**SECURITIES AND EXCHANGECOMMISSION**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 File Number 333-61386**

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**Advanstar,Inc.**(Exact name of registrant as specified in its charter) 
| **Delaware**                                  | **94-3243499**       |
|-----------------------------------------------|----------------------|
| (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 registered pursuant to Section 12(b) of theAct:  None

Securities registered pursuant to Section 12(g) of theAct:  None

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.

Yes oNox.

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act.

Yes oNox.

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 xNoo.

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 Filero       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).  oYes   oNox.  

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

Asof April 2, 2007, the registrant had 100 shares of common stock issued andoutstanding.

**DOCUMENTSINCORPORATED BY REFERENCE**

None.

 

 

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**PART I**

**Item I — *BUSINESS***

Unless otherwise noted herein, disclosures in this AnnualReport on Form 10-K relate only to our continuing operations. Our discontinuedoperations consist of properties sold and discontinued. See “Item 7.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations — Presentation of FinancialInformation — Acquisitions, Divestitures and Dispositions “ for furtherinformation on discontinued properties.

**FORWARD-LOOKING STATEMENTS**

THIS ANNUAL REPORT, OTHERREPORTS, AND COMMUNICATIONS TO SECURITY HOLDERS, AS WELL AS ORAL STATEMENTSMADE BY THE DIRECTORS, OFFICERS OR EMPLOYEES OF ADVANSTAR, INC. (“ADVANSTAR” OR“THE COMPANY”) MAY CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OFSECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THESECURITIES EXCHANGE ACT OF 1934, AS AMENDED, MADE PURSUANT TO THE SAFE HARBORPROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.  A FORWARD-LOOKING STATEMENT IS USUALLYIDENTIFIED BY OUR USE OF CERTAIN TERMINOLOGY INCLUDING “BELIEVES,” “EXPECTS,” “MAY,”“WILL,” “SHOULD,” “SEEKS,” “PRO FORMA,” “ANTICIPATES” OR “INTENDS” OR BYDISCUSSIONS OF STRATEGY OR INTENTIONS. THESE STATEMENTS MAY RELATE TO, AMONGOTHER THINGS, ADVANSTAR’S FUTURE REVENUES, OPERATING INCOME, EBITDA AND THEPLANS AND OBJECTIVES OF MANAGEMENT.  ALLFORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE MADE AS OF THE DATE HEREOF,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-LOOKINGSTATEMENTS ARE NEITHER PROMISES NOR GUARANTEES AND INVOLVE RISKS ANDUNCERTAINTIES, AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSEDIN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH VARIATION ARE DISCUSSED IN THIS ANNUALREPORT, PARTICULARLY UNDER THE HEADING “RISK FACTORS ,” AND IN ADVANSTAR’SOTHER REPORTS AND REGISTRATION STATEMENTS FILED WITH THE SECURITIES ANDEXCHANGE 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 a tradeshowis held.  Indirect competitors aresubjectively 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.

 Overallbusiness-to-business media expenditures climbed for the third straight year in2005 with a 6.6% growth to $22.3 billion. The growth is being driven by surging e-media spending, which grew 27.0%to $1.9 billion in 2005 over 2004 and tradeshow spending growth of 6.3% in2005. The solid growth in 2005 e-media and tradeshows was tempered by a moremodest 4.0% expansion in business-to-business magazine spending.

 According toVeronis Suhler Stevenson, overall business-to-business media spending wasexpected to grow in 2006, fueled by solid gains in tradeshow and a double-digitincrease in e-media spending.  Growth inbusiness-to-business magazine expenditures will be modest, as fallingcirculation spending offset gains in advertising spending.  Total business-to-business media spendinggrowth is expected to continue to mirror or slightly exceed GDP expansion in2005 through 2010 at a compound annual growth rate of 6.2% from 2005 to 2010,reaching $30.2 billion in 2010. This growth is expected to be driven byexpenditures on tradeshows and e-media. E-media is expected to continue withits double digit growth with an expected 28.1% growth in 2006 and 21.4%compound annual growth from 2005 through 2010 reaching $4.9 billion 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 by healthycorporate 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%.

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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.

**Industry Segments**

We approach our business by targeting specificindustries in North America and Europe and structuring our organization andproduct portfolio based on these three “core market” segments: Fashion andLicensing; Powersports; and Life Sciences.  We believe that by focusing on market segmentsin addition to products, we better identify and service a broad array of ourcustomers’ marketing needs.  This focusallows us to cross-sell our products and services and captures a larger shareof our customers’ marketing budgets.  Ineach 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.

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

In 2006, we 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 “Item7.  Management’s Discussion and Analysisof Financial Condition and Results of Operations — Presentation of FinancialInformation — Acquisitions, Divestitures, Dispositions and Merger” for furtherinformation on discontinued properties. Segment information is set forth in Note 11 to our consolidatedfinancial statements included in this annual report.

**Products**

*Shows and Conferences*

As of December 31, 2006, we owned and managed 40 showsand 51 standalone conferences for business, professional and consumer audiencesworldwide, most of which were among the leading events in their respectivemarkets based on square footage.  Ourlargest shows are listed in the April 2006 issue of *TradeshowWeek 200*’s list of the top 200 tradeshows as measured by totalsquare footage.  These included MAGICMarketplace Spring, MAGIC Marketplace Fall, International Powersports DealerExpo and Licensing International. Collectively, these four shows represented 2.7 million of the 4.4million total square footage for all of our shows for the year ended December31, 2006.

Our show and conference revenue is derived primarilyfrom the sale of exhibit space, show-specific advertising, sponsorships andconference attendance.  Show andconference revenue accounted for 45%, 42% and 40% of our revenue in 2006, 2005and 2004.

Shows are a long-established effective forum toconduct business.  As new products andservices are introduced, buyers and sellers within specific industries needefficient settings to interact and conduct business.  Shows can also include conference programs,which provide additional learning and presentation opportunities.

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*Publications*

We are a leading B-to-B trade publisher in the UnitedStates.  As of December 31, 2006, wepublished 53 specialized 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.

Our trade publications are generally distributedfree-of-charge to targeted, qualified, professional recipients and generaterevenue predominantly from advertising.  Publications revenue accounted for 48%, 51% and 55% of our revenue in2006, 2005 and 2004.  Our largestpublications based on ad pages include:*  Medical Economics, Pharmaceutical Technology,Dental Products Report, Dealernews, LCGC, Contemporary Pediatrics,Pharmaceutical Executive, Dermatology Times, Motor Age*and*Auto Body Repair News.*Collectively, these 10 magazines represented 39% of publicationpages for the year ended December 31, 2006.

We believe that our targeted circulation lists for ourU.S. and international publications provide our advertising customers with ahighly cost-effective method 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.

