business segment and individual performanceobjectives and to align our named executive officers’ incentives withstockholder value creation. Our current compensation package is designed toprovide a balance between achieving our business objectives and providingcompetitive compensation to our executives. The equity compensation componentis designed to closely align our executives’ pay with the interests of ourstockholders.

Except as describedbelow, our Board of Directors has not adopted any formal or informal policiesor guidelines for allocating compensation between long-term and currently paidout compensation, between cash and non-cash compensation, or among differentforms of compensation. This is due to the relatively small size of ourexecutive team and the need to tailor each executive’s award to attract andretain that executive.

To achieve these objectives,the company has maintained, and expects to further implement and maintain, acompensation plan that ties a substantial portion of our executives’ overallcompensation to the achievement of key strategic goals. The company evaluatesindividual executive performance with a goal of setting compensation at levelswe believe are comparable to executives in other companies of similar size andstage of development operating in this industry, while taking into account ourrelative performance and our own strategic goals.

***Elements of Compensation***

The principal componentsof compensation of our named executive officers consist of the followingelements:

*BaseSalary***.** Base salariesof our named executive officers are determined by evaluating the nature andresponsibility of the position, the expertise of the individual and thecompetitiveness of the market for the executive’s services, also taking intoaccount comparison to internal peers. We review base salaries annually, andadjust them from time to time in order to realign our salaries with marketlevels, after taking into account individual performance and contributions. Anexecutive’s actual base salary recognizes individual skills, experience,sustained job performance and impact on the organization. This review occurredin the fourth quarter of the previous fiscal year and the first quarter of thecurrent fiscal year.

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*2006Incentive Plan.* In setting compensation, the companyconsiders annual cash incentives based on company and individual performance tobe an important tool in motivating and rewarding the performance of our namedexecutive officers. Performance-based cash incentive compensation is paid toour named executive officers, other than our Chief Executive Officer, pursuantto our incentive bonus program.

The Company has theauthority to award discretionary annual bonuses to our executives under theterms of our 2006 Incentive Program, which formalizes our current proceduresfor granting annual bonus awards to our named executive officers. The bonus planprovides for annual cash bonuses for executives for achievement of corporateand business segment financial and operational goals and for achievement ofindividual goals and performance objectives. The amount of the cash bonusdepends on the level of achievement of the stated corporate, business sector, and individual performancegoals such as increased tier penetration, expansion of a business sector,establishment/maintenance of key strategic relationships, repositioning of aproduct line, or the launch of new products. Individual targets vary and are set depending upon the individualexecutive, but are based upon more subjective, non-financial strategic factorsrelated to that executive’s area of responsibility. The quantitative performance measurefor all named executive officers to achieve their bonus target in the currentfiscal year was based on achievement of 10% of Company EBITDA or 10% of sectorcontribution margin growth over prior fiscal year. The Chief Executive Officerhas the authority to award bonuses, set the terms and conditions of thosebonuses and take all other actions necessary for the plan’s administration.

Thecorporate goals for each named executive officer participating in the IncentiveProgram are set each year by our Chief Executive Officer and set forth inwriting. Individual goals for each named executive officer are set by the ChiefExecutive Officer during the fourth quarter of the previous year or the earlyin the current year for each fiscal year. These objectives vary, depending onthe role of each individual executive and the sector for which he/she isresponsible and relate to financial goals and strategic factors related to alllevels of business activity such as EBITDA growth over prior year, contributiongrowth for sector over prior year and strategic factors related to sales,marketing, editorial and show operations, tied to qualitative scorecardmetrics.

Thelevel of achievement of both the corporate and individual goals is monitored onan informal basis by the Chief Executive Officer on an ongoing basis throughoutthe year. At the end of the year, as part of each named executive officer’sevaluation and compensation review, the assessment of performance of anexecutive in achieving the individual goals, as well as the executive’scontribution to achieving the corporate goals, is finalized.

The annual bonus is paidin a single installment in the first quarter following the completion of agiven fiscal year. Our Board of Directors approves the annual bonus award forthe Chief Executive Officer. The Chief Executive Officer reviews his bonusrecommendations for the named executive officers’ bonuses with a designatedBoard member.

*ChiefExecutive Officer.*The annual salary, target bonus andmaximum bonus for the Chief Executive Officer are set forth in his employmentagreement of which the terms were agreed upon by the Board of Directors. Toalign compensation with our performance, the Chief Executive Officer’s bonustarget is equal to his salary. Due to achievement of certain strategic goals in2006 along with the achievement of budgeted EBITDA, the Board of Directorsgranted the Chief Executive Officer the maximum bonus. See Individual Executive Employment Agreements andArrangements section below for additional discussion of the ChiefExecutive Officer’s compensation.

***Long-Term Incentives***

We believe that long-termperformance is achieved through an ownership culture that encourages long-termparticipation by our named executive officers in equity-based awards. Weutilize stock options to reward long-term performance and to ensure that ournamed executive officers have a continuing stake in our long-term success andto help align those employees’ interests with the interests of ourstockholders. We believe that the use of stock-based awards offers the bestapproach to achieving those goals.

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The authority to makeequity-based awards to named executive officers rests with our Board ofDirectors, which may consider the recommendations of our CEO. The options forour named executive officers are granted by the Board of Directors at regularlyscheduled board meetings and the exercise price of our options is establishedpursuant to the Advanstar Holdings Corp. 2000 Management Incentive Plan, asamended.

Currently, we do not haveany program, plan or practice that requires us to grant equity-based awards tosenior management annually or on any specified dates.  Named executive officers may be provided withan option grant when they join the company, based upon their position with usand their relevant prior experience. In addition to any initial grant, ourChief Executive Officer recommends, and our Board of Directors grants,additional options to retain our executives in connection with the achievementof corporate goals and strong individual performance. Additional option grantsare not communicated to executives in advance.

Options vest between thegrant date of the option grant up to a maximum of the ninth anniversary of thegrant. Once vested, the options are fully exercisable. Options expire ten yearsfrom the grant date. We spread the vesting of our options over a period ofyears to compensate executives for their contribution over a period of time.

***Other Benefits***

We believe establishingcompetitive benefit packages for our employees is an important factor inattracting and retaining highly qualified personnel. We provide our namedexecutive officers with benefits that are generally available to all employeesand they are eligible to participate on the same basis as all employees, in allof our employee benefit plans, including company-paid medical, dental andvision, basic group life and accidental death and dismemberment insurance,short and long-term disability, Employee Assistance Program (EAP) and our401(k) plan.

***401(k) Plan***

We maintain a retirementsavings plan, or a 401(k) Plan, for the benefit of our eligible employees.Employees eligible to participate in our 401(k) Plan are those employees whohave attained the age of 21. Currently, employees may elect to defer their compensationup to the statutorily prescribed limit. Highly compensated employeeparticipation levels are limited in accordance with the limits set annually bythe IRS.

After an employee hascompleted one year of service, the company provides a matching contribution upto the first two percent of the participant’s paid compensation. An additional$.25 is matched on each dollar contributed, up to an additional four percent ofpaid compensation. Company contributionsvest in equal installments over five years. An employee’s interests inhis or her deferral are 100% vested when contributed. The 401(k) Plan is aqualified plan under Sections 401(a) and 501(a) of the Internal Revenue code.As such, contributions to the 401(k) Plan and earnings on those contributionsare not taxable to the employees until distributed from the 401(k) Plan, andall contributions are deductible by us when made. We do not offer pension orretirement benefits to any of our named executive officers.

***Severance and Change of Control Payments***

Certain of our namedexecutive officers have severance or change of control agreements with ustriggered by termination oftheir employment without cause or following a change in our control.Those severance and change of control arrangements are described below.

***Executive Time Off***

Our named executiveofficers receive time off in one of two ways, either according to the terms ofthe Vacation Accrual Policy or pursuant to the terms they negotiated with us in connection with theirrecruitment. Our named executive officers are expected to managepersonal time off in a manner that does not impact performance or achievementof goals. In the event of thetermination of an executive officer’s employment and subject to the terms ofthe Vacation Accrual Policy, the executive officer is entitled to payment ofhis or her accrued and unused benefit.

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***Conclusion***

Our compensation policiesare designed to retain and motivate our named executive officers and toultimately reward them for outstanding individual and corporate performance.

***Subsequent Event***

On March 28, 2007, concurrent with the approvalof the Merger Agreement, the Board of Directors also approved an amendment tothe amended and restated employment agreement and a new severance paymentacceleration agreement (“Acceleration Agreement”) with our Chief ExecutiveOfficer.

The amendment to the employment agreement would onlybecome effective on consummation of the merger and would reduce the maximum bonuspayable to the Chief Executive Officer upon a change of control to $1.0 million.  The Acceleration Agreement provides for apayment of $3.1 million upon completion of the merger in lieu of theamounts to which he was previously entitled under the employment agreement asdescribed below in “—Individual Executive Employment Agreements andArrangements”. The Acceleration Agreement in essence accelerates these paymentsand removes the resignation requirement.

Further, upon the closing of the merger, the ChiefExecutive Officer and our Chairman of the Board and Vice President will receiveadditional compensation of approximately $0.6 million and $0.2 millionin lieu of stock options they otherwise would otherwise been granted.

The Board of Directors also approved change of controlbonuses for key executive officers other than our Chief Executive Officer anddirectors upon closing of the merger. All of our namedexecutives would be eligible for change of control bonuses totaling $1.8 millionin the aggregate. Certain directors would be eligible for change ofcontrol bonuses totaling $0.6 million in the aggregate.

See “Management’s Discussion and Analysis-RecentDevelopments-Subsequent Event” for further information on the Merger Agreement.

**Board ofDirectors Compensation Report**

The Board of Directors has reviewed and discussed theCompensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Board ofDirectors recommended that the Compensation Discussion and Analysis be includedin this annual report.

**Board of Directors**

 

JamesM. Alic Joseph Loggia

OhSangKwon

DouglasB. Fox

CharlesPieperKamil Salame*

Scott Marden

 

*Mr. Salame did not participate indeliberations regarding the CompensationDiscussion and Analysis.

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**Compensation Tables andNarratives**

***Summary Compensation***

The following table presentsspecific compensation or components of paid compensation to our “namedexecutive officers,” including Chief Executive Officer, Chief FinancialOfficers and the three other most highly paid executive officers in the current fiscal year, for the pastthree fiscal years ended December 31, 2006:
| Name and Principal Position     | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus   (1)  ($)** | ** ** | **Non-Equity  Incentive Plan  Compensation   (2)  ($)** | ** ** | **Option  Awards  (3)  ($)** | ** ** | **All Other  Compensation  ($)** | ** ** | **Total  ($)** | ** ** |
|---------------------------------|------------|----------|------------|-----------------|------------|---------------------------|------------|-------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------------|------------|----------------|------------|
| Joseph Loggia                   |       | 2006     |       | $               | 625,000    |                      | $          | 310,273                                                           |       | $                            | 627,227    |                                  | $          | 1,684,979      |       | $ | 8,310 |   | $ | 3,225,789 |   |
| Chief Executive Officer and     |       | 2005     |       | 625,000         |       | —                    |       | 937,500                                                           |       | —                       |       | 8,010                                 |       | 1,570,510      |       |
| Director                        |       | 2004     |       | 625,000         |       | —                    |       | 339,016                                                           |       | —                       |       | 7,860                                 |       | 971,876        |       |
|                            |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| Theodore S. Alpert (4)          |       | 2006     |       | 71,154          |       | —                    |       | 37,973                                                            |       | 29,063                       |       | 311                                   |       | 138,501        |       |
| Vice President-Finance,         |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| Chief Financial Officer         |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| and Assistant Secretary         |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| David W. Montgomey (5)          |       | 2006     |       | 196,154         |       | —                    |       | —                                                            |       | —                       |       | 640,670                               | (5)        | 836,824        |       |
| Former  Vice President          |       | 2005     |       | 300,000         |       | —                    |       | 125,766                                                           |       | —                       |       | 7,682                                 |       | 433,448        |       |
| Finance  Chief Financial        |       | 2004     |       | 298,462         |       | —                    |       | 120,000                                                           |       | —                       |       | 7,388                                 |       | 425,850        |       |
| Officer  and Secretary          |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| Eric I. Lisman                  |       | 2006     |       | 362,000         |       | —                    |       | 169,626                                                           |       | 278,515                      |       | 8,310                                 |       | 818,451        |       |
| Executive Vice President — |       | 2005     |       | 362,000         |       | —                    |       | 151,814                                                           |       | —                       |       | 7,924                                 |       | 521,738        |       |
| Corporate Development           |       | 2004     |       | 362,000         |       | —                    |       | 144,800                                                           |       | —                       |       | 7,597                                 |       | 514,397        |       |
|                            |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| Danile M. Phillips              |       | 2006     |       | 325,000         |       | —                    |       | 233,533                                                           |       | 209,492                      |       | 7,525                                 |       | 775,550        |       |
| Executive Vice President        |       | 2005     |       | 325,000         |       | —                    |       | 92,370                                                            |       | —                       |       | 7,180                                 |       | 424,550        |       |
|                                 |       | 2004     |       | 325,000         |       | —                    |       | 75,000                                                            |       | —                       |       | 6,870                                 |       | 406,870        |       |
|                            |       |     |       |            |       |                      |       |                                                              |       |                         |       |                                  |       |           |       |
| Laura McConnell                 |       | 2006     |       | 299,423         |       | —                    |       | 144,255                                                           |       | 138,047                      |       | 7,433                                 |       | 589,158        |       |
| Executive Vice President        |       | 2005     |       | 285,000         |       | —                    |       | 111,010                                                           |       | —                       |       | 7,075                                 |       | 403,085        |       |
|                                 |       | 2004     |       | 283,173         |       | —                    |       | 112,000                                                           |       | —                       |       | 3,554                                 |       | 398,727        |       |
|                                 |            |          |            |                 |            |                           |            |                                                                   |            |                              |            |                                       |            |                |            |  |  |  |  |  |  |

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(1)            Includesbonuses that were granted by the Board of Directors on a discretionary basis.Bonuses are reported in the year earned,even though they are paid in the subsequent year.

(2)            Includesall bonuses paid under provisions of the Management Incentive Plan ordetermined pursuant to specific employment agreements. Compensation is reportedin the year earned, even though it is paid in the subsequent year.

(3)            Options were granted in the current and priorfiscal years.  We follow SFAS123R.  Under SFAS 123R, our share basedawards meet the definition of liability awards and we have adopted theintrinsic value method of accounting for our liability awards.  Accordingly, compensation expense and arelated liability are recorded only if the fair value of the shares underlying ourshare based awards are greater than the awards’ exercise price as of the end ofthe applicable reporting period.  Compensationexpense in 2006 was due to the fair value of our common stock underlying theshare based option awards being greater than the exercise price of our optionsas of December 31, 2006.  Prior toadoption of SFAS 123R, we accounted for our stock options and awards toexecutives under the provisions of Accounting

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Principles Board (“APB”)Opinion No. 25, *Accounting for StockIssued to Employees*, and related interpretations.  No compensation expense relating to stockoptions granted was recorded for fiscal years 2005 and 2004.

(4)            Effective September12, 2006, Mr. Montgomery resigned from the Company and was replaced by Mr.Theodore S. Alpert as the new Vice President-Finance, Chief Executive Officerand Assistant Secretary.

(5)            Mr. Montgomery signeda separation agreement with the Company which provided for his severancebenefits including a $250,000 transition services bonus, 12 months of his basesalary of $360,000 and reimbursement premiums paid for COBRA benefits tocontinue his coverage under the Company’smedical plans for twelve months.

***The Company’s 2006 Incentive Program***

Inthe current fiscal year, the named executives, other than our ChiefExecutive Officer, participated in a company-wide management incentive plan.  The plan is based on an overall targetbonus.  An employee can earn more or lessthan the target bonus depending upon overall company or sector and individualperformance.  The overall target bonus ispro-rated between company or sector performance, and individualperformance.  For corporate officers,pro-ration under the 2006 plan was 50% of the targeted bonus based upon theCompany’s performance (“Company Performance” defined below) and 50% basedupon individual employee accomplishments. For officers responsible for asector, the pro-ration was 50% based upon the growth in contribution margin forthe sector (“Sector Performance” defined below), 30% based upon the positioningof the sector for future growth, 10% based upon managing the core sector and10% based upon individual accomplishments.

*Company Performance*

TheCompany Performance component is based on year over year growth of the Company’sactual earnings before interest, taxes, depreciation and amortization andnon-cash compensation expense (“EBITDA”)over the prior year. The Company Performance component is calculated asfollows:
| ** % of Growth Over 2005** | ** ** | **2006 Company  EBITDA Target**              | ** ** | **% of Target  Earned (1)**             | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| 0%                                                  |       | $                                                      | 84,340,000 |                                                   | 0%         |   |
| 5%                                                  |       | 88,557,000                                             |       | 25%                                                    |       |
| 10%                                                 |       | 92,774,000                                             |       | 100%                                                   |       |
| 15%                                                 |       | 96,991,000                                             |       | 150%                                                   |       |
| 20%                                                 |       | 101,208,000                                            |       | 200%                                                   |       |
| 25%                                                 |       | 105,425,000                                            |       | 250%                                                   |       |
| Over 25%                                            |       | Over        $105,425,000 |       | % on each  additional dollar  per individual plan  (2) |       |
|                                                     |            |                                                        |            |                                                        |            |  |

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(1)            Forgrowth between 5-10% of the Company Performance target would be earned on a prorata basis. For every 1% of growth over 10%, 10% of the Company Performancetarget would be earned. For 2006, the target was $33,400 for the ChiefFinancial Officer and $149,200 for the Vice President-Corporate Development.

(2)            For2006, the Chief Financial Officer’s plan was for 0.2% on each additional dollarand the Vice President-Corporate Development’s plan was for 0.88% for eachadditional dollar.

For fiscal 2006, EBITDA as calculated under the Plan was $95,083,285 and127% of the targeted bonus was earned.

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*Sector Performance*

TheSector Performance component is based on year over year growth of the sectorcontribution margin (“Sector-Margin”) for which the executive isresponsible.  The Company’s performancefor the individual sector performance component is calculated as follows:
| **% of Growth Over  2005** | ** ** | **2006 Fashion  Sector  Contribution  Target** | ** ** | **2006 Powersports  Sector  Contribution  Target** | ** ** | **% of Target Earned**                                    | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| 0%                                        |       | $                                                   | 50,237,900 |                                                    | $          | 11,661,000                                                               |       | 0% |   |
| 5%                                        |       | 52,749,795                                          |       | 12,244,050                                              |       | 25%                                                                      |       |
| 10%                                       |       | 55,261,690                                          |       | 12,827,100                                              |       | 100%                                                                     |       |
| 15%                                       |       | 57,773,585                                          |       | 13,410,150                                              |       | 150%                                                                     |       |
| 20%                                       |       | 60,285,480                                          |       | 13,993,200                                              |       | 200%                                                                     |       |
| 25%                                       |       | 62,797,375                                          |       | 14,576,250                                              |       | 250%                                                                     |       |
| Over 25%                                  |       | Over  $62,797,375                                   |       | Over  $14,576,000                                       |       | 1.5% for Fashion &  6.5% for Powersports on  each additional  dollar |       |
|                                           |            |                                                     |            |                                                         |            |                                                                          |            |  |  |

 

For growth between 5-10% of the Company’s performancetarget would be earned on a pro rata basis. For every 1% of growth over 10%,10% of the Company’s performance target would be earned. For 2006, the targetwas $150,000 for the Executive Vice President-Fashion Group and $150,800 forthe Executive Vice President in charge of the Powersports Group.

For fiscal 2006, Sector-Margin for Fashion ascalculated under the Plan was $55,005,150 and 92% of the targeted bonus wasearned.  For fiscal 2006, Sector-Marginfor Powersports as calculated under the Plan was $14,106,608 and 210% of thetargeted bonus was earned.

*Other**performance measures*

Theother performance measures are based upon the employee’s performance and isgranted at the discretion of the Chief Executive Officer.  The employee may be granted from 0% up to150% of the targeted incentive for each component. The employee’s individualtarget may be adjusted at any time by the Chief Executive Officer.

***Individual Executive Employment Agreementsand Arrangements***

Mr. Loggiaentered into an employment agreement with Advanstar, Inc. dated as ofNovember 21, 2003, which was amended and restated effective June 22,2005.  Pursuant to the agreement,Mr. Loggia will continue to act as Chief Executive Officer of Advanstar,Inc. and Advanstar Communications Inc. through December 31, 2007, followedby successive three year employment terms unless terminated by either party inaccordance with the agreement. Mr. Loggia is entitled to an annual base salary of $625,000 and anannual bonus based on Advanstar, Inc.’s EBITDA for any year compared to budget,up to a maximum bonus in any one year of 150% of base salary.  The agreement provides for indemnification tothe maximum extent permitted by law.  IfMr. Loggia is terminated by Advanstar, Inc. without “cause” or terminateshis employment for “good reason,” each as defined in the agreement, he will beentitled to the continuation of his base salary for a period of two yearsfollowing his termination, and the greater of his bonus that would have beenpayable to him had he remained employed through the end of the fiscal year orthe annual bonus received by Mr. Loggia in 2004. Mr. Loggia’s agreement alsoincludes provisions triggered by a qualifying change in control, as defined inthe agreement, including accelerated vesting of his stock options, and changein control bonus, calculated based upon the effective purchase price per share,and not to exceed $4,000,000. Mr. Loggia’s agreement also provides for$2,000,000 in life insurance coverage of which premiums are to be paid for bythe Company. Mr. Loggia 

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also has entered into a new non-compete andconfidentiality agreement with Advanstar, Inc. The non-compete period is one year, during which time Mr. Loggiawill continue to receive his base salary unless he was terminated for cause oras a result of his death or disability. For fiscal 2006, Mr. Loggia earned a $937,500 annual bonus. This bonuswas comprised of $627,227 based on 2006 actual EBITDA of $95,083,285 exceedingbudgeted EBITDA of $95,015,571 and an additional strategic bonus of $310,273which was granted by the Board of Directors. If Mr. Loggia would have beeninvoluntarily severed effective December 31, 2006, his severance would have been$1,589,000.

Advanstar, Inc. currently has a severance arrangementwith Theodore S. Alpert, our and Advanstar, Inc.’s Vice President-Finance,Chief Financial Officer and Assistant Secretary.  In the event that Mr. Alpert’semployment is involuntarily terminated for any reason other than for cause, thearrangement provides that Mr. Alpert will receive a termination payment equalto twelve months of salary. If Mr. Alpert would have been involuntarily severed effective December 31,2006, his severance would have been $250,000.

Advanstar, Inc. currently has a severancearrangement with Eric I. Lisman, its Executive Vice President - CorporateDevelopment.  In the event thatMr. Lisman’s employment is terminated for any reason other than for causeor if Mr. Lisman’s principal office location is relocated outside thegreater Boston area, the arrangement provides that Mr. Lisman will receivetwelve months of severance based on his then current salary, his target bonusand health benefits.  If Mr. Lisman would have been involuntarily severedeffective December 31, 2006, his severance would have been $511,200.

Advanstar, Inc. currently has a severancearrangement with Danny Phillips, its Executive Vice President of thepowersports and automotive groups.  Inthe event that Mr. Phillips’ employment is terminated for any reason otherthan for cause, the arrangement provides that Mr. Phillips will receivesix months of severance based on his then current salary. If Mr. Phillips would have been involuntarily severedeffective December 31, 2006, his severance would have been $181,000

Advanstar, Inc. currently has a voluntaryseparation arrangement with Laura McConnell, its Executive Vice President ofthe fashion groups.  In the event thatMs. McConnell voluntarily resigns with a six month notice period, Ms. McConnellwill be eligible to receive (i) twelve months of current base salary as of June2006 of $300,000, (ii) a target bonus of $150,000; and (iii) up to twelvemonths of COBRA expenses. The bonus portion will not be paid if resignationoccurs within nine months of the payment of an ordinary course annual incentiveprogram bonus. If Ms. McConnell would have been involuntarily severed effective December 31,2006, her severance would have been $465,000.

For all named executives, ifinvoluntarily severed no further installments of the Options held under the2000 Management Incentive Plan, and the Options shall expire and may no longerbe exercised (to the extent exercisable on the last day of employment orservice) after the passage of three months from the last day of employment orservice, as the case may be, but in no case later than the scheduled expirationdate.

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***Grants of Plan-Based Awards***

The following table sets forthall plan-based awards made by Advanstar (consisting of cash incentive plans and2000 Management Incentive Plan which grants options to purchase stock ofHoldings) during the year ended December 31, 2006 to each of the namedexecutive officers. 
| **Name**           | ** ** | **Grant  Date** | ** ** | **All Other  Option  Awards:  Number of  Securities  Underlying  Options   (#)** | ** ** | **Exercise or  Base Price  of Option  Awards  ($/share)** | ** ** | **Grant  Date Fair  Value of  Stock and  Option  Awards   ($)** | ** ** |
|--------------------|------------|-----------------|------------|-------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| Joseph Loggia      |       | 11/20/2006      |       | 400,000                                                                                         |       | $                                                                   | 10.00      | (1)                                                                                 | $          | 328,000 |   |
| Theodore S. Alpert |       | 10/25/2006      |       | 150,000                                                                                         |       | 10.00                                                                    | (1)        | 129,000                                                                             |       |
|                    |            |                 |            |                                                                                                 |            |                                                                          |            |                                                                                     |            |  |  |

----

(1)            Optionexercise price is set by the Board of Directors upon authorization of option tobe granted per 2000 Management Incentive Plan.

***Option Awards — 2000 Management Incentive Plan***

The Plan provides that noindividual may be granted in any calendar year awards covering more than900,000 shares of Holdings common stock. As of December 31, 2006, a maximum of 4,072,789 shares are available for granting to participantsunder the Plan, of which 3,575,000 have been granted and are outstanding.  The Board of Directors may adjust the numberand class of shares available under the Plan to prevent dilution or enlargementof rights in the event of various changes in Holdings’ capitalization.

Holdings has certain rights torepurchase, or “call,” shares purchased pursuant to the Plan if a Planparticipant is terminated by Holdings or one of its subsidiaries for cause orwithout cause, or if the participant terminates employment for good reason,without good reason, or due to death, disability or “qualified retirement.”  A Plan participant has the right to sell, or “put,”shares purchased pursuant to the plan to Holdings if a participant’s employmentis terminated due to disability, “qualified retirement” or death.  “Qualified retirement” means retirement atage 62 or with Board approval.

If there is a change in controlof Holdings, all unvested time vesting optionsgranted pursuant to the Plan will vest and become immediately exercisable.  A change in control generally means theacquisition by any person or group of persons, other than an affiliate oraffiliates of the DLJ Merchant Banking funds, of more than 51% of theoutstanding voting securities of Holdings or a sale of all or substantially allof Holdings’ assets.

In the event a holder of options granted pursuant tothe Plan ceases to be employed by Holdings or any of its subsidiaries by reasonof his or her death, disability or voluntary or involuntary resignation, nofurther installments of the options will vest and the options shall expire andmay not be exercised after the passage of the applicable period described inthe Plan (ranging from thirty days to one year from the option holder’s lastday of service).  In the event the employment of a holder of optionsgranted pursuant to the Plan is terminated for cause, the options willimmediately expire and may no longer be exercised.

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***Outstanding Equity Awards at December 31,2006***

The following table sets forth,for each of the named executive officers, number of shares underlying the namedexecutive officer’s exercisable and unexercisable stock options as ofDecember 31, 2006.
| ** **          | ** ** | **Option Awards**                                                                   | ** ** |
|---------------------|------------|------------------------------------------------------------------------------------------|------------|
| **Name**            | ** ** | **Number of  Securities  Underlying  Unexercised  Options   (#)  Exercisable** | ** ** | **Number of  Securities  Underlying  Unexercised  Options   (#)  Unexercisable** | ** ** | **Option  Exercise  Price   ($)** | ** ** | **Option Expiration  Date** | ** ** |
| Joseph Loggia       |       | 350,000                                                                                  |       | 50,000 | (1) | $ | 10.00 |   | October 11, 2010 |   |
| Joseph Loggia       |       | 77,083                                                                                   |       | 22,917 | (1) | 10.00 |   | May 20, 2012 |   |
| Joseph Loggia       |       | 460,000                                                                                  |       | 140,000 | (1) | 10.00 |   | November 12, 2013 |   |
| Joseph Loggia       |       | 200,000                                                                                  |       | 200,000 | (1) | 10.00 |   | November 20, 2016 |   |
| Theodore S.  Alpert |       | 18,750                                                                                   |       | 131,250 | (2) | 10.00 |   | October 25, 2016 |   |
| Eric I. Lisman      |       | 90,625                                                                                   |       | 9,375 | (1) | 10.00 |   | October 11, 2010 |   |
| Eric I. Lisman      |       | 45,312                                                                                   |       | 4,689 | (1) | 10.00 |   | October 17, 2011 |   |
| Eric I. Lisman      |       | 43,750                                                                                   |       | 6,250 | (1) | 10.00 |   | May 20, 2012 |   |
| Daniel M.  Phillips |       | 113,281                                                                                  |       | 11,719 | (1) | 10.00 |   | October 11, 2010 |   |
| Daniel M.  Phillips |       | 21,875                                                                                   |       | 3,125 | (1) | 10.00 |   | May 20, 2012 |   |
| Laura McConnell     |       | 45,313                                                                                   |       | 4,687 | (1) | 10.00 |   | October 11, 2010 |   |
| Laura McConnell     |       | 43,750                                                                                   |       | 6,250 | (3) | 10.00 |   | June 8, 2015 |   |
|                     |            |                                                                                          |            |  |  |  |  |  |  |  |

----

(1)            Allunvested options vest on December 31, 2007.

(2)            Unvestedoptions vest at 12.5% of the original grant on October 25, 2007, 3.125% of theoriginal grant on each of the following dates: January 25, 2008, April 25,2008, July 25, 2008, October 25, 2008, January 25, 2009, April 25, 2009, July25, 2009, October 25, 2009, January 25, 2010, April 25, 2010, July 25, 2010,and October 25, 2010, and 12.5% of the original grant on October 25, 2007, and25% on December 31, 2007, and 25% on October 25, 2014.

(3)            Unvestedoptions vest at 3.125% of the original grant on each of the following dates:March 8, 2007, June 8, 2007, September 8, 2007, December 8, 2007, March 8,2008, June 8, 2008, September 8, 2008, December 8, 2008, March 8, 2009, June 8,2009, and 12.5% of the original grant on December 31, 2007 and 12.5% on June 8,2014.

Nooptions were exercised in 2006. Advanstar does not have a pension plan whichcovers any of the named executive officers.

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***Director Compensation***

The following table presentsspecific compensation or components paid to our Board of Directors in thecurrent fiscal year.
| **Name and Principal Position** | ** ** | **Fees Earned  or Paid in  Cash   ($)** | ** ** | **Option  Awards  (1)  ($)** | ** ** | **All Other  Compensation   ($)** | ** ** | **Total   ($)** | ** ** |
|------------------------------------------------|------------|-------------------------------------------------------------|------------|------------------------------|------------|---------------------------------------------|------------|----------------------|------------|
| Jim Alic                                       | (2)        | $                                                           | —     |                         | $          | 386,291                                     |       | $                    | —     |   | $ | 386,291 |   |
| OhSang Kwon                                    |       | —                                                      |       | —                       |       | —                                      |       | —               |       |
| Douglas B. Fox                                 | (3)        | 40,000                                                      |       | 38,750                       |       | 50,000                                      |       | 128,750              |       |
| Charles Pieper                                 |       | —                                                      |       | —                       |       | —                                      |       | —               |       |
| Kamil Salame                                   | (4)        | —                                                      |       | —                       |       | —                                      |       | —               |       |
| Scott Marden                                   | (4)        | —                                                      |       | —                       |       | —                                      |       | —               |       |
| James A Finkelstein                            | (5)        | 50,000                                                      |       | —                       |       | —                                      |       | 50,000               |       |
|                                                |            |                                                             |            |                              |            |                                             |            |                      |            |  |  |  |  |

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(1)         Options were granted in the current and priorfiscal years.  We follow SFAS123R.  Under SFAS 123R, our share basedawards meet the definition of liability awards and we have adopted theintrinsic value method of accounting for our liability awards.  Accordingly, compensation expense and arelated liability are recorded only if the fair value of the shares underlying ourshare based awards are greater than the awards’ exercise price as of the end ofthe applicable reporting period.  Compensationexpense in 2006 was due to the fair value of our common stock underlying theshare based option awards being greater than the exercise price of our optionsas of December 31, 2006. Prior to adoption of SFAS 123R, we accounted for ourstock options and awards to executives under the provisions of AccountingPrinciples Board (“APB”) Opinion No. 25, *Accountingfor Stock Issued to Employees*, and related interpretations.  No compensation expense relating to stockoptions granted was recorded for fiscal years 2005 and 2004.

** **

(2)            Mr.Alic did not receive any compensation in 2006 for being on the Board ofDirectors. However, Mr. Alic received an annual salary and bonus pursuant tohis employment agreement with the company. Mr. Alic entered his employment agreement with Advanstar, which wasamended effective March 1, 2002, September 15, 2004 and February 1,2006.  The amended agreement provides for a fixed term through December31, 2007, and continuation thereafter upon agreement of the parties. Mr.Alic  will be entitled to an annual basesalary of $150,000 and up to a maximum bonus in 2006 and 2007 of 100% of hisbase salary based on individual performance.  Mr. Alic also enteredinto a non-competition and confidentiality agreement with Advanstar, Inc. The non-compete period is one year after termination of employment unlessemployment is terminated by us without cause or by the executive for goodreason, in which case the non-competition period is six months.  Duringthe non-compete period, Mr. Alic may not hire any employee or solicit anytradeshow or publishing business from a third party that has a relationship orcontract with us.  Pursuant to the amended agreement, Mr. Alic willalso serve as Chairman of the Board.

(3)            Mr.Fox receives an annual retention fee of $40,000 and, through RenaissanceBrands, LTD, a company wholly owned by Mr. Fox, a separate annual advisory feeof $40,000, both payable in equal quarterly installments.  In 2006, an additional $10,000 advisory feewas paid to Renaissance Brands, LTD. Mr. Fox is also reimbursed for all reasonableout-of-pocket expenses incurred in connection with his service as a director ofthe Company.

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(4)            InFebruary 2007, Messrs. Salame and Marden were appointed to our Board ofDirectors. Messrs. Salame and Marden are not compensated for their services asdirectors of the Company.

(5)            OnDecember 31, 2006, Mr. James Finkelstein resigned as a member of the Board ofDirectors.  Mr. Finkelstein received anannual retention fee of $50,000.  Mr.Finkelstein was also reimbursed for all reasonable out-of-pocket expensesincurred in connection with his service as a director of the Company.

We currently have nostandard arrangements pursuant to which our directors would be compensated fortheir services as a director.

**Compensation Committee Interlocksand Insider Participation**

During the periods up to andincluding 2006, we did not have a compensation committee.  During the fiscal year ended December 31,2006, Messrs. Loggia and Alic participated in deliberations of our Board ofDirectors concerning executive officer compensation.

**Item 12. —*SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT***

All of our common stock is ownedby our parent company, Advanstar, Inc., which is wholly-owned byAdvanstar Holdings.  The following tablesets forth information with respect to the beneficial ownership of Holdings’common stock as of April 2, 2007 by (a) any person or group whobeneficially owns more than five percent of Holdings common stock,(b) each of our directors and executive officers and (c) alldirectors and officers as a group.

In accordance with the rules ofthe SEC, beneficial ownership includes voting or investment power with respectto securities and includes shares issuable pursuant to warrants that areexercisable within 60 days of April 2, 2007.  Shares issuable pursuant towarrants are deemed outstanding in computing the percentage held by the personholding the warrants but are not deemed outstanding in computing the percentageheld by any other person

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| ** **                                                                                              | ** ** | **Number of**    | ** ** | ** **             | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                                                                                              | ** ** | **Shares of**    | ** ** | ** **             | ** ** |
| ** **                                                                                              | ** ** | **Common Stock** | ** ** | **Percentage of** | ** ** |
| ** **                                                                                              | ** ** | **Beneficially**      | ** ** | **Outstanding**        | ** ** |
| **Name of Beneficial Owner:**                                                            | ** ** | **Owned**             | ** ** | **Common Stock**  | ** ** |
|                                                                                                    |       |                  |       |                   |       |
| DLJ Merchant  Banking Partners III, L.P. and related investors                                          |       | 35,966,117            | (1)        | 98.1                   | %          |
|                                                                                                    |       |                  |       |                   |       |
| Joseph Loggia                                                                                           |       | 1,087,083             | (2)        | 2.9                    | %          |
|                                                                                                    |       |                  |       |                   |       |
| James M. Alic                                                                                           |       | 392,523               | (3)        | 1.1                    | %          |
|                                                                                                    |       |                  |       |                   |       |
| R. Steven Morris                                                                                        |       | 90,626                | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| Daniel M.  Phillips                                                                                     |       | 135,156               | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| Laura McConnell                                                                                         |       | 92,188                | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| Eric I. Lisman                                                                                          |       | 179,686               | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| Rick Treese                                                                                             |       | 52,500                | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| Theodore S.  Alpert                                                                                     |       | 18,750                | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| Douglas B. Fox 

223 Wall Street,  Box 318

Huntington, New  York 11743                                 |       | 25,000                | (2)        | *                      |       |
|                                                                                                    |       |                  |       |                   |       |
| OhSang Kwon 

Avista Capital  Partners

65 East 55th St,  18th Floor

New York, NY  10022               |       | —                | (4)        | —                 |       |
|                                                                                                    |       |                  |       |                   |       |
| Charles Pieper 

DLJ Merchant  Banking Partners Inc.

Eleven Madison  Avenue

New York, New  York 10010 |       | —                | (4)        | —                 |       |
|                                                                                                    |       |                  |       |                   |       |
| Kamil Salame

DLJ Merchant  Banking Partners Inc.

Eleven Madison  Avenue

New York, New  York 10010    |       | —                | (4)        | —                 |       |
|                                                                                                    |       |                  |       |                   |       |
| Scott Marden 

DLJ Merchant  Banking Partners Inc.

Eleven Madison  Avenue

New York, New  York 10010   |       | —                | (4)        | —                 |       |
|                                                                                                    |       |                  |       |                   |       |
| All directors and  officers as a group (13 persons)                                                     |       | 2,073,512             |       | 5.4                    | %          |

* Represents less than 1% of theoutstanding shares of common stock

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(1)                                  Consistsof 35,100,000 shares held directly by DLJ Merchant Banking Partners III, L.P.and the following related investors: DLJ ESC II, L.P., DLJMB FundingIII, Inc., DLJ Offshore Partners III, C.V., DLJ Offshore Partners III-1,C.V., DLJ Offshore Partners III-2, C.V., DLJMB Funding III, Inc. and DLJPartners III GmbH & Co. KG and warrants to purchase 866,117 shares ofcommon stock issued

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to DLJ Investment Partners, II, L.P. and the followingrelated investors: DLJ ESC II, L.P., DLJ Investment Funding II, Inc. andDLJ Investment Partners, L.P. See “Item 13. Certain Relationships and RelatedParty Transactions.”  The address of eachof these investors is 11 Madison Avenue, New York, New York 10010, except thatthe address of Offshore Partners is John B. Gorsiraweg 14, Willemstad, Curacao,Netherlands Antilles.

(2)                                  Consists of shares issuable pursuant to stockoptions exercisable within 60 days.

(3)                                  Consists of 108,516 shares, warrants to purchase34,787 shares and 249,220 shares issuable pursuant to stock options exercisablewithin 60 days.

(4)                                  Shares shown for Messrs. Kwon, Pieper,Salame, and Marden exclude shares shown as held by the DLJ Merchant Banking funds and theDLJ Investment Partners funds, as to which they disclaim beneficial ownership.Mr. Kwon is a partner of AvistaCapital Partners, a private equity firm that has been engaged by an affiliateof Credit Suisse Securities (USA) LLC to serve as a consultant to assist in themonitoring of certain DLJ Merchant Banking Partners portfolio companies.  Messrs. Pieper and Salame are employees at CreditSuisse Securities (USA) LLC where they are Managing Directors with DLJ MerchantBanking Partners. Mr. Marden is associated with of DLJ Merchant BankingPartners and is the Chairman of Media Partners, DLJ Merchant Banking Partners,and Credit Suisse Alternative Investments.

The Company has no securitiesauthorized for issuance under equity compensation plans; all equity issued ascompensation consists of equity of Holdings.

**Item 13. — *CERTAINRELATIONSHIPS AND RELATED PARTY TRANSACTIONS***

Although no formal written policy is in place, our Board of Directorsis responsible for reviewing and approving the terms and conditions of allsignificant related party transactions.

**Financial Advisory Fees andAgreements**

Advanstar Holdingswas acquired by the DLJ Merchant Banking Partners III, L.P. and related fundsin October 2000 (“The Acquisition”).

CreditSuisse Securities (USA), LLC (“CSS (USA)”), an affiliate of the DLJ MerchantBanking funds, has received customary fees and reimbursement of expenses in connectionwith the arrangement and syndication of the Credit Facility and as a lenderthereunder.  CSS (USA) acts as ourfinancial advisor and acted as our financial advisor in connection with thesale of the Portfolio Group.  In May2005, we paid a consulting fee of $1.5 million to CSS (USA) related to thissale. In June 2005, the Companyrepurchased $7.1 million of its fixed rate notes at par, and $4.6 million ofits floating rate notes at a price equal to 107.3% of principal, from CSS (USA)pursuant to our tender offer.  No feeswere paid in 2006 or 2004.