*Other Products*

We provide a comprehensive set of marketing products,services and support geared to a variety of industries’ marketing andcommunications needs.  These servicesinclude direct mail and database marketing programs, reprint services,reference books and other services to facilitate our clients’ marketingprograms.  These services are incrementalto shows and publications and are utilized either independently or tosupplement our customers’ show and publication marketing plans.

In addition, we provide electronic based products andservices to complement our delivery of show, publishing and direct marketingproducts to our customers.  We have 150 electronic based productsincluding web advertising, e-newsletters, education and web seminars.  Other products accounted for 7%, 6% and 6% ofour revenue in 2006, 2005 and 2004.

**Business Strategy**

Our business strategy is to provide products andservices to facilitate “Connecting Our Customers With Theirs.”  Our objective is to concentrate on ourstrategy to achieve sustainable, profitable, long-term growth.  We will accomplish this by (1) focusing onmarkets where we can leverage our strengths, (2) delivering innovative, qualityproducts based on customer and market needs, (3) maximizing our operationalefficiencies and (4) selective acquisitions.

*Focus On Markets and Customers Where We Can Leverage Our Strengths*

We focus on owning and building leading productofferings that are the important sources of information for businesses andprofessionals in large, dynamic or growing markets.  The combination of our selected markets, ourleading products and focused industry teams provides strategic and operationalclarity along with deep insight into well defined customer segments within eachselected market.

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*Deliver Innovative, Quality Products Based On Customer and Market Needs*

We diversify our revenue streams by developingproducts that provide solutions along an industry’s “communications supplychain.”  We seek to identify specificgaps in existing markets or opportunities in adjacent markets where we caneffectively add value.  We are able toaddress evolving market needs through multiple means, including:

·                  adaptingexisting shows and magazines to reflect industry trends and attracting new categoriesof 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.

*Maximize Operating Efficiencies*

We operate effective back office production andCompany support operations.  We strive tocontinuously improve our effectiveness through the employment of state of theart information systems to maximize operating efficiencies and providerelevant, timely, fact based management information to our operating teams andsenior management.  Our operating teamsare evaluated based on extensive use of defined operating metrics designed tofocus attention and behavior on key drivers of performance success.

*Selective Acquisitions*

As we expand deeper into our current industry groups,we explore selective acquisitions and joint ventures based on the followingcriteria:

·                                          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.

From January 1, 2004 through December 31, 2006, wepurchased five tradeshows and consumer event businesses and one tradepublication business in the fashion, life sciences and powersportssegments.  See “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations  - Presentation of Financial Information- Acquisitions, Divestitures and Dispositions .”  We are engaged in ongoing evaluations ofpotential acquisitions in line with our business strategy.

**Industry Segments**

The following is a summary of our products andservices by industry segment.

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*Fashion & Licensing*

Our Fashion group serves the men’s, women’s, children’sand product sourcing sections of the apparel industry.  We operate in the fashion industry throughelectronic media and shows, including our recently acquired POOL and Projectgroups of events.  Six of these shows areheld concurrently in Las Vegas during February and August of each year. OurLicensing group includes a portfolio of products including shows, conferences,publications, and electronic media.

Key shows 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 tokey product offerings in our Fashion and Licensing segment in the year endedDecember 31, 2006:

**Fashion andLicensing Events and Publications**
| ** **                          | ** ** | **Exhibitions** | ** ** | **Conferences**     | ** ** | **Electronic  Products** | ** ** | **Magazines (1)** | ** ** |
|-------------------------------------|------------|-----------------|------------|---------------------|------------|--------------------------|------------|------------------------|------------|
| ** **                          | ** ** | ** **      | ** ** | ** **          | ** ** | ** **               | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **Number of** | ** ** |
| ** **                          | ** ** | ** **      | ** ** | **Net Square** | ** ** | ** **               | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **our magazines  ranked** | ** ** |
| **Category**                        | ** ** | **Number**      | ** ** | **Footage**         | ** ** | **Number**               | ** ** | **Number**             | ** ** | **Number** | ** ** | **Ad Pages** | ** ** | **#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)             Rankingbased only on measured magazines for the twelve months ended December 31, 2006.

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*Powersports and Automotive*

We serve the Powersports and Automotive market throughshows, publications and electronic products for both trade and consumeraudiences.

Key shows and publications include:

·                                          InternationalPowersports Dealer Expo, the largest aftermarket accessories tradeshow in theUnited States targeted at powersports dealers, the 13 city tour of consumer InternationalMotorcycle 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.

The following table sets forth information relating tokey product offerings in our Powersports and Automotive segment in the yearended December 31, 2006:

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

| ** **              | ** ** | **Exhibitions** | ** ** | **Conferences**     | ** ** | **Electronic  Products** | ** ** | **Magazines (1)** | ** ** |
|-------------------------|------------|-----------------|------------|---------------------|------------|--------------------------|------------|------------------------|------------|
| ** **              | ** ** | ** **      | ** ** | ** **          | ** ** | ** **               | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **Number of** | ** ** |
| ** **              | ** ** | ** **      | ** ** | **Net Square** | ** ** | ** **               | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **our magazines  ranked** | ** ** |
| **Category**            | ** ** | **Number**      | ** ** | **Footage**         | ** ** | **Number**               | ** ** | **Number**             | ** ** | **Number** | ** ** | **Ad Pages** | ** ** | **#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)             Rankingbased only on measured magazines for the twelve months ended December 31, 2006.

 

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*Life Sciences*

Within our Life Sciences segment, we serve thehealthcare, pharmaceutical, science, dental and veterinary markets throughproviding shows, conferences, publications and electronic media.  We serve the healthcare market in bothprimary and specialized care areas, such as practice management and managedhealthcare, pharmacy, pediatrics, geriatrics, dermatology, and ophthalmology;the pharmaceutical and science market in areas such as spectroscopy, liquid andgas chromatography, and pharmaceutical research, development, testing,regulatory compliance, manufacturing and marketing; the dental market ingeneral and specialty dentistry and dental labs; and the veterinary market inpractice management and clinical medicine.

Key shows, 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 the informationneeds of dentists since 1967, focusing on new products, techniques and trendsin 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.

The following table sets forth information relating tokey product offerings in our Life Sciences segment in the year ended December31, 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)                                  Excludesdirectories.

(2)                                  Rankingbased only on measured magazines for the twelve months ended December 31, 2006.

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**Company Operations**

*Shows and Conferences*

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 tradeshows and conferences. Because event revenue is recognized when a particular event is held, wemay also experience fluctuations in quarterly revenue based on the movement ofshow dates from one quarter to another.

The sales cycle for a future show typically beginsduring the current show.  Pricinginformation, preliminary floor plans and exhibitor promotion for the futureshow are made available at the current show or shortly after the show so thatselling for the future show can begin. Typically, this “upfront” selling includes floor space reservations withexhibitors executing a contract for the future show. At some of our shows,reservations for a large portion of exhibit space for the next event arereserved by the end of the current event. The sales cycle continues with selling to new exhibitors and collectingthe balance of payments due.  In general,we require exhibitor payments in full prior to a show as a condition toparticipation.

In addition to the sale of exhibit space, we market awide range of promotional opportunities to exhibitors to raise their visibilityat an event.  These opportunities includedirectory and preview advertising, banners, sponsorships of various functionsand a wide variety of other products or services.  We also produce related conferences andworkshops, which represent the editorial content for an event and can play astrategic role in show development. Conferences, workshops and other ancillary forums stimulate interest inthe industry and drive attendance at the show. While show attendance is typically free for qualified attendees attradeshows, participation in conferences at these shows can be a significantrevenue source.

Event promotion is primarily undertaken through directmail, trade advertising and direct contact. In those industry groups for which we also have complementarypublications, our publications play a key role in event promotion by providinglists from circulation files and editorial coverage for the upcoming show.  Other industry magazines may also beinvolved, as the goal of any event is to represent the entire industry ormarket.  The “show issue” of an industrymagazine for a related event is often the biggest issue of the year, as theadvertisers want to reinforce their show presence.

In operating shows and conferences, we function in acapacity similar to a general contractor. We select and manage venues, hotels, and vendors for set-up,registration, travel and housing, audio-visual services and otherservices.  In many cases, venue and hotelreservations are made several years in advance, particularly for primarymarkets 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 operate an efficient publishing infrastructure inthe United States and the United Kingdom. Our publications generally follow the controlled circulation model andare distributed free-of-charge to qualified recipients.  We build readership and maintain the qualityand quantity of our circulation based on delivering high quality, professionalcoverage of relevant industry information. Because we offer our advertisers access to a highly-targeted,industry-specific subscriber base with potential buying influence, ouradvertisers place their ads 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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We attract readership and improve the effectiveness ofour consumers’ advertising by maintaining and continuously improving thequality of the editorial content of our publications.  Recipients of our publications are targetedthrough market research designed to determine the market coverage andpurchasing authority desired by prospective advertisers.  Based on existing and acquired mail lists,the targeted recipient is then solicited through promotions offering freesubscriptions to the relevant publications. High-quality circulation is achieved when a high percentage of thecirculation list is recently qualified, within one or two years, and thepublication is delivered at the direct request of the recipient.  Recipients are qualified and re-qualified ona regular basis through qualification cards included in the publication,various direct mail methods and the Internet.

Our advertising sales and editorial functions aredispersed throughout the United States and the United Kingdom.  Advertising sales are predominantly conductedby our dedicated sales force.  Editorialcontent for our publications is either staff-written; contributed orpurchased from freelance writers; or written by industry or professionalparticipants in selected markets.

Advertising materials and editorial content areintegrated in our Duluth, Minnesota and Chester, England production facilities,where layout and ad insertion and are completed.  All printing is outsourced to vendors invarious 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 in relativelylow-cost locations in Duluth and Chester.

*Other Products*

We have centrally managed direct marketing whichallows our tradeshow and publishing executives to dedicate their activities tohigh value sales.  We also have centralized telesales and product managementto provide professional skills to these specialized product offerings. The fulfillment of these sales, including direct mail and database marketingprograms, reprint services, and reference books is managed by our publishingoperations discussed above.

We also have internet and electronic products which ismanaged by our publishing operations.  Weuse internet and electronic products and services to complement our delivery ofshow, publishing and direct marketing and other products to our customers. We also use the internet as a cost effective method of developing qualifyingmagazine circulation and to register show and conference attendees.

## **DiverseCustomer Base**

Our customer base has provided us with stable anddiverse sources of revenue and cash flow as well as an established foundationfrom which to further penetrate existing markets and to develop newmarkets.  We benefit from:

·                  Ahigh level of revenue diversification, primarily as a result of our businesspresence 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

·                  Astrong balance of revenue, with 48% of our revenue coming from Life Sciences,34% from Fashion & Licensing, 14% from Powersports and 4% from other in2006.

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**Competition**

The markets for our products and services areintensely competitive.  The competitionis highly fragmented by product 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.

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 sectors.  In the show and conference segment, wecompete with trade associations and, in several international markets, withexposition hall owners and operators. Show and conference competition in each market and country occurs onmany levels.  The venues and dates ofshows play an important competitive role. Historically, successful shows have been held at desirable locations andon desirable dates.  Given theavailability of alternative venues and the ability to define events forparticular market segments, the range of competition for exhibitor dollars,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.

**Intellectual Property**

We have developed strong brand awareness for ourprincipal products and services. Accordingly, we consider our trademarks, trade names, service marks,copyrights, trade secrets and similar intellectual property important to oursuccess, and we rely on trademark, service mark, copyright and trade secretlaws, as well as licensing and confidentiality agreements, to protect ourintellectual property rights.  Wegenerally register our material trademarks and service marks in the UnitedStates and in certain other key countries in which these trademarks and servicemarks are used.  Trademarks and servicemarks registered in the United States typically require periodic renewals, andwe typically obtain these renewals as a routine matter so long as the applicabletrademark and service marks are in use. Effective trademark, service mark and trade secret protection may not beavailable in every country in which our products and services are available.

**Environmental Matters**

We are subject to various foreign, federal, state andlocal environmental protection and health and safety laws and regulations.  Accordingly, we incur and will continue toincur some costs to comply with these laws and regulations.  We own or lease real property, and someenvironmental laws hold current or previous owners or operators of businessesand real property liable for contamination on, under, or from that property,even if they did not know of and were not responsible for thecontamination.  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**

As of December 31, 2006, we had approximately 1,000full-time equivalent employees.  Of thesefull-time employees, approximately 55 employees were located in the UnitedKingdom with the balance based in the United States.  None of our U.S. employees are represented bya labor union. We consider our relationships with 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 ifadvertising revenue cannot support one or more of our important publications orif declines in our customers’ marketing and advertising budgets require us todiscontinue one 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 in marketingexpenditures on publications or shows, or (3) other circumstances thatcould 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 endedDecember 31, 2006, our MAGIC Marketplace tradeshows represented 30.4% of ourtotal revenue and 42.8% of our contribution margin (defined as revenue lesscost of production and selling, editorial and circulation costs).  We expect that the MAGIC Marketplacetradeshows will continue to represent a significant portion of our overallrevenue and contribution margin in the future. Therefore, a significant decline in the performance of one or both ofthe MAGIC Marketplace tradeshows, typically held in the first and thirdquarters, could have a material adverse effect on our financial condition andresults 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 andpharmaceutical publications and products contributed 33.1% of our revenue forthe year ended December 31, 2006 and 27.3% of our contribution margin (definedas revenue less cost of production and selling, editorial and circulationcosts).  A substantial portion of theadvertising in these markets is from pharmaceutical companies.  As a result, any material reduction inmarketing activities from pharmaceutical companies, which could occur due togeneral economic conditions or factors specific to the industry, including a reductionin new drug introductions, a shift in marketing expenditures by pharmaceuticalcompanies to sources other than publications and any future governmentalregulation such as price controls or types of marketing restrictions, couldhave 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.**