In connection withthe Acquisition, Advanstar Holdings agreed to pay CSS (USA) an annual advisoryfee of $0.5 million beginning October 11, 2000 when the acquisition ofAdvanstar by DLJ Merchant Banking Partners III, L.P. and related funds occurred(“The Acquisition”) until the earlier to occur of:

(1)           aninitial public offering of Advanstar Holdings;

(2)           the date when the DLJ MerchantBanking funds own less than 16 2/3% of the shares of Advanstar Holdings’ common stock heldby them on the closing date of the Acquisition; and

(3)           October 11, 2005.

Subsequently, CSS(USA) assigned its rights under this agreement to DLJ Merchant Banking Funds.

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As of October 11,2005, the agreement above terminated and the Company no longer pays fees to CSS(USA).

Advanstar Holdingsis a holding company and has no direct material operations or source of cash topay this obligation other than by distributions from its subsidiaries includingAdvanstar Communications Inc.

Advanstar and its subsidiaries may from time to timeenter into other investment banking relationships with CSS (USA) or one of itsaffiliates pursuant to which CSS (USA) or its affiliates will receive customaryfees and will be entitled to reimbursement for all related disbursements andout-of-pocket expenses.  We expect thatany arrangement will include provisions for the indemnification of CSS (USA)against a variety of liabilities, including liabilities under the federalsecurities laws.

#### **Stockholders Agreement**

Advanstar Holdings, the DLJ Merchant Banking funds,the DLJ Investment Partners funds and the other stockholders of AdvanstarHoldings (collectively, including Mr. Alic, the “Advanstar HoldingsStockholders”) entered into a stockholders’ agreement at the closing of theDLJMB acquisition.  The stockholders’agreement provides that any person acquiring shares of common stock ofAdvanstar Holdings who is required by the stockholders’ agreement or by anyother agreement or plan of Advanstar Holdings to become a party to thestockholders’ agreement will execute an agreement to be bound by thestockholders’ agreement.

The terms of the stockholders’ agreement restricttransfers of shares of Advanstar Holdings capital stock by the AdvanstarHoldings Stockholders, except to permit transferees and subject to variousexceptions. The agreement will permit:

·                  the otherstockholders to participate in specified sales of shares of Advanstar Holdingscapital stock by the DLJ Merchant Banking funds,

·                  theDLJ Merchant Banking funds to require the other stockholders to sell shares ofAdvanstar Holdings capital stock in specified circumstances should the DLJMerchant Banking funds choose to sell any shares owned by them, and

·                  thestockholders to purchase equity securities proposed to be issued by AdvanstarHoldings to the DLJ Merchant Banking funds on a preemptive basis to maintaintheir percentage ownership interest.

The stockholders’ agreement also provides that the DLJMerchant Banking funds have the right to select three of the members of theBoard of directors of Advanstar Holdings, and the DLJ Investment Partners fundswill have the right to select one member so long as they maintain ownership ofat least 50% of their initial ownership of senior discount notes of Advanstar,Inc. (and thereafter will have rights to an observer).  In addition, the DLJ Merchant Banking fundsare permitted to expand Advanstar Holdings’ Board and select all of theadditional directors.  Messrs. Kwon,Pieper, Salame, and Marden are the directors selected by the DLJ MerchantBanking funds.  As of December 31, 2006,DLJ Investment Partners no longer owns Advanstar, Inc.’s senior discount notes,so they can no longer select a member of the Board.

Under the stockholders’ agreement, the Advanstar HoldingsStockholders entered into a registration rights agreement with AdvanstarHoldings.  Under that agreement, the DLJMerchant Banking funds will have the right to six demand registrations (or fiveif the holders of the warrants issued with the parent company notes haveexercised a demand), and the holders of the warrants issued with the parentcompany notes will have the right to one demand registration of common stockafter an initial public offering.  Inaddition, all of the holders will be entitled to piggyback registration rights,subject to customary cutback and deferral provisions.  The agreement also provides that AdvanstarHoldings will indemnify the parties against specified liabilities, includingliabilities under the Securities Act.

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**Item 14. —*PRINCIPAL ACCOUNTING FEES ANDSERVICES.***

**PrincipalAccounting Fees and Services**

The AuditCommittee engaged PricewaterhouseCoopers LLP (“PwC”) to perform an annual auditof Advanstar’s financial statements in 2005 and 2006.  The following table presents informationconcerning fees paid to PwC in each of those years.
| ** **             | ** ** | **2005**   | ** ** | **2006**   | ** ** |
|------------------------|------------|------------|------------|------------|------------|
| ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Audit fees(1)          |       | $          | 768,844    |       | $          | 492,677 |   |
| Audit-related  fees(2) |       | 88,017     |       | 5,000      |       |
| Tax fees(3)            |       | 701,191    |       | 326,689    |       |
| All other fees         |       | 1,500      |       | 1,500      |       |
|                        |            |            |            |            |            |  |  |

----

(1)  These are fees for professional servicesperformed by PwC for (1) the annual audit and quarterly reviews of Advanstar’sconsolidated financial statements, (2) statutory audits for subsidiariesoutside of the United States, (3) fees related to the audit of the financialstatements of the Portfolio Group of which approximately $292 thousand of the2005 fees were reimbursed by Questex Media Group, Inc., and (4) attributable toaudits and post effective amendment (S-1) filings.

(2)These are fees for assurance and related services performed by PwC that arereasonably related to the performance of the audit or review of Advanstar’sfinancial statements but not described in item (1) above, primarilyattributable to 2004 audit of our employee benefit plan, and third-partyworkpaper reviews.

(3)  These are fees for professional servicesperformed by PwC with respect to tax compliance, tax advice and taxplanning.  This includes tax preparationand review services performed in connection with our federal, state and foreigntax returns and tax advice and assistance regarding statutory, regulatory oradministrative developments.

***Pre-approval Policiesand Procedures***

The Audit Committee hasadopted policies and procedures for pre-approving all work performed byPwC.  Specifically, the policies and proceduresprohibit PwC from performing any services for Advanstar or its subsidiarieswithout the prior specific approval of the audit committee, except that theaudit committee pre-approved amounts for PwC services in the followingcategories for 2006: audit relatedservices, U.S. tax planning and compliance, other tax services and othernon-audit services. Services in excess of the limits approved by the AuditCommittee must have prior specific approval by the audit committee.

All services provided by PwC in 2006 werepre-approved by the audit committee pursuant to the approval policies describedabove.  None of such services wereapproved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) ofRegulation S-X, which waives the general requirement for pre-approval incertain circumstances.

 

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**PART IV**

**Item 15. —*EXHIBITS AND FINANCIAL STATEMENTSCHEDULES***

**A.****            Documents Filed as Part of this Report:**

**1.  Financial Statements:**
|                                                                                                            | ** ** | **Page** |
|------------------------------------------------------------------------------------------------------------|------------|----------|
|                                                                                                       |       |     |
| Report of Independent Registered Public Accounting  Firm                                                   |       | F-1      |
| Consolidated  Balance Sheets as of December 31, 2006 and 2005                                              |       | F-2      |
| Consolidated Statements of Operations for the years  ended December 31, 2006, 2005 and 2004                |       | F-3      |
| Consolidated Statements of Stockholder’s Equity for  the years ended December 31, 2006, 2005 and 2004 |       | F-4      |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2006, 2005 and 2004                |       | F-5      |
| Notes to Consolidated Financial Statements                                                                 |       | F-6      |
|                                                                                                       |       |     |

**2.  Financial StatementSchedule:**
| The following schedule is  included in this Annual Report on the page indicated: |   |   |
|----------------------------------------------------------------------------------|--------|--------|
|                                                                             |   |   |
| Schedule II—Valuation and Qualifying Accounts                               |   | II-1   |
|                                                                             |   |   |
| All other schedules  have been omitted because they are not applicable.          |   |   |

 

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**Report ofIndependent Registered Public Accounting Firm**

To the Stockholder and Board of Directorsof Advanstar Communications Inc.

In our opinion, the consolidated financial statementslisted in the index appearing under Item 15(a)(1) present fairly, in allmaterial respects, the financial position of Advanstar Communications Inc., awholly owned subsidiary of Advanstar, Inc., and its subsidiaries at December31, 2006 and 2005, and the results of their operations and their cash flows foreach of the three years in the period ended December 31, 2006, in conformitywith accounting principles generally accepted in the United States of America.In addition, in our opinion, the financial statement schedule listed in theindex appearing under Item 15(a)(2) presents fairly, in all material respects,the information set forth therein when read in conjunction with the relatedconsolidated financial statements. These financial statements and financial statementschedule are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements and financial statementschedule based on our audits. We conducted our audits of these statements inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.

As discussed in Note 7 tothe consolidated financial statements, in 2006 the Company changed the mannerin which it accounts for share-based compensation.  As more fully described in Note 14 to theconsolidated financial statements, the previously issued financial statementshave been revised for all periods to include the balances and operations ofAdvanstar.com which was merged with the Company during 2006.

/s/ PricewaterhouseCoopers LLP

Minneapolis, MinnesotaMarch 29, 2007

F-1

----

**Advanstar Communications Inc.**

**Consolidated Balance Sheets**

**December 31, 2006 and 2005**
| **(in thousands, except share and per share data)**                                                  | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                                                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                                                                                                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Current assets                                                                                                                          |       |       |       |       |       |
| Cash and cash  equivalents                                                                                                              |       | $          | 36,918     |       | $          | 46,609 |   |
| Accounts  receivable, net of allowance of $1,001 and $1,076 at December 31, 2006 and  2005                                              |       | 23,562     |       | 24,607     |       |
| Prepaid expenses                                                                                                                        |       | 9,280      |       | 7,871      |       |
| Other                                                                                                                                   |       | 1,855      |       | 1,965      |       |
| Total current  assets                                                                                                                   |       | 71,615     |       | 81,052     |       |
|                                                                                                                                    |       |       |       |       |       |
| Due from parent                                                                                                                         |       | 2,595      |       | 2,232      |       |
|                                                                                                                                    |       |       |       |       |       |
| Property, plant and  equipment, net                                                                                                     |       | 25,026     |       | 21,306     |       |
| Intangible and other  assets                                                                                                            |       |       |       |       |       |
| Goodwill                                                                                                                                |       | 598,398    |       | 594,982    |       |
| Intangibles and  other, net                                                                                                             |       | 38,664     |       | 62,644     |       |
| Total intangible  and other assets, net                                                                                                 |       | 637,062    |       | 657,626    |       |
| Non-current assets held  for sale                                                                                                       |       | 3,670      |       | 4,620      |       |
|                                                                                                                                    |       | $          | 739,968    |       | $          | 766,836 |   |
| **Liabilities and Stockholder’s  Equity**                                                                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Current liabilities                                                                                                                     |       |       |       |       |       |
| Current  maturities of long-term debt                                                                                                   |       | $          | —     |       | $          | 201 |   |
| Accounts payable                                                                                                                        |       | 15,556     |       | 12,342     |       |
| Accrued  compensation                                                                                                                   |       | 11,306     |       | 7,236      |       |
| Other accrued  expenses                                                                                                                 |       | 54,730     |       | 30,758     |       |
| Deferred revenue                                                                                                                        |       | 51,167     |       | 46,472     |       |
| Total current  liabilities                                                                                                              |       | 132,759    |       | 97,009     |       |
|                                                                                                                                    |       |       |       |       |       |
| Long-term debt, net of  current maturities                                                                                              |       | 461,868    |       | 461,786    |       |
| Deferred income taxes                                                                                                                   |       | 39,244     |       | 31,500     |       |
| Other long-term  liabilities                                                                                                            |       | 2,846      |       | 4,933      |       |
|                                                                                                                                    |       |       |       |       |       |
| Commitments and contingencies  (Note 10)                                                                                           |       |       |       |       |       |
|                                                                                                                                    |       |       |       |       |       |
| Stockholder’s equity                                                                                                               |       |       |       |       |       |
| Common stock,  $.01 par value, 3,500,000 shares authorized;  1,000,000 shares issued and outstanding at December 31, 2006 and 2005 |       | 10         |       | 10         |       |
| Capital in  excess of par value                                                                                                         |       | 418,254    |       | 447,367    |       |
| Accumulated  deficit                                                                                                                    |       | (325,875   | )          | (284,182   | )          |
| Accumulated  other comprehensive income                                                                                                 |       | 10,862     |       | 8,413      |       |
| Total  stockholder’s equity                                                                                                        |       | 103,251    |       | 171,608    |       |
|                                                                                                                                    |       | $          | 739,968    |       | $          | 766,836 |   |

** **

The accompanying notes are an integral part of these consolidated financialstatements.

F-2

----

**Advanstar Communications Inc.Consolidated Statements of OperationsYears Ended December 31, 2006, 2005, and 2004**
| **(in thousands)**                                                        | ** ** | **2006**   | ** ** | **2005**                                          | ** ** | **2004** | ** ** |
|--------------------------------------------------------------------------------|------------|------------|------------|---------------------------------------------------|------------|----------|------------|
| ** **                                                                     | ** ** | ** ** | ** ** | **(As Adjusted—See Note 14)** | ** ** |
| Revenue                                                                        |       | $          | 323,722    |                                              | $          | 288,913  |       | $ | 271,066 |   |
| Operating expenses                                                             |       |       |       |                                              |       |     |       |
| Cost of  production (excluding depreciation)                                   |       | 69,080     |       | 56,326                                            |       | 50,958   |       |
| Selling,  editorial and circulation (excluding depreciation)                   |       | 124,571    |       | 112,373                                           |       | 107,219  |       |
| General and  administrative (excluding depreciation)                           |       | 75,141     |       | 40,916                                            |       | 40,633   |       |
| Restructuring  charge (benefit)                                                |       | 2,325      |       | 4,771                                             |       | (4,015   | )          |
| Depreciation and  amortization                                                 |       | 32,265     |       | 37,755                                            |       | 43,089   |       |
| Total operating  expenses                                                      |       | 303,382    |       | 252,141                                           |       | 237,884  |       |
| Operating income                                                               |       | 20,340     |       | 36,772                                            |       | 33,182   |       |
| Other income (expense)                                                         |       |       |       |                                              |       |     |       |
| Interest expense                                                               |       | (54,751    | )          | (63,058                                           | )          | (70,991  | )          |
| Interest income                                                                |       | 1,810      |       | 1,476                                             |       | 468      |       |
| Loss on  extinguishment of debt (Note 6)                                       |       | (599       | )          | (12,581                                           | )          | —   |       |
| Other (expense)  income, net                                                   |       | (240       | )          | 80                                                |       | 826      |       |
| Loss from  continuing operations before income taxes                           |       | (33,440    | )          | (37,311                                           | )          | (36,515  | )          |
| Income tax  provision (benefit)                                                |       | 8,334      |       | (2,732                                            | )          | 6,518    |       |
| Loss from  continuing operations                                               |       | (41,774    | )          | (34,579                                           | )          | (43,033  | )          |
|                                                                           |       |       |       |                                              |       |     |       |
| Income (loss) from  operations of discontinued businesses, net of tax (Note 4) |       | 81         |       | 38,536                                            |       | (2,155   | )          |
| Net (loss) income                                                              |       | $          | (41,693    | )                                                 | $          | 3,957    |       | $ | (45,188 | ) |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

F-3

----

**Advanstar Communications Inc.Consolidated Statements of Stockholder’s EquityYears Ended December 31, 2006, 2005 and 2004**

** **
| ** **                                                             | ** ** | ** **            | ** ** | ** **         | ** ** | ** **          | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|---------------------|------------|-------------------|------------|------------------------|------------|------------|------------|
| ** **                                                             | ** ** | ** **            | ** ** | ** **         | ** ** | **Capital in** | ** ** | ** **        | ** ** | **Other**              | ** ** | ** ** | ** ** |
| **(in thousands, except share and per ** | ** ** | **Common Stock** | ** ** | **Excess of** | ** ** | **Accumulated**     | ** ** | **Comprehensive** | ** ** | ** **             | ** ** |
| **share data)**                                                   | ** ** | **Shares**            | ** ** | **Amount**         | ** ** | **Par Value**  | ** ** | **Deficit**       | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
| ** **                                                             | ** ** | ** **            | ** ** | ** **         | ** ** | ** **          | ** ** | ** **        | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Balances at  December 31, 2003**(As Adjusted-See Note 14)  |       | 1,000,000             |       | $                  | 10         |                | $          | 447,367           |       | $                      | (242,951   | )          | $          | 3,513 |   | $ | 207,939 |   |
| Comprehensive loss                                                     |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Net loss                                                               |       | —                |       | —             |       | —              |       | (45,188           | )          | —                 |       | —     |       |
| Translation  adjustment                                                |       | —                |       | —             |       | —              |       | —            |       | 2,587                  |       | —     |       |
| Change in  unrealized gain on derivative financial instruments         |       | —                |       | —             |       | —              |       | —            |       | 145                    |       | —     |       |
|                                                                   |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Total  comprehensive loss                                              |       | —                |       | —             |       | —              |       | —            |       | —                 |       | (42,456    | )          |
| ** **                                                             |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| **Balances at  December 31, 2004**(As Adjusted-See Note 14)  |       | 1,000,000             |       | 10                 |       | 447,367             |       | (288,139          | )          | 6,245                  |       | 165,483    |       |
| Comprehensive income                                                   |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Net income                                                             |       | —                |       | —             |       | —              |       | 3,957             |       | —                 |       | —     |       |
| Translation  adjustment                                                |       | —                |       | —             |       | —              |       | —            |       | 2,271                  |       | —     |       |
| Change in  unrealized gain on derivative financial instruments         |       | —                |       | —             |       | —              |       | —            |       | (103                   | )          | —     |       |
|                                                                   |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Total  comprehensive income                                            |       | —                |       | —             |       | —              |       | —            |       | —                 |       | 6,125      |       |
| ** **                                                             |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| **Balances at  December 31, 2005**                           |       | 1,000,000             |       | 10                 |       | 447,367             |       | (284,182          | )          | 8,413                  |       | 171,608    |       |
| Comprehensive income                                                   |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Net loss                                                               |       | —                |       | —             |       | —              |       | (41,693           | )          | —                 |       | —     |       |
| Translation  adjustment                                                |       | —                |       | —             |       | —              |       | —            |       | 2,449                  |       | —     |       |
| Total  comprehensive loss                                              |       | —                |       | —             |       | —              |       | —            |       | —                 |       | (39,244    | )          |
|                                                                   |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Dividends to parent                                                    |       | —                |       | —             |       | (29,113             | )          |              |       |                   |       | (29,113    | )          |
|                                                                   |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| **Balances at December 31, 2006**                            |       | 1,000,000             |       | $                  | 10         |                | $          | 418,254           |       | $                      | (325,875   | )          | $          | 10,862 |   | $ | 103,251 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-4

----

**AdvanstarCommunications Inc.**

**ConsolidatedStatements of Cash Flows**

**Years Ended December 31, 2006, 2005 and 2004**
| **(in thousands)**                                                                  | ** ** | **2006**   | ** ** | **2005**                                     | ** ** | **2004**   | ** ** |
|------------------------------------------------------------------------------------------|------------|------------|------------|----------------------------------------------|------------|------------|------------|
| ** **                                                                               | ** ** | ** ** | ** ** | **(As Adjusted-See Note 14)** | ** ** |
| **Cash flows from operating  activities**                                                | ** ** | ** ** | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Net (loss) income                                                                        |       | $          | (41,693    | )                                            | $          | 3,957      |       | $ | (45,188 | ) |
|                                                                                     |       |       |       |                                         |       |       |       |
| Adjustments to  reconcile net (loss) income to net cash provided by operating activities |       |       |       |                                         |       |       |       |
| Impairment of  goodwill                                                                  |       | —     |       | —                                       |       | 15,570     |       |
| Restructure  charge                                                                      |       | —     |       | —                                       |       | (4,015     | )          |
| Impairment of  intangible and assets held for sale (Note 4)                              |       | 950        |       | 2,272                                        |       | —     |       |
| Write-off of  deferred financing costs                                                   |       | 599        |       | 3,517                                        |       | —     |       |
| Depreciation and  amortization                                                           |       | 32,265     |       | 40,718                                       |       | 50,433     |       |
| Gain on  derivative financial instruments                                                |       | —     |       | (103                                         | )          | (1,391     | )          |
| Losses of  minority interest holders                                                     |       | —     |       | 566                                          |       | 562        |       |
| Non-cash  interest expense                                                               |       | 2,398      |       | 2,843                                        |       | 3,264      |       |
| Loss (gain) on  disposition of business and other                                        |       | 245        |       | (52,710                                      | )          | (1,006     | )          |
| Provision for  bad debts                                                                 |       | 695        |       | 1,417                                        |       | 874        |       |
| Deferred income  taxes                                                                   |       | 7,744      |       | 13,250                                       |       | 11,260     |       |
| Changes in  operating assets and liabilities                                             |       |       |       |                                         |       |       |       |
| Accounts  receivable                                                                     |       | 350        |       | (224                                         | )          | 6,060      |       |
| Inventories                                                                              |       | 161        |       | 507                                          |       | (708       | )          |
| Prepaid expenses                                                                         |       | (1,409     | )          | 24                                           |       | (506       | )          |
| Accounts payable  and accrued expenses                                              |       | 25,587     |       | (1,958                                       | )          | (8,161     | )          |
| Deferred revenue                                                                         |       | 4,695      |       | (3,926                                       | )          | (6,902     | )          |
| Other                                                                                    |       | 3,707      |       | (1,915                                       | )          | (1,245     | )          |
| Net cash  provided by operating activities                                          |       | 36,294     |       | 8,235                                        |       | 18,901     |       |
| **Cash flows from investing  activities**                                                | ** ** | ** ** | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Additions to property,  plant and equipment                                              |       | (14,046    | )          | (9,564                                       | )          | (9,576     | )          |
| Acquisitions of  publications and shows, net of cash acquired                            |       | —     |       | (15,561                                      | )          | (7,915     | )          |
| Proceeds from sale of  assets                                                            |       | 17         |       | 174,067                                      |       | 24,418     |       |
| Acquisitions of  intangibles, contingent payments, and other                             |       | (309       | )          | 17                                           |       | (1,931     | )          |
| Net cash (used  in) provided by investing activities                                     |       | (14,338    | )          | 148,959                                      |       | 4,996      |       |
| **Cash flows from financing  activities**                                                | ** ** | ** ** | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Proceeds from revolving  credit loan                                                     |       | —     |       | —                                       |       | 6,000      |       |
| Payments on revolving  credit loan                                                       |       | —     |       | —                                       |       | (14,000    | )          |
| Proceeds from long-term  debt                                                            |       | 10,000     |       | —                                       |       | —     |       |
| Payments of long-term  debt                                                              |       | (9,972     | )          | (152,167                                     | )          | (3,700     | )          |
| Deferred financing  costs                                                                |       | (1,706     | )          | (168                                         | )          | (315       | )          |
| Project grant funds  received                                                            |       | —     |       | 600                                          |       | —     |       |
| Project grant funds  distributed                                                         |       | (175       | )          | —                                       |       | —     |       |
| Dividends paid to  stockholder                                                           |       | (29,113    | )          | —                                       |       | —     |       |
| Dividends paid to  minority interest holders                                             |       | —     |       | (900                                         | )          | (500       | )          |
| Net cash used in  financing activities                                                   |       | (30,966    | )          | (152,635                                     | )          | (12,515    | )          |
| Effect of exchange rate  changes on cash                                                 |       | (681       | )          | 754                                          |       | 576        |       |
| Net (decrease)  increase in cash and cash equivalents                                    |       | (9,691     | )          | 5,313                                        |       | 11,958     |       |
| **Cash and cash equivalents**                                                            | ** ** | ** ** | ** ** | ** **                                   | ** ** | ** ** | ** ** |
| Beginning of year                                                                        |       | 46,609     |       | 41,296                                       |       | 29,338     |       |
| End of year                                                                              |       | $          | 36,918     |                                         | $          | 46,609     |       | $ | 41,296 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-5

----

**AdvanstarCommunications Inc.**

**Notes toConsolidated Financial Statements**

**December 31, 2006, 2005, and 2004**

 

**1.**                          Nature of Business

The accompanyingconsolidated financial statements include the accounts of AdvanstarCommunications Inc., a wholly owned subsidiary of Advanstar, Inc., and itsmajority owned subsidiaries (collectively, “Advanstar” or the “Company”).  All intercompany accounts and transactionsbetween consolidated entities have been eliminated.

The Company operates andmanages shows and conferences; publishes controlled and paid circulation trade,professional and consumer periodicals; and markets a broad range of marketing,direct mail and database products and services. The Company’s MAGIC Marketplace tradeshows  included in the Fashion and License segmentand healthcare and pharmaceutical publications and projects included within theLife Sciences segment generated 30.4% and 33.1% of total revenue in 2006.

**2.**                          Summary of Significant Accounting Policies

**Cash and Cash Equivalents**

Cash and cash equivalentsinclude cash on deposit and highly liquid investments with original maturitiesof three months or less.  Cashequivalents are stated at cost, which approximates fair market value.

**Prepaid Expenses and Other CurrentAssets**

Prepaid expenses consist primarilyof prepaid show and conference expenses, prepaid publication production costsand miscellaneous deposits.  Event andpublication expenses are charged to operations at the time of the related eventand at the time of publication issuance. Other current assets consist primarily of paper inventories.

**Property, Plant and Equipment**

Property, plant andequipment consisted of the following at December 31:

 
| (in thousands)                 | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
| Land and  improvements              |       | $        | 469        |     | $          | 481 |   |
| Buildings                           |       | 4,038    |       | 3,850    |       |
| Furniture,  machinery and equipment |       | 48,577   |       | 43,519   |       |
| Leasehold  improvements             |       | 9,464    |       | 7,997    |       |
|                                |       | 62,548   |       | 55,847   |       |
| Accumulated  depreciation           |       | (37,522  | )          | (34,541  | )          |
| Property, plant and equipment, net  |       | $        | 25,026     |     | $          | 21,306 |   |

Property, plant and equipment is stated at itsoriginal cost and is depreciated on the straight-line basis over the followingestimated useful lives:
| Land improvements                   |   | 10–15 years                               |
|-------------------------------------|--------|------------------------------------------------|
| Buildings                           |   | 20–40 years                               |
| Furniture,  machinery and equipment |   | 3–10 years                                |
| Leasehold  improvements             |   | Shorter of useful life  or original lease term |

 

F-6

----

 

Depreciation expense forthe years ended December 31, 2006, 2005 and 2004, was $9.7 million, $8.0million and $8.3 million.

Maintenance and repairsare charged to expense as incurred. Major betterments and improvements, which extend the useful life of theitem, are capitalized and depreciated. The cost and accumulated depreciation of property, plant and equipmentretired or otherwise disposed of are removed from the related accounts, and anyresidual values are charged or credited to operations.

**Intangible and Other Assets**

Trade exhibitor andadvertiser lists are amortized on a double-declining balance method over sixyears and five years, respectively. Subscriber lists and other intangible assets are amortized on astraight-line basis over three to ten years. Trademarks and trade names are amortized on a straight-line basis overtwenty years.  The cost and accumulatedamortization of trade exhibitor, advertiser and subscriber lists are removedfrom the related accounts once they are fully amortized.

**Impairment of Long-Lived Assets andGoodwill**

The Company evaluates thecarrying value of long-lived assets, including identifiable intangibles, forimpairment when events or changes in circumstances indicate that the carryingamount of an asset may not be recoverable. If impairment indicators are present and the estimated futureundiscounted cash flows are less than the carrying value of the assets, thecarrying value is reduced to the estimated fair value as measured by theassociated discounted cash flows.

The Company evaluatesgoodwill for impairment annually using a two-step test based upon a fair valueapproach.  The first step is used toidentify a potential impairment, while the second step calculates the amount ofimpairment, if any.  Additionally,goodwill is tested for impairment between annual tests if an event occurs orcircumstances change that would more likely than not reduce the fair value of areporting unit below its carrying value.

**Other Accrued Expenses**

Other accrued expensesconsisted of the following at December 31:
| (in thousands)                   | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|
| Acquisition  related compensation     |       | $        | 29,584     |     | $          | 1,348 |   |
| Interest                              |       | 11,159   |       | 11,261   |       |
| Deposits and  customer advances       |       | 7,825    |       | 10,292   |       |
| Income, real  estate, and other taxes |       | 3,959    |       | 3,953    |       |
| Benefits and  severance               |       | 1,199    |       | 2,018    |       |
| Other                                 |       | 1,004    |       | 1,886    |       |
| Total other  accrued expenses         |       | $        | 54,730     |     | $          | 30,758 |   |

 

F-7

----

 

**Revenue Recognition**

Shows and conferencesrevenue is recognized in the period in which the event is conducted.  Subscription revenue is recognized on a prorata basis as publications are issued to fulfill the subscriptionobligations.  Advertising revenue isrecognized when the publication with the respective advertisement isissued.  Revenue from custom projectscontaining multiple elements is recognized as each element is delivered ifsufficient evidence of fair value exists for the undelivered elements.  If sufficient evidence of fair value does notexist, revenue is deferred and not recognized until all elements aredelivered.  Deferred revenue is recordedwhen cash is received in advance of when an event is held, the publication isissued, or the project is completed. Customer advances are recorded when cash is received in advance offuture advertising undesignated to a specific publication issue.

Deferred revenueconsisted of the following at December 31:

 
| (in thousands)                                     | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|
| Deferred shows  and conferences revenue                 |       | $        | 41,415     |     | $          | 35,732 |   |
| Deferred  advertising, subscription and project revenue |       | 9,752    |       | 10,740   |       |
| Total deferred  revenue                                 |       | $        | 51,167     |     | $          | 46,472 |   |

**ForeignCurrency Translation**

The Company accounts fortranslation adjustments related to its investments in foreign entities in accordancewith Statement of Financial Accounting Standards (“SFAS”) No. 52, *Foreign Currency Translation*.  Local currencies are considered thefunctional currencies outside of the U.S. Income and expense items aretranslated at average rates of exchange prevailing during the year.  For operations in local currencyenvironments, assets and liabilities are translated at year-end exchange rateswith cumulative translation adjustments included as a component of stockholder’sequity.

**Financial Derivative Instruments**

Changes in the fair value of derivative financial instruments are recognized currently in earnings unless specific hedge accounting criteria are met.  For those instruments meeting the hedging criteria, gains and losses are recognized in other comprehensive income rather than in earnings.

**Stock-Based Compensation**

The Company accounts forstock options awarded to employees as liability awards under SFASNo. 123R, *Accounting for Stock-Based Compensation.*Accordingly,compensation expense and a related liability is recorded only if the value ofthe Company’s shares underlying its share based awards are greater than theawards’ exercise price as of the end of the applicable reporting period. See Note 7 for further discussionof the Company’s stock compensation plans.

**Comprehensive Income (Loss)**

The Company follows theprovisions of SFAS No. 130, *Reporting ComprehensiveIncome*.  This statementestablished rules for the reporting of comprehensive income (loss) and itscomponents.  Comprehensive income (loss)reflects the change in equity of a business enterprise during a period fromtransactions and other events and circumstances from nonowner sources.  Comprehensive income (loss) consists of netincome (loss), foreign currency translation adjustments and changes inunrealized loss on derivative financial instruments, and is presented in theaccompanying consolidated statements of stockholder’s equity.

F-8

----

 

**Use of Estimates**

The preparation offinancial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during thereporting periods.  Ultimate resultscould differ from these estimates.  On anongoing basis, management reviews its estimates, including those affectingdoubtful accounts, recovery of goodwill and intangible assets, restructuring,contingent compensation, medical claims accruals and income taxes.  Changes in facts and circumstancesmay result in revised estimates.

**New Accounting Pronouncements**

In July 2006 FASB issuedInterpretation No. 48 (“FIN 48”) *Accounting for Uncertaintyin Income Taxes — an interpretation of FASB Statement No. 109*. FIN 48 prescribes a recognition threshold and measurement process for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return.  Additionally, FIN 48 providesguidance on the derecognition, classification, accounting in interim periodsand disclosure requirements for uncertain tax positions.  The accountingprovisions of FIN 48 will be effective for the Company beginning January 1,2007.  The Company has not completed its evaluation of FIN 48 and theeffect its adoption will have on its consolidated financial statements.

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

The FASB also issued in September 2006Statement of Financial Accounting Standards No. 158, *Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans*(“FAS158”). The new standard requires companies to recognize the overfundedor underfunded status of a defined benefit postretirement plan as an asset orliability on the balance sheet and to recognize changes in that funded statusin the year in which the change occurs through comprehensive income. FAS 158provides for adoption effective December 31, 2007 for companies that do nothave publicly traded equity securities. As such, our consolidated balance sheet as of December 31, 2007 willreflect the funded status of our postretirement benefit plans, with the offsetreported in other comprehensive income (loss) in its consolidated balance sheet.If the Company had adopted FAS 158 on December 31, 2006, the Company would haverecorded an additional $1.2 million of other long term liabilities and othercomprehensive income. Upon its adoption of FAS 158 as of December 31, 2007, theCompany does not expect the actual impact to be materially different from thisamount.

In September 2006, the Securities andExchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”), *Financial Statements — Considering the Effects ofPrior Year Misstatements when Quantifying Misstatements in Current YearFinancial Statements*. SAB 108 provides guidance on how prior yearmisstatements should be taken into consideration when quantifying misstatementsin current year financial statements for purposes of determining whether thecurrent year’s financial statements are materially misstated. SAB 108 had noimpact on the Company’s consolidated financial statements.

F-9

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**3.**                          Goodwill and OtherIntangible Assets

TheCompany evaluates acquired goodwill for impairment on an annual basis basedupon a fair value approach. Additionally, goodwill is evaluated for impairment between annual testsif an event occurs or circumstances change that would more likely than notreduce the fair value of a reporting unit below its carrying value.

On July 1, 2006 and 2005,the Company completed its annual goodwill impairment test of each of its threereporting units.  Based on thisassessment, which utilized a discountedcash flow method, there was no impairment of goodwill indicated.

Thechanges in the carrying amount of goodwill for the year ended December 31, bysegment, are as follows:
|                                                                | ** ** | **Fashion &** | ** ** | **Life**     | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|--------------|------------|-----------------|------------|------------|------------|------------|------------|
| **(in thousands)**                                        | ** ** | **Licensing**          | ** ** | **Sciences** | ** ** | **Powersports** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
|                                                           |       |                   |       |         |       |            |       |       |       |       |       |
| Balances at  December 31, 2004                                 |       | $                      | 307,708    |         | $          | 188,837         |       | $          | 77,835     |       | $          | 12,587 |   | $ | 586,967 |   |
| Goodwill  acquired or completion  of purchase price allocation |       | 8,846                  |       | —       |       | 1,839           |       | —     |       | 10,685     |       |
| Foreign currency  translation                                  |       | —                 |       | —       |       | —          |       | (2,670     | )          | (2,670     | )          |
| Balances at  December 31, 2005                                 |       | 316,554                |       | 188,837      |       | 79,674          |       | 9,917      |       | 594,982    |       |
| Goodwill  acquired or completion  of purchase price allocation |       | —                 |       | —       |       | 331             |       | —     |       | 331        |       |
| Foreign currency  translation                                  |       | —                 |       | —       |       | —          |       | 3,085      |       | 3,085      |       |
| Balances at December  31, 2006                                 |       | $                      | 316,554    |         | $          | 188,837         |       | $          | 80,005     |       | $          | 13,002 |   | $ | 598,398 |   |

Intangible and other assets consist of the followingat December 31:
| (in thousands)                     | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------|------------|----------|------------|----------|------------|
|                                    |       |     |       |     |       |
| Trade exhibitor  lists                  |       | $        | 9,301      |     | $          | 132,936 |   |
| Advertiser lists                        |       | 29,680   |       | 29,680   |       |
| Subscriber lists                        |       | 789      |       | 6,023    |       |
| Trade names and  trademarks             |       | 19,211   |       | 19,211   |       |
| Other intangible  assets                |       | 19,972   |       | 20,275   |       |
| Deferred  financing costs               |       | 16,479   |       | 18,668   |       |
|                                    |       | 95,432   |       | 226,793  |       |
| Accumulated  amortization               |       | (56,768  | )          | (164,149 | )          |
| Total intangible  and other assets, net |       | $        | 38,664     |     | $          | 62,644 |   |

Fully amortized intangible assets removed from the related accounts inthe year ended December 31, 2006 and 2005 were $129.6 million and $27.7million. The fully amortized assets primarily consisted of exhibitor lists in2006 and advertiser lists in 2005.

F-10

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The allocated fair value of intangible assets acquired during the yearended December 31, 2005 was as follows:
| (in thousands)                                | ** ** | ** ** | ** ** |
|----------------------------------------------------|------------|------------|------------|
| Trade exhibitor  lists                             |       | $          | 3,820      |   |
| Advertiser lists                                   |       | 103        |       |
| Subscriber lists                                   |       | —     |       |
| Trade names and  trademarks                        |       | 1,230      |       |
| Other intangible  assets                           |       | 1,730      |       |
| Total intangible  assets and other assets acquired |       | $          | 6,883      |   |

Estimated amortization expense of intangible assets for the next fiveyears is as follows:
| (in thousands) | ** ** | ** ** | ** ** |
|---------------------|------------|------------|------------|
| 2007                |       | $          | 8,471      |   |
| 2008                |       | 5,931      |       |
| 2009                |       | 1,962      |       |
| 2010                |       | 1,601      |       |
| 2011                |       | 1,184      |       |
|                     |            |            |            |  |

Amortization expense for the years endedDecember 31, 2006, 2005 and 2004, was $22.6 million, $29.8 million and$34.8 million.

**4.**                          Acquisitions, Divestitures and Dispositions

**Acquisitions**

All acquisitions(collectively, the “Acquired Businesses”) have been accounted for using thepurchase method of accounting and, accordingly, the assets acquired andliabilities assumed have been recorded at their fair values as of the dates ofthe acquisitions.  The excess of thepurchase price over the fair value of the assets acquired and liabilitiesassumed has been recorded as goodwill. Results of operations for the Acquired Businesses have been included inthe accompanying consolidated financial statements since their respective datesof acquisition.  The Acquired Businesseshave been consummated to expand the Company’s show and publication presencewithin its existing market sectors and to maximize marketing and customerservice infrastructure and expertise.

On September 12, 2005,the Company purchased an off-road consumer event business from Petersen EventsCorporation (“Off-Road Expo”) for $2.2 million in cash.  The Company paid $0.1 million in additionalcash consideration in November 2006 to the former shareholders based on theactual 2006 operating revenue from the acquired assets.  This contingent consideration was recorded asgoodwill on the consolidated balance sheet.

F-11

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On August 23, 2005, theCompany purchased a fashion industry tradeshow business and related productsfrom the owner of POOL Tradeshow (‘‘POOL’’) for $3.0 million in cash. The originalPOOL purchase agreement provided for additional contingent cash considerationto be paid to the former owner based on the 2007 and 2008 operating results of POOLand required the owner’s continued employment with the Company.  In July 2006, the Company and the formerowner of POOL entered into an agreement which terminated the former owner’semployment with the Company and settled all their respective rights andobligations under the POOL asset purchase agreement and the employmentagreement. Upon execution of this agreement, the Company made an initialpayment of $1.5 million to the former owner. A final payment of $0.5 millionunder the agreement will be made in 2007. The $2.0 million consideration was recorded as compensation expense inthe third quarter of 2006.

On August 19, 2005, theCompany purchased Project Global Tradeshow, Inc. (‘‘Project”), a producer oftradeshows serving the fashion industry, for $9.9 million in cash.  The original Projectpurchase agreement provided for additional contingent cash consideration to bepaid to the former owners based on the 2007 and 2008 operating results ofProject and required the owners’ continued employment with the Company. In December 2006, the Companyand the former owners of Project agreed to terminate the former owners’employment with the Company and agreed to settle all their respective rightsand obligations under the Project stock purchase agreement and the employmentagreement. Under the terms of the amended agreement, the Company made a paymentof $28.0 million to the former owners in January 2007.  The $28.0 million consideration was recordedas compensation expense in 2006.

In 2005, the Companycompleted two other acquisitions of consumer tradeshow businesses with anaggregate purchase price of $0.5 million in cash. The Company accrued $0.2million in contingent consideration based on 2006 operating results, which wasrecorded as goodwill on the consolidated balance sheet.

In 2004, the Companypurchased a portfolio of pharmaceutical industry conferences and magazines (‘‘IVT’’)for $7.9 million in cash. The Company is obligated to pay contingentconsideration based on 2004 and 2005 operating results of the acquired assetsand the continued employment of the former shareholders. Consideration payable to the former shareholders is reported ascompensation expense in the 2005 and 2004 consolidated statements ofoperations. The contingent consideration based upon 2004 results was partiallypaid in 2005 with the remainder paid in 2006.  The contingentconsideration based on 2005 results was accrued as an estimate in 2005 and issubject to further negotiation with the former shareholders.  The Company expects the finalpayout to the former shareholders to be made in 2007.

TheCompany has recognized acquisition related compensation for the AcquiredBusinesses as compensation expense in the consolidated statements of operationsas follows:

 
| (in thousands)                       | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| IVT acquisition  related compensation     |       | $        | —     |     | $          | 740      |       | $ | 1,500 |   |
| Project  acquisition related compensation |       | 28,000   |       | —   |       | —   |       |
| POOL acquisition  related compensation    |       | 2,000    |       | —   |       | —   |       |
|                                           |            |          |            |          |            |          |            |  |  |  |

 

F-12

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Thechange in the balance of accrued contingent consideration included in otheraccrued liabilities in the accompanying consolidated balance sheet is asfollows:
| (in thousands)                           | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|------------|------------|
|                                          | ** ** | **Total**  | ** ** |
| Balance at  December 31, 2004       |       | $          | 1,500      |   |
| Contingent consideration expense              |       | 740        |       |
| Payments to former shareholders               |       | (904       | )          |
| Balance at  December 31, 2005       |       | 1,336      |       |
| Contingent consideration expense              |       | 30,000     |       |
| Contingent consideration recorded as goodwill |       | 331        |       |
| Payments to former shareholders               |       | (2,083     | )          |
| Balance at December 31,  2006                 |       | $          | 29,584     |   |

The pro forma combined operating results of the Acquired Businesses and the Company for the yearsended December 31, 2006, 2005 and 2004 are not materially different fromthe Company’s consolidated results of operations.