Our success depends in part upon our ability tomonitor rapidly changing market trends and to adapt our events and publicationsto meet the evolving needs of existing and emerging target audiences.  Our future success will depend in part on ourability to continue to adapt our existing events and publications and to offernew events and publications by addressing the needs of specific audience groupswithin our target markets.  The processof researching, developing, launching and establishing profitability for a newevent or publication is inherently risky and costly.  We generally incur initial operating losseswhen we introduce new events and publications. Our efforts to introduce new events or publications may not ultimatelybe successful or profitable.  Inaddition, costs related to the development of new events and publications areaccounted for as expenses, so our year-to-year results may be materiallyadversely affected by the 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 financial condition.  Moreover, we may not realize any of theanticipated benefits of an acquisition, and integration costs may exceedanticipated 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 highershow revenue 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 was generated during the first quarter and30% during the third quarter.  The secondquarter accounted for 18% of revenue and the fourth quarter accounted for 19%of revenue in 2006.  Because eventrevenue is recognized when a particular event is held, we may also experiencefluctuations in quarterly revenue based on the movement of annual show datesfrom 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 of debt, which couldlimit our ability to remain competitive or grow our business.**

As of December 31, 2006,we had (a) total indebtedness of $621.9 million and(b) $48.4 million of borrowings available under our subsidiary,Advanstar Communications Inc.’s (“Communications”) Credit Facility, subject tocustomary borrowing conditions.  Inaddition, subject to the restrictions Communications’ 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:

·                                          limitingcash flow available for general corporate purposes, including capitalexpenditures and acquisitions, because a substantial portion of our cash flowfrom operations must be dedicated to servicing our debt;

·                                          limitingour ability to obtain additional debt financing in the future for workingcapital, capital expenditures or acquisitions; and

·                                          limitingour flexibility in reacting to competitive and other changes in our industryand economic conditions generally.

**We are a holding company and therefore dependenton dividends from our subsidiaries to meet our debt obligations.**

We are a holding company, and our ability to payinterest on the senior discount notes is dependent upon the receipt ofdividends from our direct and indirect subsidiaries.  We do not have, and may not in the futurehave, any assets other than ownership interests in Communications.  Communications and its subsidiaries areparties to the Credit Facility, the senior subordinated note indenture andsenior secured notes indenture, each of which imposes substantial restrictionson Communications’s ability to pay dividends. See “Liquidityand Capital Resources” for additional information on indebtedness.  Any payment of dividends will be subject tothe satisfaction of certain financial conditions set forth in the seniorsubordinated notes indenture, the senior secured notes indenture and the CreditFacility.  The ability of Communicationsand its subsidiaries to comply with such conditions may be affected by events thatare beyond our or their control.  Futureborrowings by Communications can also be expected to contain restrictions orprohibitions on the payment to us.  Wecannot predict what the value of Communications’ assets or predict the amountof its liabilities in the future and whether such values or amounts will permitthe payment of distributions to us. Accordingly, there can be no assurance that we will be able to pay ourdebt service obligations on the senior discount notes.

As a result of our holding company structure, theholders of the senior discount notes are structurally junior to all creditorsof Communications, except to the extent that we are recognized as a creditor ofany such subsidiary, in which case our claims would still be subordinate to anysecurity in the assets of such subsidiary and any indebtedness of suchsubsidiary senior to that held by us.  Inthe event of insolvency, liquidation, reorganization, dissolution or otherwinding-up of our subsidiaries, we will not receive any funds availableto pay to creditors of the subsidiaries until they are paid in full.

If we are unable to meet our debt service obligations,we could attempt to restructure or refinance our indebtedness or seekadditional equity capital.  We cannotassure you that we will be able to accomplish those actions on satisfactoryterms, if at all.

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**Restrictive covenants in our debt instruments maylimit our ability to engage in a variety of transactions and could triggerdefaults that would accelerate all of our debt.**

We have no financially restrictive covenants, however,Communications’ second priority senior secured notes, senior subordinatednotes, our discount notes and Communications’ Credit Facility contain covenantsthat limit our ability to engage in a variety of transactions and contain otherrestrictive covenants.  Our ability tomeet such covenants can be affected by events beyond our control, and we cannotassure you that we will meet them.  Abreach of any of these covenants or other provisions in the agreement governingthe Communications’ Credit Facility, Communications’ senior subordinated notes,our discount notes and/or Communications’ second priority senior secured notescould result in a default under Communications’ Credit Facility, Communications’senior subordinated notes, our discount notes, and/or Communications’ secondpriority senior secured notes.  Upon theoccurrence of an event of default under Communications’ Credit Facility, thelenders could elect to declare all amounts outstanding under Communications’Credit Facility to be immediately due and payable and terminate all commitmentsto extend further credit.  If we wereunable to repay those amounts, the lenders could proceed against the collateralgranted to them to secure that indebtedness. Communications’ has pledged substantially all of its assets, other thanassets of its foreign subsidiaries, as security under its Credit Facility on afirst-priority basis.  If thelenders under Communications’ Credit Facility accelerate the repayment of borrowings,we cannot assure you that Communications will have sufficient assets to repayCommunications’ Credit Facility, Communications’ other indebtedness and ourindebtedness.

**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 parent company are held by the DLJ Merchant Banking funds.  As a result of their stock ownership, the DLJMerchant Banking funds control us and have the power to elect a majority of ourdirectors, appoint new management and approve any action requiring the approvalof the holders of common stock, including adopting amendments to ourcertificate of incorporation and approving acquisitions or sales of all orsubstantially all of our assets.  Thedirectors elected by the DLJ Merchant Banking funds have the ability to controldecisions affecting our capital structure, including the issuance of additionalcapital stock, the implementation of stock repurchase programs and thedeclaration 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 notes.

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# **You maynot be able to rely on forward-looking statements, as our actual resultsmay 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 annualreport 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 STAFF COMMENTS**

Notapplicable.

**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 offices from thirdparties.  However, we own our offices inDuluth and Cleveland We have classified our Cleveland office as held for sale,as we are attempting to sell the building and related land. We have grantedmortgages on the Cleveland property to the lenders under our Credit Facilityand, on a second priority basis, for the benefit of the holders of the secondpriority senior secured notes.  Webelieve that our properties are in good operating condition and that suitableadditional or alternative space will be available on commercially reasonableterms for future expansion.

**Item 3. — *LEGAL PROCEEDINGS***

We are not a party to any legal proceedings whichwould be material to our business, financial condition or results of operationsother than ordinary course, routine litigation.

**Item 4. — *SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS***

None.

**PART II**

**Item 5. — *MARKET FOR REGISTRANT’SCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES***

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. In July 2006, we declared and paid $3.3 million in dividends.  No dividends were declared or paid on our common stock in 2005.

**Item 6. — *SELECTED FINANCIAL DATA***

The following table presents selected consolidatedfinancial data for Advanstar, Inc. (“Advanstar”) 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 consolidated financialdata should be read in conjunction with Item 7. “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and the consolidatedfinancial statements and notes thereto included elsewhere in this AnnualReport.

All historicalamounts have been reclassified to reflect the results and any gains or lossesof sold and discontinued properties as discontinued operations. For furtherinformation on discontinued properties, see “Item 7.  Management’s Discussion and Analysis of FinancialCondition and Results of Operations  —Presentationof Financial Information — Acquisitions, Divestitures and Dispositions .”

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| **(in thousands, except for per share data)**                       | ** ** | **Year Ended**   | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                        | ** ** | **December 31,** | ** ** |
| ** **                                                                                        | ** ** | **2006**              | ** ** | **2005** | ** ** | **2004** | ** ** | **2003 (8)** | ** ** | **2002 (8)** | ** ** |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| **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)                                 |       | 75,225                |       | 41,677 |   | 41,334 |   | 31,581 |   | 31,766 |   |
| 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)                                                                           |       | 20,256                |       | 36,011 |   | 32,481 |   | 6,090 |   | (9,140 | ) |
| Other income (expense):                                                                           |       |                  |       |   |   |   |   |   |   |   |   |
| Interest expense                                                                                  |       | (82,137               | )          | (88,060 | ) | (92,225 | ) | (77,162 | ) | (68,479 | ) |
| Interest income                                                                                   |       | 1,864                 |       | 1,476 |   | 468 |   | 471 |   | 1,455 |   |
| Loss on  extinguishment of debt (3)                                                               |       | (599                  | )          | (12,581 | ) | — |   | (11,324 | ) | — |   |
| Other (expense)  income, net                                                                      |       | (240                  | )          | 83 |   | 826 |   | 893 |   | 1,043 |   |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Loss from continuing  operations  before income taxes and cumulative  effect of accounting change |       | (60,856               | )          | (63,071 | ) | (58,450 | ) | (81,032 | ) | (75,121 | ) |
| Provision (benefit) for  income taxes                                                             |       | 8,334                 |       | (9,524 | ) | 6,259 |   | (6,887 | ) | (11,348 | ) |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Loss from continuing  operations  before cumulative effect of accounting change                   |       | (69,190               | )          | (53,547 | ) | (64,709 | ) | (74,145 | ) | (63,773 | ) |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Income (loss) from  operations of discontinued  businesses, net of tax                            |       | 81                    |       | 31,743 |   | (2,418 | ) | 4,001 |   | 8,423 |   |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Loss before cumulative  effect of  accounting change                                              |       | (69,109               | )          | (21,804 | ) | (67,127 | ) | (70,144 | ) | (55,350 | ) |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Cumulative effect of  accounting change, net of tax (4)                                           |       | —                |       | — |   | — |   | — |   | (62,729 | ) |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| Net loss                                                                                          |       | $                     | (69,109    | ) | $ | (21,804 | ) | $ | (67,127 | ) | $ | (70,144 | ) | $ | (118,079 | ) |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| **Cash flows provided by (used  in):**                                                            |       |                  |       |   |   |   |   |   |   |   |   |
| Operating activities                                                                              |       | $                     | 10,522     |   | $ | 8,235 |   | $ | 18,550 |   | $ | 46,525 |   | $ | 24,701 |   |
| Investing activities                                                                              |       | (14,338               | )          | 148,959 |   | 4,996 |   | (145,655 | ) | (31,388 | ) |
| Financing activities                                                                              |       | (5,141                | )          | (152,635 | ) | (12,515 | ) | 110,236 |   | (15,650 | ) |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| **Balance sheet data (at end of  period):**                                                       |       |                  |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                                                        |       | $                     | 37,003     |   | $ | 46,641 |   | $ | 41,328 |   | $ | 29,721 |   | $ | 19,022 |   |
| Working capital (5)                                                                               |       | (103,445              | )          | (67,898 | ) | (70,658 | ) | (79,067 | ) | (70,062 | ) |
| Total assets                                                                                      |       | 739,180               |       | 765,953 |   | 914,910 |   | 989,173 |   | 870,562 |   |
| Total debt                                                                                        |       | 621,909               |       | 620,592 |   | 753,319 |   | 744,071 |   | 657,804 |   |
| Total stockholder’s  (deficit) equity                                                        |       | (63,361               | )          | 6,587 |   | 26,223 |   | 90,618 |   | 88,171 |   |
|                                                                                              |       |                  |       |   |   |   |   |   |   |   |   |
| **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)                                                                      |       | $                     | 32,890.00  |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |

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(1)                                 Werecorded $30.0 million as compensation expense in 2006 relating to the POOL andProject acquisitions and the settlement of certain claims and termination ofour obligations under the respective purchase agreements and terminated theformer owners’ employment with us. See “Management’sDiscussion 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 thatthe fair value of Advanstar Holdings, Corp’s common stock underlying all stockoption 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) relatingto the intrinsic value of stock option awards was recorded as compensationexpense for the year ended December 31, 2006. See “Management’s Discussion andAnalysis of Financial Condition and Results of Operations – Presentation ofFinancial Information – Significant Accounting Policies and Estimates-Stock-BasedCompensation” for furtherdiscussion.

(2)                                 InSeptember 2003, we consolidated our midtown New York leased office spacefrom two floors to one and sublet the excess space.  In December 2003, we consolidated ourChester, U.K. leased office space and vacated two of our four floors.  These activities resulted in a charge for thepresent 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 payfacility lease costs, net of sublease income, associated with the previouslyused facilities through August 2015.

                                               In2001, we completed a restructuring of ourorganization to more closely integrate many of the sales, marketing, technologyand operating functions.  Therestructuring activities were completed in 2001, except for facility leasecosts, which were to continue through June 2010.  In April 2004, the remaining facility leasecommitment was settled for a total of $1.9 million, resulting in an offset to operatingexpense of $4.0 million as we released the remaining accrual.

                                               In2005, related to the sale of the PortfolioGroup, (see “Management’s Discussion and Analysis of Financial Condition andResults of Operations — Presentation of Financial Information — Acquisitions,Divestitures and Dispositions”), we ceased use of certain leased office spacein 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.  Inthe first quarter of 2006, the Company vacated additional leased office spacein New York, NY, and revised its estimate of expected future sublease incomefor this space, resulting inadditional charges during 2006.  These charges consist of the discounted remainingfuture minimum lease payments due under non-cancelable leases, net of estimatedfuture sublease income. These lease commitments expire at various dates through2010.

                                               During 2005 we terminated 117 employees inconnection with the sale of the Portfolio Group and the reorganization of our operating and support departmentmanagement team.  We recorded a charge tooperations of $2.3 million during the year ended December 31, 2005 for severance and other termination costs.