**Divestitures****and Dispositions**

The operating results,related income taxes, and any gains or losses of the following divestitures anddispositions (collectively, the “Disposed Businesses”) have been reported indiscontinued operations in the consolidated statements of operations for theyears ended December 31, 2006, 2005 and 2004. ** ******Interest expense was not allocated to any of theCompany’s discontinued operations.****

*Arenacross*

In December 2005, theCompany closed on the sale of its Arenacross Championship Series business (“Arenacross”)for a total selling price of $0.2 million. The Company recorded a $0.6 millionloss on the sale.  In 2006, the Companyincurred an additional $0.2 million in costs related to the sale of Arenacross.These costs were reported in income (loss) from discontinued operations.

Revenue of Arenacrossincluded in discontinued operations in the consolidated statements ofoperations was $0.9 million for the year ended December 31, 2005. Arenacrosshad no revenue for the year ended December 31, 2004.

*East Coast Fashion Tradeshow Acquiredfrom Larkin-Pluznik-Larkin, LLC*

In the second quarter of2005, the Company discontinued its East Coast Fashion group business (“EastCoast Fashion”) and recognized a $2.3 million impairment, which was thecarrying value of the related intangible assets.

Revenue of East CoastFashion included in discontinued operations in the consolidated statements ofoperations was $0.9 million and $6.1 million for the years ended December 31,2005 and 2004.

 

F-13

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*PortfolioGroup*

On May 23, 2005, the Company completed the sale of virtually allbusiness assets and liabilities associated with its tradeshows and conferences,trade publications and direct marketing products in the following primaryindustries: Information Technology & Communications, Travel/Hospitality,Beauty, Home Entertainment, Abilities and Portfolio, including the shares ofthe Company’s Hong Kong subsidiaries. The shares of the Company’s Brazilian subsidiary were sold to the samebuyer in July 2005 after final regulatory approval. Collectively, all of theabove properties are referred to as “the Portfolio Group.” The sale price forthese assets and shares was $185.0 million in cash less selling expenses and working capital adjustmentsof $11.2 million.  The Company recorded again of $52.9 million on the sale.  In 2006, theCompany received a refund of $0.2 million for taxes paid in 2005 related to thegain on sale of the Portfolio Group which was reported in income (loss) fromdiscontinued operations.

Revenue of thePortfolio Group, included in discontinued operations in the consolidatedstatements of operations, was $49.0 million for the period from January 1, 2005to May 23, 2005 and $102.5 million for the year ended December 31, 2004.

*DMS*

On September 8, 2004, the Company sold its German tradeshow business (“DMS”)for $1.7 million in cash.  In connectionwith the sale, the Company recorded a goodwill impairment charge of $6.2million.  The amount of the impairmentcharge was determined based upon the excess of the carrying value of DMS overthe selling price, less the costs incurred by the Company to sell DMS.  The Company is continuing to incur accountingand legal fees in connection with the closure of its DMS office. These costswill be reported in income (loss) from discontinued operations.

Revenue of DMS, included in discontinued operations in the consolidatedstatements of operations, was $0.1 million for the period from January 1, 2004to September 8, 2004.

*SeCA*

On August 5, 2004, the Company completed the sale of its 65% ownershipin its French joint venture (“SeCA”) for a total selling price of $3.1 millionin cash.  In connection with the sale,the Company recorded a goodwill impairment charge of $9.4 million, net ofminority interest effect of $5.1 million in the second quarter of 2004.  The impairment charge was determined basedupon the excess of the carrying value of the Company’s interest in SeCA overthe selling price, less the costs incurred by the Company to sell SeCA.  Subsequent to the sale of SeCA, managementchanged its reportable segments (see Note 11). The Company’s new reportingsegments do not include a segment which would contain the related impairment.

Revenue of SeCA, included in discontinued operations in theconsolidated statements of operations, was $2.9 million for the period fromJanuary 1, 2004 to August 5, 2004.

*Post*

On July 2, 2004, the Company completed the sale of its *Post*business trade publication (“Post”)for $1.0 million in cash.  The Companyrecorded an after tax loss on the sale of $1.3 million.

Revenue of Post, included in discontinued operations in theconsolidated statements of operations, was $0.7 million for the period fromJanuary 1, 2004 to July 2, 2004.

F-14

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*ArtGroup*

On March 12, 2004, the Company completed the sale of its art industrytradeshows and magazines business (the “Art Group”) for a total selling priceof $19.6 million in cash.  The Companyrecorded a gain after taxes on the sale of $3.4 million.

Revenue of the Art Group, included in discontinued operations in theconsolidated statements of operations, was $8.5 million for the period fromJanuary 1, 2004 to March 12, 2004.

The financial results of the Disposed Businesses included in thediscontinued operations in the accompanying consolidated statements ofoperations for the years ended December 31 are as follows:
| (in thousands)                                                                        | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**          | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|
| ** **                                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-** | ** ** |
| ** **                                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)**  | ** ** |
| (Loss) income  before income taxes (including goodwill impairment charge and gain on sale) |       | $     | (162       | )          | $     | 55,961            |       | $  | (977 | ) |
| Income tax  (benefit) provision                                                            |       | (243       | )          | 16,859     |       | 5,442             |       |
| Minority  interests                                                                        |       | —     |       | (566       | )          | 4,264             |       |
| Income (loss) from  discontinued businesses                                                |       | $          | 81         |       | $          | 38,536            |       | $ | (2,155 | ) |

 

The Company allocated goodwill to the Disposed Businesses and includedthe allocated goodwill in its determined gain or loss on disposal.  Goodwill allocated to the Art Group, Post,and the Portfolio Group is based on the relative fair values of the Disposed Businessto the entire reporting unit prior to disposal.  SeCA and DMS were neverintegrated into the Company’s broader reporting units. Thus, the carryingamount of acquired goodwill for those businesses was included in thecalculation of any gain or loss on disposal.

Goodwill allocated to the businesses disposed of and used in thecalculation of the gain or loss on sale of the Disposed Businesses was $121.8million and $23.5 million for the years ended December 31, 2005 and 2004.Subsequent to the sale of the Disposed Businesses, management changed itsreportable segments (see Note 11). The Company’s new reporting segments do notinclude a segment which would contain the goodwill allocated to the DisposedBusinesses.

**Non-Current Assets Held for Sale**

In the second quarter of 2005, the Company committed to a plan to sellits Cleveland office building and land (“the Cleveland Office”). The Companyceased depreciation of these assets, effective the second quarter of 2005.During 2006, the Company recognized a $1.0 million impairment, which isincluded in general and administrative expense in the accompanying consolidatedstatements of operations, on the Cleveland Office to write its carrying valuedown to its estimated selling price less selling costs.  The fair value was estimated  primarily based upon terms of a letter ofintent between the Company and a buyer of the building and a portion of theland.  As of December 31, 2006 and 2005,the Company reported this building and land as assets held for sale in the consolidatedbalance sheet.

F-15

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**5.**              Financial Derivative Instruments

The Company has periodically used derivative instruments to manageexposure to interest rate and foreign currency risks.  The Company’s objectives for holdingderivatives are to minimize the risks, using what management believes are themost effective methods to eliminate or reduce the impact of these exposures.

**Interest Rate Risk**

Variable rate debt instruments are subject to interest rate risk.  The Company periodically enters into interestrate collar and swap agreements to manage its exposure to interest ratemovements on its variable rate debt obligations.  The effective portion of the cumulative gainor loss on these agreements are reported as a component of accumulated othercomprehensive income in stockholder’s equity and recognized in earnings as theunderlying interest expense is incurred. The ineffective portion of these agreements are recognized in currentearnings.  Gains and losses on the undesignatedportion of these agreements at the end of each fiscal quarter (which arecalculated as the net amount payable upon termination at the date ofdetermination) are recognized in current earnings until expired.

In 2001 the Company entered into an interest rate collar agreementwhich expired in February 2004 to manage its exposure to interest ratemovements on a portion of its variable rate debt obligations.

In May 2003 the Company entered into an interest rate swap agreementexpiring November 2005, and subsequently terminated the agreement in December2003.  The net gain at termination ofapproximately $0.2 million was reported in accumulated other comprehensiveincome and was amortized into earnings over the original contract term.

**ForeignCurrency Risk**

The Company periodically uses forward contracts to manage its exposureassociated with forecasted international revenue and expense transactionsdenominated in euro and British Pound Sterling for up to 15 months in thefuture.  Changes in the fair value ofthese instruments are reported as a component of accumulated other comprehensiveincome in stockholder’s equity and are recognized in earnings as the underlyingrevenue or expense is recognized. Forward contracts not designated as hedging instruments underSFAS No. 133 are also used to manage the impact of the variability inexchange rates.  Changes in the fairvalue of these foreign exchange contracts are recognized in current earnings.

At December 31, 2006, the Company had no foreign exchange derivativecontracts.

**Statementof Operations**

The following table summarizes the gains included inother income on the Company’s statement of operations related to theineffective portion of the Company’s interest rate collar agreements andchanges in the fair value of foreign exchange contracts not designated ashedging instruments for the years ended December 31:
|                               | ** ** | **Interest Rate** | ** ** | **Foreign**   | ** ** | ** ** | ** ** |
|-------------------------------|------------|------------------------|------------|---------------|------------|------------|------------|
| ** **                    | ** ** | **Collar**             | ** ** | **Exchange**  | ** ** | ** ** | ** ** |
| **(in thousands)**       | ** ** | **Agreements**         | ** ** | **Contracts** | ** ** | **Total**  | ** ** |
|                          |       |                   |       |          |       |       |       |
| Year ended December 31, 2005  |       | $                      | 103        |          | $          | —     |       | $ | 103 |   |
|                          |       |                   |       |          |       |       |       |
| Year ended December 31,  2004 |       | $                      | 1,319      |          | $          | 71         |       | $ | 1,390 |   |

 

F-16

----

 

**6.**              Debt

**CreditFacility**

The Company is party to a credit facility (the “Credit Facility”) witha group of financial institutions acting as lenders. On May 24, 2006, theCompany amended and restated its existing credit facility. The amended CreditFacility reduced the revolving loan from $60.0 million to $50.0 million, added a $10.0 million Term Loan, modified oreliminated certain restrictive covenants and extended the maturity date fromApril 2007 to May 2009 for the entire Credit Facility.** **TheCredit Facility is guaranteed by the Company’s parent, Advanstar, Inc., itsparent, Advanstar Holdings Corp. (“Holdings”), and by the Company’s domesticsubsidiaries and is collateralized by first priority liens on substantially allof the assets of the Company and the guarantors.  As a result of the amendment and restatementof the Credit Facility, the Company expensed unamortized deferred finance costsof $0.6 million and capitalized additional deferred finance costs of $1.7million.

The Credit Facility contains restrictive covenants, includinglimitations on certain asset dispositions, dividends, investments and otherrestricted payments.  Failure to complywith the covenants could cause an event of default under the CreditFacility.  The Company incurs a dailycommitment fee of 0.5% and 1.25% per annum for unused revolving loanavailability and standby letters of credit, respectively. As of December 31,2006, the Company had $1.6 million of standby letters of credit, which reducedborrowings available under the Credit Facility to $48.4 million.

Prior to June 2005, the Credit Facility consisted of (i) $25.0million of term B loans due October 11, 2008, and (ii) $60.0 millionof revolving loan availability through April 11, 2007.  In June 2005, the Company repaid theoutstanding term B loans with proceeds from the sale of the Portfolio Group(see Note 4).

**SeniorSecured Notes**

The Senior Secured Notes initially consisted of $130.0million of Second Priority Senior Secured Floating Rate Notes due 2008 (the “floatingrate notes”), which required quarterly amortization equal to 0.25% of theprincipal amount thereof, and $300.0 million of 10.75% Second Priority SeniorSecured Notes due 2010 (the “fixed rate notes”).

The fixed rate notes are fully and unconditionally guaranteed on asenior basis, jointly and severally, by the Company’s wholly owned domesticsubsidiaries and collateralized by second priority liens on substantially all the collateral pledgedagainst borrowings under the Company’s Credit Facility (other than the capitalstock of certain of its subsidiaries and assets of its parent companies,Advanstar, Inc., and Holdings, the parent company of Advanstar,Inc.).  The covenants under the notesinclude limitations on certain asset dispositions, liens, debt incurrence,dividends, investments and other restricted payments.

In June 2005, the Company used a portion of theproceeds from the Portfolio Group sale to repurchase $8.7 million of the fixedrate notes at a price equal to 100% of the principal amount plus accruedinterest.   Separately, the Company alsoconsummated a tender offer in June 2005 for the floating rate notes andrepurchased $117.8 million of the floating rate notes at a price equal to$1,073 per $1,000 principal amount tendered plus accrued and unpaid interest tothe date of settlement.  In the secondquarter of 2005, the Company recognized a $12.6 million loss onextinguishment of debt related to the repurchase, including $8.6 million in tender offer premium andconsent fees, a write-off of $3.5 million in unamortized deferred financingcosts, and $0.5 million in legal fees and expenses.

F-17

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In August 2006, the Company used a portion of theproceeds from the Term Loan to redeem all of its remaining $9.8 million ofoutstanding floating rate notes at par. As a result of the redemption, the Company recognized a $0.1 million loss onextinguishment of debt related to the redemption due to the write off of unamortized deferredfinancing costs.

**SeniorSubordinated Notes**

The Company’s $160.0 million unsecured, 12% senior subordinatednotes due 2011 (the “Senior Subordinated Notes”) bear interest payablesemiannually on February 15 and August 15 of each year.  The Senior Subordinated Notes are fully andunconditionally guaranteed on a senior subordinated basis, jointly andseverally, by the Company’s wholly owned domestic subsidiaries.  The covenants under the Senior SubordinatedNotes include limitations on certain asset dispositions, liens, debtincurrence, dividends, investments and other restricted payments.

Long-term debt consists of the following at December 31:
| (in thousands)                                                                                                             | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                                                                            |       |     |       |     |       |
| Revolving Credit Facility, interest at LIBOR plus  2.5%; due 2009                                                               |       | $        | —     |     | $          | — |   |
| Term loan, interest at LIBOR plus 2.5%; 7.82% at December  31, 2006 due 2009                                                    |       | 10,000   |       | —   |       |
| Second priority senior secured floating rate notes,  interest at LIBOR plus 7.5%                                                |       | —   |       | 9,872    |       |
| 10.75% Second priority senior secured notes, due  2010, plus unamortized premium of $533 and $680 at December 31, 2006 and 2005 |       | 291,868  |       | 292,015  |       |
| Senior subordinated notes, interest at 12.00%, due  2011                                                                        |       | 160,000  |       | 160,000  |       |
| Acquisition note                                                                                                                |       | —   |       | 100      |       |
|                                                                                                                            |       | 461,868  |       | 461,987  |       |
| Less: Current maturities                                                                                                        |       | —   |       | (201     | )          |
|                                                                                                                            |       | $        | 461,868    |     | $          | 461,786 |   |

 

Based on the borrowing rates currently available to the Company fordebt instruments with similar terms and average maturities, the fair value oflong-term debt exceeded its carrying value by $29.1 million and $35.3 millionat December 31, 2006 and 2005.

Cash paid for interest for the years endedDecember 31, 2006, 2005 and 2004 was $52.4 million, $60.4 million and$67.2 million.

Annual maturities of long-term debt for the next five years (excludingamortization of premium) are as follows:
| (in thousands) | ** ** | ** ** | ** ** |
|---------------------|------------|------------|------------|
| 2007                |       | $          | —     |   |
| 2008                |       | —     |       |
| 2009                |       | 10,000     |       |
| 2010                |       | 291,335    |       |
| 2011                |       | 160,000    |       |
|                |       | $          | 461,335    |   |

 

F-18

----

 

**7.**              Stockholder’s Equity

**2000Management Incentive Plan**

On October 12, 2000,Holdings, adopted the 2000 Management Incentive Plan (“the Plan”).  A maximum of 4,072,789 shares of Holdings areauthorized for grant to participants under the Plan.  Options are granted by Holdings’ board ofdirectors at an exercise price of not less than the fair value of Holdingscommon stock at the date of grant and vest over a maximum of nine years. Certainoptions vest upon a change of control, as defined, and vesting of all optionscan be accelerated at any time at the sole discretion of the Company’s Board ofDirectors.  Shares available for grantunder the Plan totaled 497,789 at December 31, 2006. 

 

A summary of stock option activity under the Plan is as follows:
|                                        | ** ** | ** **      | ** ** | **Weighted** | ** ** |
|----------------------------------------|------------|-----------------|------------|--------------|------------|
| ** **                             | ** ** | ** **      | ** ** | **Average**  | ** ** |
| ** **                             | ** ** | **Options**     | ** ** | **Exercise** | ** ** |
| ** **                             | ** ** | **Outstanding** | ** ** | **Price**    | ** ** |
|                                   |       |            |       |         |       |
| Outstanding at December 31, 2005  |       | 3,965,000       |       | 10.00        |       |
| Granted                                |       | 875,000         |       | 10.00        |       |
| Cancelled                              |       | (1,265,000      | )          | 10.00        |       |
| Outstanding at  December 31, 2006 |       | 3,575,000       |       | $            | 10.00      |   |
|                                        |            |                 |            |              |            |  |

 

At December 31, 2006, the outstanding stock optionshad a weighted average remaining contractual life of 5.8 years and an exerciseprice of $10.00 per option.  Of theoptions outstanding at December 31, 2006, 2,353,018 wereexercisable with a remaining contractual life of 4.9 years, and an exerciseprice of $10.00 per option. 

** **

On January 1, 2006, the Company adopted Statements ofFinancial Accounting Standards No. 123R, *Share-Based Payment* (“SFAS 123R”).  Under SFAS 123R, the Company’s share basedawards meet the definition of liability awards. As allowed under the provisions of this statement for entities notmeeting the public company definition, the Company adopted the intrinsic valuemethod of accounting for its liability awards. Accordingly, compensation expense and a related liability is recorded tothe extent the fair value of the Company’s shares underlying itsshare based awards are greater than the awards’ exercise price as of the end ofthe applicable reporting period.  

 

As of December 31, 2006, management estimated that the fair value ofHoldings' common stock underlying all stock option awards exceeded the exerciseprice.  Accordingly, compensation expenseof $3.6 million ($0.4 million selling, editorial and circulation and $3.2million general and administrative) relating to the intrinsic value of stockoption awards was included in the consolidated statement of operations for theyear ended December 31, 2006.

Prior to January 1, 2006, the Company accounted for its stock optionsand awards to employees under the provisions of Accounting Principles Board (“APB”)Opinion No. 25, *Accounting for StockIssued to Employees*, and related interpretations.  No compensation expense relating to stockoptions was recorded in the consolidated statement of operations for the yearsended December 31, 2005 and 2004.

As of December 31, 2006, the aggregate intrinsic value of allstock options outstanding was $5.5 million. Any change in the aggregateintrinsic value of vested stock options will be included in operations in theperiod of the change. As of December 31, 2006, the aggregate intrinsic value ofunvested stock options was $1.9 million, which, subject to any changes inthe intrinsic value of the options, will be charged to operations as theoptions vest.  As of December 31, 2006the weighted-average remaining vesting term of unvested options was2.4 years, although earlier vesting may occur based upon terms of thePlan.

F-19

----

 

**8.**              401(k) Plan

The Company has a 401(k) savings plan and trust (the “401(k) Plan”)available to employees of the Company and its domestic subsidiaries.  All domestic employees who are at least 21years of age are eligible to participate in the 401(k) Plan.  The Company is required to make a matchingcontribution, after the employee completes one year of service, to the 401(k)Plan and may make discretionary contributions to the 401(k) Plan.  Eligible employees are vested 100% in theirown contributions.  Contributions made bythe Company vest in equal installments over five years.  Total contribution expense was $1.1 million,$1.4 million, and $1.6 million for the years ended December 31, 2006, 2005 and2004.

**9.**              Income Taxes

The Company’s taxable income or loss is included in the consolidatedfederal income tax return of Holdings.  Federalincome taxes are paid or refunded pursuant to the terms of a tax-sharingagreement under which taxes approximate the amount that would have beencomputed on a separate company basis. Taxes payable to Advanstar, Inc. of $2.7 million at December 31,2006 and 2005 are included in Due from parent in the accompanying consolidatedbalance sheet.

Cash paid for income taxes during the years ended December 31,2006, 2005 and 2004 was $0.7 million, $0.9 million and $0.2 million.