                                               We entered into a lease modification andsurrender agreement for approximately 60% of our vacated office space in NewYork, NY in June 2006.  Under the termsof the agreement, we paid the lessor $2.8 million in cash, the lease coveringthe surrendered space was terminated and we will have no further future leaseobligations for the portion of the space surrendered.

(3)                                 In2006, Communications incurred $0.6 million in costs related to the write off ofunamortized deferred finance costs related to the amendment and restatement ofthe Credit Facility and repayment of floating rate notes. 

                                               In2005, Communications incurred $12.6 million in costs related to the repurchaseof a part of its fixed and floating rate senior secured debt.  These costs include $8.6 million in tenderoffer premium and consent fees, $3.5 million in unamortized deferred financingcosts, and $0.5 million in legal fees and expenses.

                                               See “Liquidityand Capital Resources —**Creditfacility amendment and restatement” and “Liquidity and CapitalResources — Creditfacility and second priority secured and floating rate notes repayment” forfurther information.

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(4)                                 Uponadoption of Statement of Financial Accounting Standards No. 142, “Goodwilland Other Intangible Assets,” we discontinued the amortization of goodwillbeginning January 1, 2002 and recorded a cumulative effect of accountingchange in 2002 for the impairment of goodwill using the transitional impairmenttest.

(5)                                 Workingcapital is defined as current assets, excluding cash, of $34.7 million,$34.4 million, $38.6 million, $47.4 million, and $34.6 million as ofDecember 31, 2006, 2005, 2004, 2003 and 2002 less current liabilities,excluding the current portion of long-term debt, of $138.1 million,$102.3 million, $109.3 million, $126.4 million and $104.7 million asof December 31, 2006, 2005, 2004, 2003, and 2002.

(6)                                 Forpurposes of determining the ratio of earnings to fixed charges, earnings aredefined as pretax income from continuing operations plus fixed charges.  Fixed charges consist of interest expense andone-third of rental expense, which is considered by management to berepresentative of the interest component of rental expense.  Earnings were insufficient to cover fixedcharges in the years ended December 31, 2006, 2005, 2004, 2003, and 2002by $60.9 million, $63.1 million, $58.5 million, $81.0 million, and $75.1 million.

(7)                                 Cashdividends were paid to our parent in 2006 to fund Advanstar Holdings Corp’srepurchase of stock held by a former Chief Executive Officer. See “Liquidityand Capital Resources — Cash flows from financing activities” for further information.

(8)                                 InOctober 2003, we completed a significant acquisition of a healthcare propertiesportfolio. The pro forma unaudited results as if the acquisition had takenplace on January 1, 2002 are as follows:
| **(in thousands of dollars - unaudited)**             | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                           |       |     |       |     |       |
| Revenue                                                                        |       | $        | 254,934    |     | $          | 243,817 |   |
| Loss from continuing  operations before cumulative effect of accounting change |       | (87,498  | )          | (72,520  | )          |
| Net loss                                                                       |       | (83,497  | )          | (126,826 | )          |
|                                                                                |            |          |            |          |            |  |  |

 

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**Item 7. — *MANAGEMENT’S DISCUSSIONAND 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-looking statements,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 and Dispositions.”

We report our business in these three industry focusedsegments:

·                  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.”

Unless otherwise noted, disclosures herein relate onlyto our continuing operations. All historical amounts have been restated toexclude results and gains or losses from discontinued operations. For furtherinformation on discontinued properties, see “Presentation of FinancialInformation—Acquisitions, Divestitures and Dispositions.”

The percentage of our total revenue by segment for theyears ended December 31, 2006, 2005 and 2004 is as follows:
| ** **              | ** ** | **2006** | ** ** | **2005** | ** ** | **2004**   | ** ** |
|-------------------------|------------|----------|------------|----------|------------|------------|------------|
|                    |       |     |       |     | ** ** | ** ** | ** ** |
| Life Sciences           |       | 48       | %          | 51       | %          | 54         | %          |
| Fashion & Licensing |       | 34       | %          | 31       | %          | 30         | %          |
| Powersports             |       | 14       | %          | 14       | %          | 13         | %          |
| Other                   |       | 4        | %          | 4        | %          | 3          | %          |

 

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Our revenue reaches its highest levels during thefirst and third quarters of the year due to the timing of the MAGIC Marketplacetradeshows and our other large tradeshows and conferences.  Because show and conference revenue 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, Communications amended and restatedits existing Credit Facility. The amended Credit Facility reduced the revolvingloan from $60.0 million to $50.0 million, added a $10.0 million Term Loan,modified or eliminated certain restrictive covenants and extended the maturitydate from April 2007 to May 2009 for the entire Credit Facility.  See “Liquidity and Capital Resources - Creditfacility amendment and restatement.”

**Recent Developments - Subsequent Event**

On March 28, 2007, the Board of Directors of ourparent, Advanstar Holdings Corp. (“Holdings”), unanimously approved, andHoldings entered into, a definitive merger agreement (the “Merger Agreement”) amongHolding, VSS-AHC Consolidated Holdings Corp. (“Buyer”), VSS-AHC AcquisitionCorp. (“Merger Sub”), a wholly owned subsidiary of the Buyer, and DLJ MerchantBanking III, Inc., as the stockholders’ representative. Pursuant to the MergerSub will be merged with and into Holdings, with Holdings being the surviving corporation.

The aggregate purchase price is approximately $1.142billion subject to deductions for cost of the outstanding debt of Holdings andits subsidiaries, certain transaction expenses, change of control payments andcertain other liabilities of Holdings and its subsidiaries. Additionally, thepurchase price is subject to post-closing adjustments specified in the MergerAgreement based on the working capital of Holdings upon the closing of themerger. As a result of the merger, Holding’s shares of common stock will beconverted into the right to receive the applicable merger consideration in cashat the closing, subject to the post-closing working capital adjustment. Theoutstanding options of Holdings, including those issued to the Company’semployees and directors, will be cancelled at closing and option holders willreceive the same per share merger consideration in cash as the holders ofcommon stock receive, net of the exercise price of the option, and subject tothe post-closing working capital adjustment.

Under the Merger Agreement, as soon as practicableafter signing, Holdings has agreed to cause Communications to commence a tenderoffer and consent solicitation for its outstanding 10-3/4% Second PrioritySenior Secured Notes due 2010 and 12% Senior Subordinated Notes due 2010 and tocause us to commence a tender offer for our outstanding 15% Senior SecuredDiscount Notes due 2011.

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## **Presentationof Financial Information**

*Acquisitions, Divestitures and Dispositions*

We continue to look foropportunities to execute our strategy of building significant positions intargeted markets, through the acquisition of identified assets.  In 2005 and 2004, we completed sixacquisitions as follows:

·                  On September 12, 2005, we purchased an off-roadconsumer event business from Petersen Events Corporation (“Off-Road Expo”) for$2.2 million in cash. We paid $0.1 million in additional cash consideration in2006 to the former shareholders based on the actual 2006 operating revenue fromthe acquired assets.  This contingentconsideration was recorded as goodwill on the consolidated balance sheet.

·                  On August 23, 2005, we purchased two fashion industry tradeshows basedin Las Vegas from the owner of the POOL Tradeshow (‘‘POOL”) for $3.0 million incash.  The original purchase agreement provided for additionalcontingent cash consideration to be paid to the former owner based on the 2007and 2008 operating results of POOL and required the owner’s continuedemployment with us.  In July 2006, we and the former owner of POOL enteredinto an agreement which terminated the former owner’s employment with us,terminated the former owner’s right to receive additional contingent paymentsand eliminated our obligations under the POOL asset purchase agreement and the employmentagreement.  Upon execution of thisagreement, we made an initial payment of $1.5 million to the former owner, andwill make a final payment of $0.5 million in 2007.  We recorded the $2.0 million as compensationexpense in 2006.

·                  On August 19, 2005, we purchased Project GlobalTradeshow, Inc. (‘‘Project”), a producer of tradeshows serving the fashionindustry, for $9.9 million in cash.  The originalProject purchase agreement provided for additional contingent cashconsideration to be paid to the former owners based on the 2007 and 2008operating 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, terminate the former owners’ rightto receive additional payments and eliminate our obligations under the Projectstock purchase agreement and the employment agreement. Under the terms of theamended 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 of consumershows in our Powersports group with an aggregate purchase price of $0.5 millionin cash. Based on 2006 operating results, we accrued an additional $0.2 millionin contingent consideration based on 2006 operating results payable to theformer owners, resulting in an adjustment to goodwill.

·                  On March 8, 2004, we purchased a portfolio ofpharmaceutical industry specific magazines and conferences from the Instituteof Validation Technology, Inc. (“IVT”) for $7.9 million in cash.  In addition, we accrued additional contingentconsideration based on 2004 and 2005 operating results of the acquired assetsand the continued employment of the former shareholders with us. The contingentconsideration of $1.5million and $0.7 million was recorded as compensation expense in 2004and 2005.  The contingent consideration based on 2005 results is anestimate and is subject to further negotiation with the former shareholders.  We expect the final payout tothe 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 our ArenacrossChampionship Series (“Arenacross”) for a total selling price of $0.2 million.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 second quarter of 2005, we discontinued theremaining East Coast Fashion tradeshow business acquired in 1999 fromLarkin-Pluznik-Larkin, LLC. (the “East Coast Fashion Group”) as part of our newstrategy.  We recorded a $2.3 millionimpairment charge for the remaining intangible assets of this business in 2005.Revenue and contribution margin through the second quarter of 2005 for EastCoast 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.

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·                  On May 23, 2005, we completed the sale of our businessassets and liabilities associated with our tradeshows and conferences, tradepublications 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, theseassets and shares are referred to as the “Portfolio Group.” The sale price forthe Portfolio Group was $185.0 million less $11.2 million in working capitaladjustments and expenses.  We recorded again on the sale of $52.9 million.  Revenueand contribution margin from January 1, 2005 to May 23, 2005 were $49.0 millionand $14.9 million.  Revenue andcontribution margin in 2004 were $102.5 million and $26.8 million.

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

·                  In the first quarter of 2004, we sold our art industrytradeshows and magazines for a total sales price of $19.6 million in cash (“ArtGroup”).  We recorded a gain after taxeson the sale of $3.4 million. Art Group revenue and contribution margin fromJanuary 1, 2004 to March 12, 2004 were $8.5 million and $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     | )          | 23,652   |       | 5,705    |       |
| Minority  interests                                                                        |       | —   |       | (566     | )          | 4,264    |       |
| Income (loss)  from discontinued businesses                                                |       | $        | 81         |     | $          | 31,743   |       | $ | (2,418 | ) |

 

###### **Sourcesof Revenue by Product**

###### *Shows and Conferences*

Revenue from our events is principally from the saleof exhibit space and conference attendance fees.  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.

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*Publications*

Revenuefrom publications is principally generated from the sale of advertising in ourtrade magazines.  Additionally, certainpublications derive revenue from paid subscriptions and custom publishing andprojects.  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.

*OtherProducts*

Otherproduct revenue sources include the sale of value-added marketingproducts such as print and internet based classified advertising, direct mailservices, reprints, database marketing, directories, guides, reference booksand electronic based products.  Theseproducts complement and utilize the content or databases generated by ourshows, conferences and publications.  Thesale of these products is generally impacted by the success of the event orpublication from which these products are derived, the quality of the salesteam and general market conditions. Revenue is recognized when the applicable product is shipped orotherwise delivered.

**Componentsof Expenses by Product**

*Shows and Conferences*

Costsincurred for shows and conferences include facility rent, attendee andexhibitor sales and marketing, as well as on-site services such asregistration, security and set-up. Exhibitors generally contract directly with third parties for on-siteservices such as electrical services and booth set-up.  Staff salaries and related payroll expensesare treated as monthly period expenses. All other direct costs are expensed when the event occurs.

###### *Publications*

Costsincurred for publications include printing, paper and postage; selling andpromotion; editorial and prepress; and circulation acquisition andfulfillment.  Additionally, publisher andsales staff costs, production, editorial and circulation staff costs, withrelated payroll taxes and benefits, are charged to 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 to operationswhen incurred.

###### *Other*

Costsfor other products include printing and distribution costs, databaseadministration fees and selling and product development staff costs.  Product specific costs are charged tooperations when the product is delivered. All other direct costs are charged to operations when incurred.

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**SignificantAccounting Policies and Estimates**

Thediscussion and analysis of our financial condition and results of operationsare based upon our consolidated financial statements, which have been preparedin accordance with accounting principles generally accepted in the UnitedStates of America.  The preparation ofthese financial statements requires management to make estimates and judgmentsthat affect the reported amounts of assets, liabilities, revenue and expenses.  On an ongoing basis, we evaluate theseestimates, including those related to bad debts, restructuring accruals,realizability of goodwill and intangible assets and recoverability of deferredincome tax assets.  We base theseestimates on historical experience and on various other assumptions that arebelieved to be reasonable under the circumstances, the results of which formthe basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources.  Actual results may differ from theseestimates under different assumptions or conditions.

Weapply the following critical accounting policies in the preparation of ourconsolidated financial statements:

*RevenueRecognition*

Revenueis recognized as discussed in the “Sources of Revenue” section above.  The balance of deferred revenue at December31, 2006 was $41.4 million for shows and $9.8 million for publications.  On a relative basis, our deferred revenuereaches its highest levels during the second and fourth quarters of the yearlargely due to the timing of the MAGICMarketplace tradeshows and our other large shows and conferences.