The summary of loss from continuing operations before (benefit)provision for income taxes was as follows for the years ended December 31:
| (in thousands) | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|---------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
|                |       |       |       |       |       |                       |       |
| Domestic            |       | $          | (33,500    | )          | $          | (35,460                    | )          | $ | (36,266 | ) |
| Foreign             |       | 60         |       | (1,851     | )          | (249                       | )          |
|                |       | $          | (33,440    | )          | $          | (37,311                    | )          | $ | (36,515 | ) |

 

The (benefit) provision for income taxes is comprised of the followingfor the years ended December 31:
| (in thousands)        | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |     |       |
| Current                    |       |     |       |     |       |     |       |
| Federal                    |       | $        | —     |     | $          | —   |       | $ | — |   |
| State                      |       | 570      |       | 14       |       | 7        |       |
| Foreign                    |       | 20       |       | (675     | )          | 20       |       |
| Deferred                   |       | 7,744    |       | (2,071   | )          | 6,491    |       |
| Total provision  (benefit) |       | $        | 8,334      |     | $          | (2,732   | )          | $ | 6,518 |   |

 

F-20

----

 

The Company accounts for income taxes following the provisions of SFASNo. 109, *Accounting for Income Taxes*,which requires recognition of deferred tax assets and liabilities for theexpected future tax consequences of differing amounts that have been includedin the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determinedbased on the difference between the financial statement and tax bases of assetsand liabilities using currently enacted tax rates at which the differences areexpected to reverse.

Significant components of the Company’s deferred income taxes were asfollows at December 31:
| (in thousands)                                        | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net current  deferred tax asset                            |       |       |       |       |       |
| Accounts receivable                                        |       | $          | 336        |       | $          | 467 |   |
| Accrued expenses and other                                 |       | 5,428      |       | 5,204      |       |
| Stock option compensation                                  |       | 1,368      |       | —     |       |
| Prepaid and other                                          |       | (1,712     | )          | (1,037     | )          |
| Total net current deferred tax asset                       |       | 5,420      |       | 4,634      |       |
| Net noncurrent  deferred tax asset                         |       |       |       |       |       |
| Property, plant and equipment                              |       | 1,515      |       | 1,246      |       |
| Identifiable intangible assets                             |       | 22,245     |       | 17,575     |       |
| Goodwill                                                   |       | (39,244    | )          | (31,500    | )          |
| Deferred change in tax capitalization versus book  expense |       | 11,063     |       | —     |       |
| U.S. net operating loss carryforwards                      |       | 41,028     |       | 39,252     |       |
| Foreign jurisdiction net operating loss  carryforwards     |       | 10,424     |       | 8,600      |       |
| AMT credit carryforwards                                   |       | 510        |       | 453        |       |
| Total net noncurrent deferred tax asset                    |       | 47,541     |       | 35,626     |       |
| Valuation  allowance                                       |       | (92,205    | )          | (71,760    | )          |
| Net deferred income tax  liabilities                       |       | $          | (39,244    | )          | $          | (31,500 | ) |

 

The Company has established a valuation allowance to offset all of thenet deferred tax assets.  Theamortization of goodwill for income tax purposes resulted in the tax basis ofgoodwill being less than the carrying value for financial reportingpurposes.  Because goodwill is notamortized for financial reporting purposes, the Company has established adeferred tax liability equal to this tax effected basis difference of $39.2million and $31.5 million at December 31, 2006 and 2005 and has increased thevaluation allowance by the same amount. All goodwill additions in 2006 relatedto additional contingent cash consideration paid on 2005 acquisitions (see Note4) is expected to be deductible for tax purposes.

At December 31, 2006 and 2005, the Company had net operating losscarryforwards of $151.0 million and $130.1 million.  Of these losses, $26.1 million and$21.5 million are related to losses generated by the Company’s operationsin foreign tax jurisdictions whose use are subject to the tax laws of suchforeign jurisdictions and will be limited by the ability of such foreignentities to generate taxable income.  Ofthe total operating loss carryforwards at December 31, 2006, $26.1 million haveno expiration date and $124.9 million expire at various dates beginning in2021.  The Company has recorded avaluation allowance to offset the potential tax benefits of the losscarryforwards and all other deferred tax assets because their realization isuncertain based on the Company’s operating history. In the event of a change inownership, there could be a limitation on net operating loss carryforwards.

F-21

----

 

A reconciliation of the Company’s (benefit) provision for income taxesat the federal statutory rate to the reported income tax (benefit) provision isas follows:
| (in thousands)                                                      | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|--------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **                                                               | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **                                                               | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
|                                                                     |       |       |       |       |       |                       |       |
| Income tax  benefit at statutory rates                                   |       | $          | (11,704    | )          | $          | (13,059                    | )          | $ | (14,630 | ) |
| Change in  valuation allowance                                           |       | 20,445     |       | 3,352      |       | 17,228                     |       |
| State taxes, net  of federal benefit                                     |       | (836       | )          | (933       | )          | (1,045                     | )          |
| Foreign rate  differential                                               |       | 42         |       | 345        |       | 213                        |       |
| Permanent  difference due to sale of Portfolio Group                     |       | —     |       | 7,382      |       | —                     |       |
| Permanent  difference due to discontinuation of East Coast Fashion Group |       | —     |       | 852        |       | —                     |       |
| Other permanent  differences                                             |       | 248        |       | 280        |       | 1,006                      |       |
| Other, net                                                               |       | 139        |       | (951       | )          | 3,746                      |       |
| (Benefit) provision for  income taxes                                    |       | $          | 8,334      |       | $          | (2,732                     | )          | $ | 6,518 |   |

 

**10.**       Commitments and Contingencies

**Leases**

The Company has long-term operating leases for office space and officeequipment.  The leases generally requirethe Company to pay maintenance, insurance, taxes and other expenses in additionto minimum annual rentals.  Building andequipment rent expense, including an allocation of certain facility operatingexpenses net of sublease rent income of $1.8 million, $2.7 million, and $0.2million, was $7.1 million, $7.0 million and $9.1 million for the years endedDecember 31, 2006, 2005 and 2004. Future minimum rent commitments under operating leases with initialterms of one year or more are as follows:
| (in thousands) | ** ** | ** ** | ** ** |
|---------------------|------------|------------|------------|
|                |       |       |       |
| 2007                |       | $          | 4,726      |   |
| 2008                |       | 4,497      |       |
| 2009                |       | 3,060      |       |
| 2010                |       | 2,682      |       |
| 2011                |       | 2,119      |       |
| Thereafter          |       | 5,832      |       |
|                     |            |            |            |  |

 

**Litigation**

The Company is a defendant in legal proceedings arising in the ordinarycourse of business.  Based on informationpresently available, management has determined that the accruals for theseroutine actions and claims are adequate. Although recorded accruals include management’s best estimates ofprobable outcome, the resolution of these matters cannot be predicted withcertainty.  Management believes, however,that it is unlikely that any identified matters, either individually or in theaggregate, will have a material adverse effect on the Company’s results ofoperations, financial position or cash flows.

F-22

----

 

**11.**       Segments

The Company follows the provisions of SFASNo. 131, “Disclosures about Segments of an Enterprise and RelatedInformation.” In 2006, the Company undertook a strategic change in themonitoring and management of the business to better reflect management’s focusand commitment to its three industry-focused segments: Fashion & Licensing,Life Sciences, and Powersports.  Thischange was prompted as a result of a substantial change in the businessorganization following the divestiture of the Portfolio Group (see Note4).  The Company has included its nonreportable operating segments in Other. Prior to this strategic change, the Company’s reportable segments wereby product type rather than by market sector as currently is beingreported.  The Company has restated itssegment information for 2005 and 2004 to reflect the new reportable segments.

The Company evaluates the performance of, and allocates resources to,its segments based on contribution margin, which is a non-GAAP measure —defined as revenue less cost of production; selling, editorial and circulation;and certain allocated general and administrative costs. The accounting policies of the reportable segments are the same as thosedescribed in the summary of significant accounting policies.  The segments derive revenue from shows andconferences; trade, professional and consumer periodicals; marketing, directmail and database products and services; and electronic media products.  There are no inter-segment sales ortransfers.  Assets are not allocated tosegments and therefore have not been presented. Revenue and contribution margins from continuing operations of theCompany’s reportable segments are as follows for the years ended December 31:
| (in thousands)     | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|-------------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
| Revenue                 |       |       |       |       |       |                       |       |
| Life Sciences           |       | $          | 155,688    |       | $          | 146,884                    |       | $ | 145,597 |   |
| Fashion & Licensing |       | 110,627    |       | 89,999     |       | 79,982                     |       |
| Powersports             |       | 44,670     |       | 39,489     |       | 34,098                     |       |
| Other                   |       | 12,737     |       | 12,541     |       | 11,389                     |       |
| Total                   |       | $          | 323,722    |       | $          | 288,913                    |       | $ | 271,066 |   |
|                    |       |       |       |       |       |                       |       |
| Contribution  margin    |       |       |       |       |       |                       |       |
| Life Sciences           |       | $          | 50,665     |       | $          | 46,138                     |       | $ | 42,493 |   |
| Fashion & Licensing |       | 59,879     |       | 52,140     |       | 47,870                     |       |
| Powersports             |       | 13,668     |       | 11,678     |       | 11,375                     |       |
| Other                   |       | 1,103      |       | 5,904      |       | 7,012                      |       |

 

F-23

----

 

The reconciliation of total segment contribution margin to consolidatedloss from continuing operations before income taxes is as follows:
| (in thousands)                                                        | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|----------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
|                                                                       |       |       |       |       |       |                       |       |
| Total segment  contribution margin                                         |       | $          | 125,315    |       | $          | 115,860                    |       | $ | 108,750 |   |
| General and  administrative expense unallocated to segment operations |       | (70,385    | )          | (36,562    | )          | (36,494                    | )          |
| Restructuring  charge                                                      |       | (2,325     | )          | (4,771     | )          | 4,015                      |       |
| Depreciation and  amortization                                             |       | (32,265    | )          | (37,755    | )          | (43,089                    | )          |
| Other expense  (primarily interest)                                        |       | (53,780    | )          | (74,083    | )          | (69,697                    | )          |
| Loss from continuing  operations before income taxes                       |       | $          | (33,440    | )          | $          | (37,311                    | )          | $ | (36,515 | ) |

 

The Company’s revenue from continuing operations by product type is asfollows for the three years ended December 31: 
| (in thousands)    | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|------------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
| Revenue                |       |       |       |       |       |                       |       |
| Shows and  conferences |       | $          | 144,193    |       | $          | 122,239                    |       | $ | 107,089 |   |
| Publications           |       | 155,715    |       | 148,214    |       | 148,408                    |       |
| Other products         |       | 23,814     |       | 18,460     |       | 15,569                     |       |
|                   |       | $          | 323,722    |       | $          | 288,913                    |       | $ | 271,066 |   |

 

Other products include direct marketing, direct mail and databaseproducts and services, and electronic media products.

Financial information relating to the Company’s revenue from continuingoperations by geographic area is as follows for the years ended December 31:
| (in thousands) | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|---------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
| Revenue             |       |       |       |       |       |                       |       |
| United States       |       | $          | 312,975    |       | $          | 280,059                    |       | $ | 262,618 |   |
| International       |       | 10,747     |       | 8,854      |       | 8,448                      |       |
|                |       | $          | 323,722    |       | $          | 288,913                    |       | $ | 271,066 |   |

 

F-24

----

 

**12.**       Restructuring Activities and Contract TerminationCosts

**Restructuring**

Related to the sale of the Portfolio Group (seeNote 4), in May 2005, the Company ceased use of certain leased office space in NewYork, NY, Milford, CT, and Santa Ana, CA.  In the third quarter of 2005, the Companyvacated additional leased office space in Milford, CT and Chicago, IL. These activitiesresulted in charges to the Company’s operations during 2005.  In thefirst quarter of 2006, the Company vacated additional leased office space inNew York, NY, and revised its estimate of expected future sublease income forthis space, resulting in additional charges during the first quarter of 2006. These charges consist of the discountedremaining future minimum lease payments due under non-cancelable leases, net ofestimated future sublease income. These lease commitments expire at variousdates through 2010.

In June 2006, the Company entered into a leasemodification and surrender agreement for approximately 60% of its vacatedoffice space in New York, NY.  Under theterms of the agreement, the Company paid the lessor $2.8 million in cash, thelease covering the surrendered space was terminated and the Company has nofurther future lease obligations for the surrendered space.  In June 2006 the Company adjusted its accrualfor this space based upon the terms of the agreement and recorded a reductionof operating expenses of $0.1 million.

During 2005 the Company terminated 117 employeesfrom the Company in connection with the sale of the Portfolio Group and thereorganization of the Company’s operating and support department managementteam. The Company took a charge to operations during the year ended December 31, 2005 for severance and other termination costs.

In 2001, the Company’s parent integrated many ofthe sales, marketing, technology and operating functions of Advanstar.com withthe Company and its core activities in publishing, shows and direct marketingproducts.  These restructuring activitieswere completed by the end of 2001, except for facility lease costs from thefacility Advanstar.com vacated.  Thefacility lease obligation was settled in May 2004 for less than amounts owedunder the lease.  A $4.0 millionfavorable settlement (net of fees and related expenses) of the lease obligationwas recognized as a reduction in operating expenses in 2004.

Restructuring charges incurred are as follows for the years ended December 31:
| (in thousands)                             | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**                   | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|----------------------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **(As Adjusted-**     | ** ** |
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **See Note 14)** | ** ** |
| Facility exit  costs                            |       | $          | 2,339      |       | $          | 2,499                      |       | $ | — |   |
| Advanstar.com  lease settlement                 |       | —     |       | —     |       | (4,015                     | )          |
| Employee  severance and other termination costs |       | (14        | )          | 2,272      |       | —                     |       |
| Restructuring charge  (benefit)                 |       | $          | 2,325      |       | $          | 4,771                      |       | $ | (4,015 | ) |

 

F-25

----

 

The change in restructuring accruals is asfollows (in thousands):
| (in thousands)                     | ** ** | **Facility Exit Costs** | ** ** | **Employee Severance** | ** ** | **Total**  | ** ** |
|-----------------------------------------|------------|-----------------------------------|------------|-----------------------------|------------|------------|------------|
| ** **                              | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** ** | ** ** |
| Balance at December 31, 2004  |       | $                                 | 1,827      |                        | $          | —     |       | $ | 1,827 |   |
| Restructuring charge                    |       | 2,499                             |       | 2,272                       |       | 4,771      |       |
| Utilized-cash                           |       | (914                              | )          | (1,465                      | )          | (2,379     | )          |
| Balance at December 31, 2005  |       | 3,412                             |       | 807                         |       | 4,219      |       |
| Restructuring charge                    |       | 2,339                             |       | (14                         | )          | 2,325      |       |
| Utilized-cash                           |       | (4,585                            | )          | (766                        | )          | (5,351     | )          |
| Balance at  December 31, 2006 |       | $                                 | 1,166      |                        | $          | 27         |       | $ | 1,193 |   |

 

The restructuring accrualbalance in the accompanying consolidated balance sheet is $1.2 million and $4.2million at December 31, 2006 and 2005, of which $0.5 million and $2.1 millionis in other accrued expenses at December 31, 2006 and 2005, and $0.7 millionand $2.1 million is in other long-term liabilities at December 31, 2006 and2005.

**Long-Term Contract Termination**

In October 2006, the Company and one of its vendorsentered into an agreement to terminate a long-term contract originallyeffective through December 31, 2008.  Thetermination agreement calls for a termination fee of $1.9 million to be paid bythe Company in March 2007 and provides for services to be performed by thevendor through April 1, 2007.  TheCompany took a charge to operations of $1.9 million during the fourth quarterof 2006, which is included in accounts payable in the accompanying consolidatedbalance sheet.

**13.**       Related-Party Transactions

**FinancialAdvisory Fees and Agreements**

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

In June 2005, the Company repurchased $7.1 million ofits fixed rate notes at par, and $4.6 million of its floating rate notes at aprice equal to 107.3% of principal, from CSS (USA) pursuant to the Company’stender offer (see Note 6).

**Advanstar, Inc. Notes**

In February 2001, Advanstar, Inc.issued discount notes bearing interest at 15% (the “Discount Notes”) with anaggregate principal amount due October 2011 of $171.8 million.  These notes require semi-annual cash interestpayments.  Neither the Company nor any ofits subsidiaries guarantee the Discount Notes.

Advanstar, Inc. is a holdingcompany and its ability to pay interest on the Discount Notes will be dependentupon the receipt of dividends from its subsidiaries, including theCompany.  The Credit Facility, SeniorSecured Notes and the SeniorSubordinated Notes impose substantialrestrictions on the Company’s and its subsidiaries’ ability to pay dividends.

F-26

----

 

The restricted payments covenants in the Company’sSenior Secured Notes indenture and Senior Subordinated Notes indenture providethat the Company can pay dividendsonly if its leverage ratio (as defined) is 6.0 to 1.0 or better and only from a“basket” defined as the amount by which the Company’s cumulative EBITDA (asdefined) since January 1, 2001 exceeds 150% of the Company’s cumulativeinterest expense in that period plus other items including proceeds from equityofferings. The Company cannot provide assurance that its results will allow itto make future distributions in light of these restrictions.  Failure to pay the interest on these noteswill be a default under the notes and also resultin a default under the Company’s Credit Facility, which could have a materialadverse effect on the Company’s financial position, results of operations, andcash flows and/or could impact the Company’s ability to continue to operatewithout an amendment or restructuring of its Credit Facility and thenotes.  Notwithstandingthe leverage ratio limitation on restricted payments, the Company can makerestricted payments in an aggregate amount of up to $20 million toAdvanstar, Inc., none of which has been used as of December 31, 2006.  Both onMarch 14, 2006 and on October 14, 2006 the Company declared and paid a dividendof $12.9 million to Advanstar, Inc. to be used for its April 2006 and October2006 interest payments for its Discount Notes. Debt service on the discount notes will be $25.8 million in2007.  Although there can be noassurance, the Company expects its results will allow it to continue to makedividend payments to Advanstar, Inc., to satisfy its debt serviceobligations.  In February 2007, theCompany declared a dividend of $12.9 million payable to Advanstar, Inc. to beused for servicing its April 2007 debt obligations.

**Stockholderdividend**

In July2006, Holdings entered into a stock purchase agreement with the Company’sformer Chief Executive Officer.  Pursuantto the agreement, Holdings agreed to repurchase all of the shares of its commonstock held by the former CEO and he surrendered all of his stock options inexchange for a $3.3 million payment.  TheCompany declared and paid a $3.3 million dividend to its stockholder,Advanstar, Inc., for purposes of funding this transaction.

**14.**       Advanstar.com merger

In December 2006, the Company’s management completed the legal mergerof Advanstar.com, Inc. (“Advanstar.com”) and the Company. Prior to the merger,Advanstar.com was an affiliate of the Company, wholly owned by the Company’sparent. Because the Company and Advanstar.com are under common control, thistransaction was accounted for as a combination of entities under common controland, accordingly, the Company did not establish a new basis of accounting inthe assets or liabilities of Advanstar.com. The Company’s reported results fromprior periods have been restated to include the financial results ofAdvanstar.com.

On January 1, 2005, the Company began consolidating the operations ofAdvanstar.com with its operations upon the adoption of Financial AccountingStandards Board (“FASB”) Interpretation No. 46R, *Consolidationof Variable Interest Entities*(“FIN 46R”).  As a result of the adoption of FIN 46R, theCompany had recorded a $4.6 million gain, which was reported as a cumulativeeffect of accounting change in the first quarter of 2005. As a result of thelegal merger described above, the Company’s 2005 consolidated statement ofoperations no longer reflects this cumulative effect.

Prior to adoption of FIN 46R, the Company recorded advances and notesissued to Advanstar.com as an operating expense in the Company’s consolidated statementof operations.  These advances and noteswere used by Advanstar.com in support of its operations, including the purchaseof depreciable assets.  Accordingly,there was a difference in the timing of when the advances and notes resulted inexpenses reflected in the consolidated statements of operations of the Company

F-27

----

 

and Advanstar.com.  As a resultof the merger accounting described above, this difference resulted in anadjustment to reduce the Company’s consolidated net loss for the year ended December31, 2004.

The merger of Advanstar.com resulted in an adjustment to net income asreported for the years ended December 31, 2005 and 2004 and for the quarterended March 31, 2005 as follows:
|                                                      | ** ** | **Year Ended**   | ** ** | **Quarter Ended** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                                           | ** ** | **December 31,** | ** ** | **March 31,**     | ** ** |
| **(in thousands)**                              | ** ** | **2005**              | ** ** | **2004**               | ** ** | **2005** | ** ** |
|                                                 | ** ** | ** **            | ** ** | ** **             | ** ** | ** ** | ** ** |
| Net income  (loss) as previously reported            |       | $                     | 8,575      |                   | $          | (51,163 | ) | $ | 6,145 |   |
| Prior period  adjustment for merger of Advanstar.com |       | (4,618                | )          | 5,975                  |       | (4,618 | ) |
| Net income (loss) as  adjusted                       |       | $                     | 3,957      |                   | $          | (45,188 | ) | $ | 1,527 |   |

 

The 2005 and 2006 quarterly operating results, other than the quarterended March 31, 2005, were not adjusted as a result of the merger ofAdvanstar.com.

The merger of Advanstar.com resulted in an adjustment to stockholder’sequity as reported as of December 31, 2004 and 2003 as follows:
| (in thousands)                                  | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accumulated  deficit as previously reported          |       | $          | (292,757   | )          | $          | (241,594 | ) |
| Prior period  adjustment for merger of Advanstar.com |       | 4,618      |       | (1,357     | )          |
| Accumulated deficit as  adjusted                     |       | $          | (288,139   | )          | $          | (242,951 | ) |

 

The merger of the Company and Advanstar.com had no effect onstockholder’s equity as reported for any quarters in fiscal 2005 and 2006.

The merger of the Company and Advanstar.com had an immaterial effect onthe Company’s consolidated statement of cash flows for the years ended December31, 2005 and 2004 and fiscal 2005 and 2006 quarters.

**15.  Subsequent Event**

On March 28,2007, the Board of Directors of Holdings, unanimously approved, and Holdingsentered into, a definitive merger agreement (“Merger Agreement”) among Holdings,VSS-AHC Consolidated Holdings Corp. (“Buyer”), VSS-AHC Acquisition Corp.(“Merger Sub”), being a wholly owned subsidiary of the Buyer, and DLJ MerchantBanking III, Inc., as the stockholders’ representative.  Pursuant to theMerger Agreement and subject to the terms and conditions set forth therein, asof the closing of the merger, the Merger Sub will be merged with and intoHoldings, with Holdings being the surviving corporation.

 

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

 

Under theMerger Agreement, as soon as practicable after signing, Holdings has agreed tocause the Company to commence a tender offer and consent solicitation for itsoutstanding 10-3/4% Second Priority Senior Secured Notes due 2010 and 12% SeniorSubordinated Notes due 2011 and to cause Advanstar, Inc. to commence a tenderoffer for its outstanding 15% Senior Secured Discount Notes due 2011.

F-28

----

 

**16.**       Supplemental Guarantor Condensed ConsolidatingFinancial Statements

**Basis of Presentation**

The Company’s Senior Subordinated Notes andSenior Secured Notes are fully and unconditionally guaranteed on a seniorsubordinated basis and senior basis, respectively, jointly and severally, bythe Company’s wholly owned domestic subsidiaries.  The subsidiary guarantors are Men’s ApparelGuild in California, Inc., Applied Business teleCommunications, CME2, Inc. andProject Global Tradeshow, Inc.  Thecondensed consolidating financial statements of the guarantors are presentedbelow and should be read in conjunction with the consolidated financialstatements of the Company.  Separatefinancial statements of the guarantors are not presented because the guarantorsare jointly, severally, fully and unconditionally liable under the guaranteesand the Company believes the condensed consolidating financial statementspresented are sufficiently meaningful in understanding the financial positionand results of the guarantors.  There areno significant restrictions on the ability of the subsidiary guarantors to makedistributions to the Company.

F-29

----

**Advanstar Communications Inc.Condensed Consolidating Balance SheetsDecember 31, 2006**

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

 

F-30

----

**AdvanstarCommunications Inc.**

**CondensedConsolidating Statements of Operations**

**Year Ended December 31, 2006**
| ** **                                                               | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------|------------|--------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                  | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
|                                                                     |       |               |       |             |       |             |       |             |       |             |       |
| Revenue                                                                  |       | $                  | 207,904    |             | $          | 105,071          |       | $                | 10,747     |             | $          | — |   | $ | 323,722 |   |
| Operating expenses                                                       |       |               |       |             |       |             |       |             |       |             |       |
| Cost of  production and selling, editorial and circulation               |       | 136,967            |       | 48,510           |       | 8,174            |       | —           |       | 193,651          |       |
| General and  administrative                                              |       | 71,861             |       | 2,222            |       | 1,058            |       |             |       | 75,141           |       |
| Restructuring  charge                                                    |       | 2,325              |       | —           |       | —           |       | —           |       | 2,325            |       |
| Depreciation and  amortization                                           |       | 18,940             |       | 12,813           |       | 512              |       | —           |       | 32,265           |       |
| Total operating  expenses                                                |       | 230,093            |       | 63,545           |       | 9,744            |       | —           |       | 303,382          |       |
| Operating (loss)  income                                                 |       | (22,189            | )          | 41,526           |       | 1,003            |       | —           |       | 20,340           |       |
| Other income (expense)                                                   |       |               |       |             |       |             |       |             |       |             |       |
| Interest income  (expense), net                                          |       | (52,963            | )          | —           |       | 22               |       | —           |       | (52,941          | )          |
| Other expense,  net                                                      |       | 128                |       | (2               | )          | (965             | )          | —           |       | (839             | )          |
| (Loss) income  from continuing operations operations before income taxes |       | (75,024            | )          | 41,524           |       | 60               |       | —           |       | (33,440          | )          |
| (Benefit) provision for  income taxes                                    |       | (7,873             | )          | 16,216           |       | (9               | )          | —           |       | 8,334            |       |
| Equity in earnings of  subsidiaries                                      |       | 25,377             |       | —           |       | —           |       | (25,377          | )          | —           |       |
| (Loss) income  from continuing operations                                |       | (41,774            | )          | 25,308           |       | 69               |       | (25,377          | )          | (41,774          | )          |
| Income (loss) from  operations of discontinued business, net of tax      |       | 81                 |       | —           |       | 29               |       | (29              | )          | 81               |       |
| Net (loss) income                                                        |       | $                  | (41,693    | )                | $          | 25,308           |       | $                | 98         |             | $          | (25,406 | ) | $ | (41,693 | ) |

 

F-31

----

**AdvanstarCommunications Inc.Condensed Consolidation Statements of Cash FlowsYear Ended December 31, 2006**
| **(in thousands)**                                                                  | ** ** | **Communications** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Nonguarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Total** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
| ** **                                                                               | ** ** | ** **         | ** ** | ** **                  | ** ** | ** **                     | ** ** | ** **       | ** ** | ** **              | ** ** |
| **Cash flows from operating  activities**                                                |       |               |       |                        |       |                           |       |             |       |                    |       |
| Net (loss) income                                                                        |       | $                  | (41,693    | )                           | $          | 25,308                         |       | $                | 98         |                    | $          | (25,406 | ) | $ | (41,693 | ) |
| Adjustments to  reconcile net (loss) income to net cash provided by operating activities |       |               |       |                        |       |                           |       |             |       |                    |       |
| Equity in  earnings of subsidiaries                                                      |       | (25,406            | )          | —                      |       | —                         |       | 25,406           |       | —                  |       |
| Deferred income  taxes                                                                   |       | 10,376             |       | (2,632                      | )          | —                         |       | —           |       | 7,744                   |       |
| Depreciation and  amortization                                                           |       | 18,940             |       | 12,813                      |       | 512                            |       | —           |       | 32,265                  |       |
| Other non-cash  items                                                                    |       | 4,644              |       | 146                         |       | 97                             |       | —           |       | 4,887                   |       |
| Change in  working capital items                                                         |       | 63,550             |       | (30,918                     | )          | 459                            |       | —           |       | 29,444                  |       |
| Net cash  provided by operating activities                                               |       | 30,411             |       | 4,717                       |       | 1,166                          |       | —           |       | 36,294                  |       |
| **Cash flows from investing  activities**                                                |       |               |       |                        |       |                           |       |             |       |                    |       |
| Additions to property,  plant and equipment                                              |       | (11,186            | )          | (2,808                      | )          | (52                            | )          | —           |       | (14,046                 | )          |
| Proceeds from sale of  assets and other                                                  |       | (296               | )          | 4                           |       | —                         |       | —           |       | (292                    | )          |
| Net cash used in  investing activities                                                   |       | (11,482            | )          | (2,804                      | )          | (52                            | )          | —           |       | (14,338                 | )          |
| **Cash flows from financing  activities**                                                |       |               |       |                        |       |                           |       |             |       |                    |       |
| Payments of long-term  debt, net                                                         |       | 28                 |       | —                      |       | —                         |       | —           |       | 28                      |       |
| Dividends paid to  shareholder                                                           |       | (29,113            | )          | —                      |       | —                         |       | —           |       | (29,113                 | )          |
| Project grant funds  distributed                                                         |       | —             |       | (175                        | )          | —                         |       | —           |       | (175                    | )          |
| Deferred financing  costs                                                                |       | (1,706             | )          | —                      |       | —                         |       | —           |       | (1,706                  | )          |
| Net cash used in  financing activities                                                   |       | (30,791            | )          | (175                        | )          | —                         |       | —           |       | (30,966                 | )          |
| Effect of exchange rate  changes on cash                                                 |       | —             |       | —                      |       | (681                           | )          | —           |       | (681                    | )          |
| Net (decrease)  increase in cash and  cash equivalents                              |       | (11,862            | )          | 1,738                       |       | 433                            |       | —           |       | (9,691                  | )          |
| **Cash and cash equivalents**                                                            |       |               |       |                        |       |                           |       |             |       |                    |       |
| Beginning of year                                                                        |       | 44,108             |       | 1,725                       |       | 776                            |       | —           |       | 46,609                  |       |
| End of year                                                                              |       | $                  | 32,246     |                        | $          | 3,463                          |       | $                | 1,209      |                    | $          | — |   | $ | 36,918 |   |

 

F-32

----

**Advanstar Communications Inc.**

**Condensed Consolidating BalanceSheets**

**December31, 2005**
| ** **                                             | ** ** | ** **         | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                | ** ** | **Communications** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| **Assets**                                             |       |               |       |             |       |             |       |             |       |             |       |
| Current assets                                         |       |               |       |             |       |             |       |             |       |             |       |
| Cash and cash  equivalents                             |       | $                  | 44,108     |             | $          | 1,725            |       | $                | 776        |             | $          | — |   | $ | 46,609 |   |
| Accounts  receivable, net                              |       | 23,140             |       | 446              |       | 1,021            |       | —           |       | 24,607           |       |
| Prepaid expenses                                       |       | 6,539              |       | 1,136            |       | 196              |       | —           |       | 7,871            |       |
| Other                                                  |       | 1,929              |       | —           |       | 36               |       | —           |       | 1,965            |       |
| Total current assets                                   |       | 75,716             |       | 3,307            |       | 2,029            |       | —           |       | 81,052           |       |
| Non-current assets                                     |       |               |       |             |       |             |       |             |       |             |       |
| Due from parent                                        |       | 2,232              |       | —           |       | —           |       | —           |       | 2,232            |       |
| Property, plant  and equipment, net                    |       | 18,360             |       | 2,778            |       | 168              |       | —           |       | 21,306           |       |
| Deferred tax  asset                                    |       | 3,217              |       | 502              |       | —           |       | (3,719           | )          | —           |       |
| Intangible and  other assets, net                      |       | 368,693            |       | 266,246          |       | 22,687           |       | —           |       | 657,626          |       |
| Investments in  subsidiaries                           |       | 515,479            |       | —           |       | —           |       | (515,479         | )          | —           |       |
| Intercompany  receivable                               |       | —             |       | 259,760          |       | (5,423           | )          | (254,337         | )          | —           |       |
| Non-current  assets held for sale                      |       | 4,620              |       | —           |       | —           |       | —           |       | 4,620            |       |
|                                                   |       | $                  | 988,317    |             | $          | 532,593          |       | $                | 19,461     |             | $          | (773,535 | ) | $ | 766,836 |   |
| **Liabilities and Stockholder’s  Equity**         |       |               |       |             |       |             |       |             |       |             |       |
| Current liabilities                                    |       |               |       |             |       |             |       |             |       |             |       |
| Current  maturities of long-term debt                  |       | $                  | 201        |             | $          | —           |       | $                | —     |             | $          | — |   | $ | 201 |   |
| Accounts payable                                       |       | 10,948             |       | 449              |       | 945              |       |             |       | 12,342           |       |
| Accrued  liabilities                                   |       | 29,625             |       | 8,086            |       | 283              |       | —           |       | 37,994           |       |
| Deferred revenue                                       |       | 23,585             |       | 22,840           |       | 47               |       | —           |       | 46,472           |       |
| Total current  liabilities                             |       | 64,359             |       | 31,375           |       | 1,275            |       | —           |       | 97,009           |       |
| Long-term debt, net of  current maturities             |       | 461,786            |       | —           |       | —           |       | —           |       | 461,786          |       |
| Deferred income taxes  and other long-term liabilities |       | 36,227             |       | 3,719            |       | 206              |       | (3,719           | )          | 36,433           |       |
| Intercompany payable                                   |       | 254,337            |       | —           |       | —           |       | (254,337         | )          | —           |       |
| Stockholder’s equity                              |       |               |       |             |       |             |       |             |       |             |       |
| Common stock                                           |       | 10                 |       | 8                |       | 353              |       | (361             | )          | 10               |       |
| Capital in  excess of par value                        |       | 447,367            |       | 448,112          |       | 48,704           |       | (496,816         | )          | 447,367          |       |
| (Accumulated  deficit) retained earnings               |       | (284,182           | )          | 49,379           |       | (39,490          | )          | (9,889           | )          | (284,182         | )          |
| Accumulated  other comprehensive income (loss)         |       | 8,413              |       | —           |       | 8,413            |       | (8,413           | )          | 8,413            |       |
| Total  stockholder’s equity                       |       | 171,608            |       | 497,499          |       | 17,980           |       | (515,479         | )          | 171,608          |       |
|                                                   |       | $                  | 988,317    |             | $          | 532,593          |       | $                | 19,461     |             | $          | (773,535 | ) | $ | 766,836 |   |

F-33

----

**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Operations**

**Year Ended December 31, 2005**

 
| ** **                                                                | ** ** | ** **                      | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                   | ** ** | **Communications**              | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                                |       | **(As  Adjusted-See Note 14 )** |       |
| Revenue                                                                   |       | $                               | 202,463    |             | $          | 77,596           |       | $                | 8,854      |             | $          | — |   | $ | 288,913 |   |
| Operating  expenses                                                       |       |                            |       |             |       |             |       |             |       |             |       |
| Cost of production and selling, editorial and  circulation                |       | 131,223                         |       | 30,855           |       | 6,621            |       | —           |       | 168,699          |       |
| General and administrative                                                |       | 36,771                          |       | 1,733            |       | 2,412            |       |             |       | 40,916           |       |
| Restructuring charge                                                      |       | 4,771                           |       | —           |       | —           |       | —           |       | 4,771            |       |
| Depreciation and amortization                                             |       | 22,100                          |       | 14,967           |       | 688              |       | —           |       | 37,755           |       |
| Total operating expenses                                                  |       | 194,865                         |       | 47,555           |       | 9,721            |       | —           |       | 252,141          |       |
| Operating income                                                          |       | 7,598                           |       | 30,041           |       | (867             | )          | —           |       | 36,772           |       |
| Other income  (expense)                                                   |       |                            |       |             |       |             |       |             |       |             |       |
| Interest income (expense), net                                            |       | (61,611                         | )          | 1                |       | 28               |       | —           |       | (61,582          | )          |
| Other expense, net                                                        |       | (11,412                         | )          | (76              | )          | (1,013           | )          | —           |       | (12,501          | )          |
| (Loss) income from continuing  operations before income taxes        |       | (65,425                         | )          | 29,966           |       | (1,852           | )          | —           |       | (37,311          | )          |
|                                                                      |       |                            |       |             |       |             |       |             |       |             |       |
| (Benefit)  provision for income taxes                                |       | (14,410                         | )          | 11,669           |       | 9                |       | —           |       | (2,732           | )          |
| Equity in  earnings of subsidiaries                                       |       | 16,436                          |       | —           |       | —           |       | (16,436          | )          | —           |       |
| (Loss) income from continuing operations                                  |       | (34,579                         | )          | 18,297           |       | (1,861           | )          | (16,436          | )          | (34,579          | )          |
| Income (loss)  from operations of discontinued  business, net of tax |       | 38,536                          |       | —           |       | 1,795            |       | (1,795           | )          | 38,536           |       |
| Net income (loss)                                                         |       | $                               | 3,957      |             | $          | 18,297           |       | $                | (66        | )                | $          | (18,231 | ) | $ | 3,957 |   |

 

F-34

----

**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Operations**

**Year Ended December 31, 2005**

 
| ** **                                                                                                | ** ** | ** **                                   | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                                                   | ** ** | **Communications**                           | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                                                                | ** ** | **(As Adjusted-See Note 14)** | ** ** |
| ** **                                                                                                | ** ** | ** **                                   | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** |
| **Cash flows from operating  activities**                                                                 |       |                                         |       |             |       |             |       |             |       |             |       |
| Net income (loss)                                                                                         |       | $                                            | 3,957      |             | $          | 18,297           |       | $                | (66        | )                | $          | (18,231 | ) | $ | 3,957 |   |
| Adjustments to  reconcile net income (loss) to  net  cash provided by (used in) operating activities |       |                                         |       |             |       |             |       |             |       |             |       |
| Equity in  earnings of subsidiaries                                                                       |       | (18,231                                      | )          | —           |       | —           |       | 18,231           |       | —           |       |
| Gain on  derivative financial instruments                                                                 |       | (103                                         | )          | —           |       | —           |       | —           |       | (103             | )          |
| Write-off of  deferred financing costs                                                                    |       | 3,517                                        |       |             |       |             |       |             |       | 3,517            |       |
| Impairment of  intangible assets                                                                          |       | 2,272                                        |       | —           |       | —           |       | —           |       | 2,272            |       |
| Deferred income  taxes                                                                                    |       | 18,261                                       |       | (5,011           | )          | —           |       | —           |       | 13,250           |       |
| Depreciation and  amortization                                                                            |       | 24,791                                       |       | 14,967           |       | 960              |       | —           |       | 40,718           |       |
| Other non-cash  items                                                                                     |       | (67,482                                      | )          | 321              |       | 19,277           |       | —           |       | (47,884          | )          |
| Change in  working capital items                                                                          |       | 35,510                                       |       | (14,517          | )          | (28,485          | )          | —           |       | (7,492           | )          |
| Net cash  provided by (used in)  operating activities                                           |       | 2,492                                        |       | 14,057           |       | (8,314           | )          | —           |       | 8,235            |       |
| **Cash flows from investing  activities**                                                                 |       |                                         |       |             |       |             |       |             |       |             |       |
| Additions to property,  plant and equipment                                                               |       | (7,485                                       | )          | (2,048           | )          | (31              | )          | —           |       | (9,564           | )          |
| Acquisitions of publications  and shows                                                                   |       | (4,677                                       | )          | (10,884          | )          | —           |       | —           |       | (15,561          | )          |
| Proceeds from sale of  assets and other                                                                   |       | 172,984                                      |       | —           |       | 1,100            |       | —           |       | 174,084          |       |
| Net cash  provided by (used in)  investing  activities                                               |       | 160,822                                      |       | (12,932          | )          | 1,069            |       | —           |       | 148,959          |       |
| **Cash flows from financing  activities**                                                                 |       |                                         |       |             |       |             |       |             |       |             |       |
| Payments of long-term  debt                                                                               |       | (152,167                                     | )          | —           |       | —           |       | —           |       | (152,167         | )          |
| Dividends paid to  minority interest holders                                                              |       | (900                                         | )          | —           |       | —           |       | —           |       | (900             | )          |
| Project grant refunds  received                                                                           |       | —                                       |       | 600              |       | —           |       | —           |       | 600              |       |
| Deferred financing  costs                                                                                 |       | (168                                         | )          | —           |       | —           |       | —           |       | (168             | )          |
| Net cash used in  (provided by) financing activities                                                      |       | (153,235                                     | )          | 600              |       | —           |       | —           |       | (152,635         | )          |
| Effect of exchange rate  changes on cash                                                                  |       | —                                       |       | —           |       | 754              |       | —           |       | 754              |       |
| Net increase  (decrease) in cash and  cash  equivalents                                              |       | 10,079                                       |       | 1,725            |       | (6,491           | )          | —           |       | 5,313            |       |
| **Cash and cash equivalents**                                                                             |       |                                         |       |             |       |             |       |             |       |             |       |
| Beginning of year                                                                                         |       | 34,029                                       |       | —           |       | 7,267            |       | —           |       | 41,296           |       |
| End of year                                                                                               |       | $                                            | 44,108     |             | $          | 1,725            |       | $                | 776        |             | $          | — |   | $ | 46,609 |   |

 

 

F-35

----

**Advanstar Communications Inc.**

**Condensed ConsolidatingStatements of Cash Flows**

**Year Ended December 31, 2004**

 
| **(in thousands)**                                               | ** ** | **Communica  tions**                         | ** ** | **Guarantor  Subsidiaries** | ** ** | **Nonguarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Total** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
| ** **                                                            | ** ** | **(As Adjusted-See Note 14)** | ** ** |
| ** **                                                            |       |                                         |       |                        |       |                           |       |             |       |                    |       |
| Revenue                                                               |       | $                                            | 194,262    |                        | $          | 68,356                         |       | $                | 8,448      |                    | $          | — |   | $ | 271,066 |   |
| Operating expenses                                                    |       |                                         |       |                        |       |                           |       |             |       |                    |       |
| Cost of  production and selling, editorial and circulation            |       | 127,089                                      |       | 25,318                      |       | 5,770                          |       | —           |       | 158,177                 |       |
| General and  administrative                                           |       | 37,506                                       |       | 1,750                       |       | 1,377                          |       | —           |       | 40,633                  |       |
| Restructure  charge                                                   |       | (4,015                                       | )          | —                      |       | —                         |       | —           |       | (4,015                  | )          |
| Depreciation and  amortization                                        |       | 28,365                                       |       | 13,967                      |       | 757                            |       | —           |       | 43,089                  |       |
| Total operating  expenses                                             |       | 188,945                                      |       | 41,035                      |       | 7,904                          |       | —           |       | 237,884                 |       |
| Operating income                                                      |       | 5,317                                        |       | 27,321                      |       | 544                            |       | —           |       | 33,182                  |       |
| Other income (expense)                                                |       |                                         |       |                        |       |                           |       |             |       |                    |       |
| Interest  expense, net                                                |       | (70,527                                      | )          | —                      |       | 4                              |       | —           |       | (70,523                 | )          |
| Other income  (expense), net                                          |       | 1,671                                        |       | (49                         | )          | (796                           | )          | —           |       | 826                     |       |
| (Loss) income  from continuing operations before income taxes         |       | (63,539                                      | )          | 27,272                      |       | (248                           | )          | —           |       | (36,515                 | )          |
|                                                                  |       |                                         |       |                        |       |                           |       |             |       |                    |       |
| (Benefit) provision for  income taxes                            |       | (3,688                                       | )          | 10,206                      |       | —                         |       | —           |       | 6,518                   |       |
| Equity in earnings of  subsidiaries                                   |       | 16,818                                       |       | —                      |       | —                         |       | (16,818          | )          | —                  |       |
|                                                                  |       |                                         |       |                        |       |                           |       |             |       |                    |       |
| (Loss) income  from continuing operations                             |       | (43,033                                      | )          | 17,066                      |       | (248                           | )          | (16,818          | )          | (43,033                 | )          |
|                                                                  |       |                                         |       |                        |       |                           |       |             |       |                    |       |
| (Loss) income  from operations of discontinued business, net of taxes |       | (2,155                                       | )          | —                      |       | (15,197                        | )          | 15,197           |       | (2,155                  | )          |
| Net (loss) income                                                     |       | $                                            | (45,188    | )                           | $          | 17,066                         |       | $                | (15,445    | )                       | $          | (1,621 | ) | $ | (45,188 | ) |

 

F-36

----

**Adanstar CommunicationsInc.Condensed Consolidated Statements of Cash FlowsYear Ended December 31, 2004**
| ** **                                                                                         | ** ** | ** **                                   | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **(in thousands)**                                                                            | ** ** | **Communications**                           | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| ** **                                                                                         | ** ** | **(As Adjusted-See Note 14)** | ** ** |
| ** **                                                                                         | ** ** | ** **                                   | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** |
| **Cash flows from operating activities**                                                           |       |                                         |       |             |       |             |       |             |       |             |       |
| Net (loss) income                                                                                  |       | $                                            | (45,188    | )                | $          | 17,066           |       | $                | (15,445    | )                | $          | (1,621 | ) | $ | (45,188 | ) |
| Adjustments to reconcile net (loss) income to net cash provided by  (used in) operating activities |       |                                         |       |             |       |             |       |             |       |             |       |
| Equity in earnings of  subsidiaries                                                                |       | (1,621                                       | )          | —           |       | —           |       | 1,621            |       | —           |       |
| Gain on derivative  financial instruments                                                          |       | (1,391                                       | )          | —           |       | —           |       | —           |       | (1,391           | )          |
| Impairment of goodwill                                                                             |       | —                                       |       | —           |       | 15,570           |       | —           |       | 15,570           |       |
| Deferred income taxes                                                                              |       | 16,346                                       |       | (5,086           | )          | —           |       | —           |       | 11,260           |       |
| Depreciation and  amortization                                                                     |       | 34,596                                       |       | 13,967           |       | 1,870            |       | —           |       | 50,433           |       |
| Other non-cash items                                                                               |       | (509                                         | )          | 113              |       | 75               |       | —           |       | (321             | )          |
| Change in working  capital items                                                                   |       | 18,155                                       |       | (23,151          | )          | (6,466           | )          | —           |       | (11,462          | )          |
|                                                                                               |       |                                         |       |             |       |             |       |             |       |             |       |
| Net cash provided by  (used in)  operating activities                                    |       | 20,388                                       |       | 2,909            |       | (4,396           | )          | —           |       | 18,901           |       |
| **Cash flows from investing activities**                                                           |       |                                         |       |             |       |             |       |             |       |             |       |
| Additions to property, plant and equipment                                                         |       | (8,013                                       | )          | (1,309           | )          | (254             | )          | —           |       | (9,576           | )          |
| Acquisitions of publications and shows, net                                                        |       | (7,915                                       | )          | —           |       | —           |       | —           |       | (7,915           | )          |
| Proceeds from sale of assets and other                                                             |       | 20,332                                       |       | (1,600           | )          | 3,755            |       | —           |       | 22,487           |       |
| Net cash provided by  (used in) investing activities                                               |       | 4,404                                        |       | (2,909           | )          | 3,501            |       | —           |       | 4,996            |       |
| **Cash flows from financing activities**                                                           |       |                                         |       |             |       |             |       |             |       |             |       |
| Payments of long-term debt, net                                                                    |       | (11,700                                      | )          | —           |       | —           |       | —           |       | (11,700          | )          |
| Dividends paid to minority interest holders                                                        |       | (500                                         | )          | —           |       | —           |       | —           |       | (500             | )          |
| Deferred financing costs                                                                           |       | (315                                         | )          | —           |       | —           |       | —           |       | (315             | )          |
| Net cash used in  financing activities                                                             |       | (12,515                                      | )          | —           |       | —           |       | —           |       | (12,515          | )          |
| Effect of exchange rate changes on cash                                                            |       | 118                                          |       | —           |       | 458              |       | —           |       | 576              |       |
| Net increase (decrease)  in cash and cash equivalents                                              |       | 12,395                                       |       | —           |       | (437             | )          | —           |       | 11,958           |       |
| **Cash and cash equivalents**                                                                      |       |                                         |       |             |       |             |       |             |       |             |       |
| Beginning of year                                                                                  |       | 21,632                                       |       | —           |       | 7,706            |       | —           |       | 29,338           |       |
| End of year                                                                                        |       | $                                            | 34,027     |             | $          | —           |       | $                | 7,269      |             | $          | — |   | $ | 41,296 |   |

 

 

F-37

----

 

**2.   Financial Statement Schedules**

**Schedule II — Valuation and Qualifying Accounts**

**AdvanstarCommunications Inc.**

**Valuationand Qualifying Accounts**

** **
| ** **                       | ** ** | **Balance at  Beginning  of  Period** | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Charged to  Other  Accounts** | ** ** | **Deductions  (1)** | ** ** | **Balance at  End of  Period** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------|------------|---------------------|------------|------------------------------------------|------------|
| ** **                       | ** ** | ** **                                 | ** ** | **Additions**                                 | ** ** | ** **                           | ** ** | ** **          | ** ** |
|                             |       |                                       |       |                                          |       |                                 |       |                |       |                                     |       |
| Allowance for doubtful  accounts |       |                                       |       |                                          |       |                                 |       |                |       |                                     |       |
| Year Ended  December 31,         |       |                                       |       |                                          |       |                                 |       |                |       |                                     |       |
|                             |       |                                       |       |                                          |       |                                 |       |                |       |                                     |       |
| 2006                             |       | $                                          | 1,076,000  |                                          | $          | 695,000                              |       | $                   | —     |                                     | $          | 770,000 |   | $ | 1,001,000 |   |
| 2005                             |       | 785,000                                    |       | 1,406,000                                     |       | —                               |       | 1,115,000           |       | 1,076,000                                |       |
| 2004                             |       | 838,000                                    |       | 605,000                                       |       | —                               |       | 658,000             |       | 785,000                                  |       |
|                                  |            |                                            |            |                                               |            |                                      |            |                     |            |                                          |            |  |  |  |  |  |

----

(1)             Uncollectibleaccounts written off.

All other financial schedules are omitted because they are notapplicable or the information is included in the financial statements orrelated notes.

 

II-1

----

 

**3.  Exhibits**
| Exhibit No. | ** ** | **Document**                                                                                                                                                                                                                                                                                                                                                         |
|-------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                                                                                                                                 |
| 2.1         |       | Asset Purchase Agreement among Thomson Healthcare  Inc., Global Information Licensing Corporation and Advanstar Communications  Inc. dated as of August 22, 2003 (Previously filed as an exhibit to  Advanstar, Inc.’s Current Report on Form 8-K filed on October 16, 2003 and  incorporated by reference herein)                                              |
| 2.1.1       |       | Amendment No. 1 dated October 1, 2003 to the Asset  Purchase Agreement dated as of August 22, 2003 among Thomson Healthcare Inc.,  Global Information Licensing Corporation and Advanstar Communications Inc.  (Previously filed as an exhibit to Advanstar, Inc.’s Current Report on Form  8-K filed on October 16, 2003 and incorporated by reference herein) |
| 2.2         |       | Asset and share purchase agreement dated April 2,  2005 between Advanstar, Inc. and its subsidiaries and Questex Media Group,  Inc. (Previously filed as an exhibit to Advanstar, Inc.’s Current Report on  Form 8-K filed on April 6, 2005 and incorporated by reference herein)                                                                               |
| 2.3         |       | Agreement and Plan of Merger dated as of March 28,  2007 among Advanstar Holdings Corp., VSS-AHC Consolidated Holdings Corp.,  VSS-AHC Acquisition Corp., and DLJ Merchant Banking Funds III, Inc. (Previously  filed as an exhibit to the Company’s current report on Form 8-K dated March  28, 2007 and incorporated by reference herein)                     |
| 3.1         |       | Certificate of Incorporation of Advanstar  Communications Inc. (Previously filed as an exhibit to the Company’s  Registration Statement on Form S-4 (333-57201) and incorporated  by reference herein)                                                                                                                                                          |
| 3.1.1       |       | Certificate of Amendment of the Certificates of  Incorporation of Advanstar Communications Inc. (Previously filed as an  exhibit to the Company’s Annual Report on Form 10-K for 2000 and  incorporated by reference herein)                                                                                                                               |
| 3.2         |       | Amended and Restated By-Laws of Advanstar  Communications Inc. (Previously filed as an exhibit to the Company’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 and  incorporated by reference herein)                                                                                                                                       |
| 4.1         |       | Indenture, dated as of February 21, 2001 among Advanstar  Communications Inc., the guarantors party thereto and the Trustee (Previously  filed as an exhibit to the Company’s Annual Report on Form 10-K  for 2000 and incorporated by reference herein)                                                                                                   |
| 4.2         |       | Indenture, dated as of August 18, 2003 among  Advanstar Communications Inc., the guarantors party thereto and the Trustee  (Previously filed as an exhibit to the Company’s Registration Statement on  Form S-1 (333-59284) and incorporated by reference herein)                                                                                          |
| 4.3         |       | Intercreditor Agreement dated as of August 18,  2003 among Advanstar Communications Inc., Fleet National Bank, Credit Suisse  First Boston and Wells Fargo Bank Minnesota N.A. (Previously filed as an  exhibit to the Company’s Registration Statement (333-109648) and  incorporated by reference herein)                                                |
|        |       | The Company has not filed certain debt instruments  with respect to long-term debt that does not exceed ten percent of the  total assets of the Company and its subsidiaries on a consolidated basis. The  Company hereby agrees to furnish a copy of such instruments to the Commission  upon request.                                                              |
| 10.1        |       | Advanstar Holdings Corp. 2000 Management Plan  Incentive dated as of October 11, 2000 (as amended September 17, 2002,  December 10, 2002, April 19, 2005 and September 30, 2005) (Previously filed  as an exhibit to Advanstar, Inc.’s Current Report on Form 8-K filed on  April 21, 2005 and October 5, 2005 and incorporated by reference herein) +          |
| 10.1.1      |       | Form of Award Agreement under Advanstar Holdings  Corp. 2000 Management Incentive Plan (filed as an exhibit to Advanstar,  Inc.’s Annual Report on Form 10-K for 2004 and incorporated by reference  herein)+                                                                                                                                                   |
| 10.2        |       | Advanstar Holdings Corp. Shareholders Agreement  dated as of October 11, 2000 (Previously filed as an exhibit to the  Company’s Annual Report on Form 10-K for 2000 and incorporated by  reference herein)                                                                                                                                            |

 

II-2

----

 
| 10.2.1  | First Amendment and Waiver to Shareholders’ Agreement dated as of  February 21, 2001 (Previously filed as an Exhibit to the Company’s  Registration Statement on Form S-1 (333-59284) and incorporated by reference  herein)                                                 |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2.2  | Second Amendment and Waiver to Stockholders’ Agreement dated as of  April 4, 2001  (Previously filed as an  Exhibit to the Company’s Registration Statement on Form S-1 (333-59284) and  incorporated by reference herein)                                                   |
| 10.3    | Second Amended and Restated Credit Agreement dated as of May 24, 2006.  (Previously filed as an exhibit to the Company’s  Current Report on Form 8-K dated  May 24, 2006 and incorporated by reference herein)                                                               |
| 10.3.1  | First amendment to the Second Amended and Restated Credit Agreement,  dated as of November 29, 2006. (Previously filed as an exhibit to the Company’s  Current Report on Form 8-K dated November 29, 2006 and incorporated by  reference herein)                                       |
| 10.4    | Severance  Payment Agreement dated as of March 28, 2007 between Advanstar, Inc. and  Joseph Loggia (Previously filed as an exhibit to the Company’s current report  on Form 8-K dated March 28, 2007 and incorporated by reference herein)+                                            |
| 10.5    | Employment Agreement, dated August 14, 2000, between Advanstar,  Inc. and James M. Alic. (Previously filed as Exhibit 10.2 to Form 10-Q  of Advanstar, Inc. filed with the Securities and Exchange Commission on  November 14, 2000, and incorporated by reference herein) + |
| 10.5.1  | Amendment to Employment Agreement, effective March 1, 2002, between  Advanstar, Inc. and James M. Alic (Previously filed as an exhibit to the  Company’s Annual Report on Form 10-K for 2001 and incorporated by reference  herein) +                                                  |
| 10.5.2  | Amendment to Employment Agreement, effective September 15, 2004,  between Advanstar, Inc. and James M. Alic (Filed as an exhibit to Advanstar,  Inc.’s Annual Report on Form 10-K for 2004 and incorporated by reference  herein) +                                                    |
| 10.5.3  | Amendment to Employment Agreement No. 3, effective February 1, 2006,  between Advanstar, Inc. and James M. Alic. (Previously filed as an exhibit to  the Company’s Current Report on Form 8-K filed on March 27, 2006 and  incorporated by reference herein) +                         |
| 10.6    | Employees’ 401(k) Plan and Trust, as amended (Previously filed as an  exhibit to the Company’s Registration Statement on Form S-4 (333-57201)  and incorporated by reference herein) +                                                                                            |
| 10.7    | Letter Agreement dated August 18, 2006 between Advanstar  Communications Inc. and Theodore S. Alpert. (Previously filed as an exhibit  to the Company’s Current Report on Form 8-K dated August 28, 2006 and  incorporated by reference herein) +                                      |
| 10.8    | Employment Agreement dated November 21, 2003 between Advanstar,  Inc. and Joseph Loggia (Previously filed as an exhibit to the Company’s  Registration Statement (333-109648) and incorporated by reference herein)  +                                                            |
| 10.8.1  | Amended and restated employment agreement by and between Advanstar,  Inc., and Joseph Loggia dated April 1, 2005 (Previously filed as an exhibit  to the Company’s Current Report on Form 8-K filed on June 28, 2005 and incorporated  by reference herein) +                          |
| 10.8.2  | Amendment to the  Amended and Restated Employment agreement by and between Advanstar, Inc., and  Joseph Loggia dated March 28, 2007  (Previously  filed as an exhibit to the Company’s current report on Form 8-K dated March  28, 2007 and incorporated by reference herein)+    |
| 10.9    | Direct Investment Plan dated as of October 11, 2000 (Previously filed  as an exhibit to the Company’s Annual Report on Form 10-K for 2001 and  incorporated by reference herein) +                                                                                                     |
| 10.10   | Advisory Agreement, effective December 10, 2002, between  Advanstar, Inc. and Douglas B. Fox (Previously filed as an exhibit to  the Company’s Annual Report on Form 10-K for 2002 and incorporated  by reference herein) +                                             |
| 10.10.1 | Letter Agreement by and between Advanstar Holdings Corp., and Douglas  B. Fox dated March 6, 2006. (Previously filed as an exhibit to the Company’s Current Report on Form 8-K  filed on March 29, 2006 and incorporated by reference herein) +                                        |
| 10.11   | Agreement dated June 15, 2006 between Advanstar Communications Inc. and Laura McConnell + *                                                                                                                                                                                                 |
| 10.12   | Agreement, dated February 19, 1999, by and among Advanstar, Inc.,  Advanstar Communications Inc. and Eric I. Lisman (Previously filed as an  exhibit to the Company’s Annual Report on Form 10-K/A for 2002 and incorporated  by reference herein) +                                   |
| 10.13   | Agreement dated September 3, 1996 between Advanstar Communications  Inc. and Danny Phillips + *                                                                                                                                                                                             |
| 12.1    | Computation of Ratio of Earnings to Fixed Charges *                                                                                                                                                                                                                                         |
| 21.1    | Subsidiaries of Advanstar Communications Inc. (Previously filed as an  exhibit to the Company’s Registration Statement (333-137798) and incorporated  by reference herein) +                                                                                                           |

 

II-3

----

 
| 31.1 | Certification by Chief Executive Officer required by Rule  13a-14(a)/15d-14(a)*                                                                  |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification by Chief Financial Officer required by Rule  13a-14(a)/15d-14(a)*                                                                  |
| 32.1 | Certification of Chief Executive Officer required by Rule 13a-14(b) or  Rule 15d-14(b) and Section 1350 of Chapter 63 of the United States Code* |
| 32.2 | Certification of Chief Financial Officer required by Rule 13a-14(b) or  Rule 15d-14(b) and Section 1350 of Chapter 63 of the United States Code* |

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*              Filed herewith

+              Denotes management contract or compensatory plan

 

II-4

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**SIGNATURES**

Pursuant to the requirements ofSection 13 or 15(d) of the Exchange Act of 1934, the registrant has duly causedthis Report to be signed on its behalf by the undersigned, thereunto dulyauthorized.
|        |   |   | Advanstar Communications Inc. |
|--------|--------|--------|-------------------------------|
|   |   |   | By:                           |
|   |   |   |                          | /s/ Ted S.  Alpert |
|   |   |   |                          | Name: Ted S. Alpert |
|   |   |   |                          | Title:Vice President - Finance, |
|   |   |   |                          | Chief Financial Officer |
|   |   |   |                          |   |
|   |   |   |                          | Date: April 2, 2007 |

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the Registrant, in the capacities indicated, onthe dates indicated below.
| Signature               | ** ** | **Title**                                  | ** ** | **Date**      |
|-------------------------|------------|--------------------------------------------|------------|---------------|
|                    |       |                                       |       |          |
|  /s/ James M. Alic |       | Chairman of the Board and Director         |       | April 2, 2007 |
| James M. Alic           |       |                                       |       |          |
|                    |       |                                       |       |          |
|  /s/ Joseph Loggia |       | Chief Executive Officer and Director       |       | April 2, 2007 |
| Joseph Loggia           |       |                                       |       |          |
|                    |       | Vice President-Finance, Chief Financial    |       |          |
|  /s/ Ted S. Alpert |       | Officer, Assistant Secretary and Principal |       | April 2, 2007 |
| Ted S. Alpert           |       | Accounting Officer                         |       |          |
|                    |       |                                       |       |          |
| /s/ OhSang  Kwon        |       | Director                                   |       | April 2, 2007 |
| OhSang Kwon             |       |                                       |       |          |
|                    |       |                                       |       |          |
| /s/ Douglas  B. Fox     |       | Director                                   |       | April 2, 2007 |
| Douglas B. Fox          |       |                                       |       |          |
|                    |       |                                       |       |          |
| /s/ Charles  Pieper     |       | Director                                   |       | April 2, 2007 |
| Charles Pieper          |       |                                       |       |          |
|                    |       |                                       |       |          |
|                    |       | Director                                   |       |          |
| Kamil Salame            |       |                                       |       |          |
|                    |       |                                       |       |          |
| /s/ Scott Marden        |       | Director                                   |       | April 2, 2007 |
| Scott Marden            |       |                                       |       |          |

 

II-5

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