*Allowancefor Doubtful Accounts*

Wemaintain an allowance for doubtful accounts for estimated losses resulting fromthe inability of our customers to make required payments.  The balance of the allowance for doubtfulaccounts 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.

Theallowance for doubtful accounts is an estimate based on specifically identifiedaccounts 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 financialobligations.  In these cases, managementuses judgment, based on the best available facts and circumstances, todetermine if a specific reserve for that customer’s receivable iswarranted.   These specific reserves arereevaluated and adjusted as additional information is received. We alsoestablish a non-specific reserve for all customers based on historicalpercentages applied to customer balances depending on the age of the amountdue.  This percentage is based onhistorical collection and write-off experience. If circumstances change, our estimates of the recoverability of amountsdue us could be reduced or increased by a material amount.  Such a change in estimated recoverabilitywould be accounted for in the period in which the facts that give rise to thechange become known.

*DeferredTaxes*

 Pursuant to the requirements of SFAS No. 109,we record 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 haverecorded a valuation allowance to offset the deferred tax benefit associatedwith all of our U.S. and foreign net operating loss carryforwards because therealization of these benefits is not considered likely based upon our historyof not generating 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,

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which are fullyreserved, we have established a deferred tax liability based upon the excess ofthe carrying value of our goodwill for financial reporting purposes over thetax 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.

*Amortizationof Intangible Assets*

Intangibleassets related to trade exhibitor and advertiser lists are amortized using adouble-declining balance method over 6 years and 5 years,respectively.  Intangible assets relatedto trade names and trademarks are amortized using a straight-line method over20 years.  Intangible assets related tosubscriber lists and other intangible assets are amortized using astraight-line method over 3 to 10 years. We amortize intangible assets on a basis which corresponds to ourprojections of future cash flows directly related to these intangibleassets.  A change in circumstances couldresult in a determination that asset lives should be changed or that therelated assets are impaired and impairment charges to reduce the carrying valueof intangible assets may be necessary. The effect of any changes in useful lives or a determination that thecarrying value of an intangible asset is impaired would be accounted for in theperiod that such determination was made.

*Impairmentof Long-Lived Assets*

Weevaluate the carrying value of long-lived assets, including identifiableintangibles, for impairment when events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable.  If impairment indicators are present and theestimated future undiscounted cash flows are less than the carrying value ofthe assets, the carrying value is reduced to the estimated fair value asmeasured by the associated discounted cash flows.

Inaccordance with the provisions of SFAS No. 142, we evaluate goodwill forimpairment using a two-step test based upon a fair value approach.  The first step is used to identify apotential impairment by comparing the carrying value of the net assets of eachreporting unit to an estimate of the fair value of each of our reporting units(as defined by SFAS No. 142), while the second step calculates the amountof impairment, if any.  Additionally,goodwill will be tested for impairment between annual tests if an event occursor circumstances change that would more likely than not reduce the fair valueof an entity below its carrying value. We determine the fair value of our reporting units by application of adiscounted cash flow analysis.  Ifcircumstances change, our estimates of fair value will also change and couldresult in a determination that additional impairment charges to reduce thecarrying value of goodwill are necessary. We completed our annual goodwill impairment test for each of ourreporting units as of July 1, 2006. Based on this first step test, there was no impairment of goodwillindicated.

*Stock-BasedCompensation*

Weaccount for stock options awarded to employees as liability awards under SFASNo. 123R, *Accounting for Stock-Based Compensation*(“FAS123R”)*.* Accordingly, compensation expense anda related liability is recorded only if the fair value of the shares underlyingour share-based awards are greater than the awards’ exercise price as of theend of the applicable reporting period. We adopted FAS 123R using the modified prospective transition method.  Our adoption of FAS 123R did not result inany cumulative effect from the change in accounting method.

As ofDecember 31, 2006, management estimated that the fair value of Holdings' commonstock underlying all stock option awards exceeded the exercise price.  Accordingly, compensation expense of $3.6million ($0.4 million selling, editorial and circulation and $3.2 milliongeneral and administrative) relating to the intrinsic value of stock optionawards was included in the consolidated statement of operations for the year endedDecember 31, 2006. 

As ofDecember 31, 2006, the aggregate intrinsic value of all stock optionsoutstanding was $5.5 million. Any change in the aggregate intrinsic value ofvested stock options will be included in operations in the period of the change.As of December 31, 2006, the aggregate intrinsic value of unvested stockoptions was $1.9 million, which, subject to any changes in the intrinsic valueof the options, will be charged to operations as the options vest.  As of December 31, 2006 the weighted-averageremaining vesting term of unvested options was 2.4 years, although earliervesting may occur based upon terms of the Plan.

Priorto January 1, 2006, we accounted for our stock options and awards to employeesunder the provisions 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 of operationsfor the years ended December 31, 2005 and 2004.

*FutureContingent Cash Obligations from Acquisitions*

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 continued employmentis not a condition of the agreement, any contingent consideration paid will berecorded as goodwill.

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**Resultsof Operations**

2006 COMPARED TO2005

# *Revenue*

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

Life Sciencesrevenue of $155.7 million in 2006 increased 6.0% or $8.8 million from $146.9million in 2005.  Revenue from healthcarecustom projects increased $5.1 million or 38.9% from 2005 primarily due to morefocused selling efforts and our ability to meet our customer deliveryexpectations. Strong performances also were achieved from several specialtycare and dental publications. 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 and Licensing revenue of $110.6 million in 2006 increased 22.9%or $20.6 million from $90.0 million in 2005. Revenue from our 2006 MAGIC Marketplace Las Vegas spring and fall eventsincreased a combined $13.2 million or 16.8% over 2005 due to an increase insquare feet sold, yields and sponsorships. Total exhibit space for both eventsincreased by 12.0% to 2.1 million square feet. The August 2005 acquisitions ofPOOL and Project 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*

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

Life Sciencesexpenses in 2006 increased by 5.0%, or $4.9 million, to $102.5 million from$97.6 million in 2005.  The increase isprimarily due to $4.3 million in product launch costs for new conferences andpublications, 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 Yorkevents.  Expenses to support our firstspring Las Vegas POOL and Project events, included in MAGIC Marketplace, andour first Project 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 million from$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, compared to$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 launchcosts for *Ophthalmology Times Europe*.

# *General and administrative*

General andadministrative expenses increased $33.5 million, or 80.5%, to $75.2 million in2006 from $41.7 million in 2005. Expenses increased primarily due to the $30.0 million of compensationexpense incurred in 2006 for our 2005 Project and POOL acquisitions. Inaddition, 2006 includes $3.2 million in compensation expense related to theintrinsic value of stock options, unclaimed property obligations of $2.6million and a $1.0 million charge for the impairment on our Cleveland officebuilding to write down the carrying value to its fair value less estimatedselling costs. These increases were partially offset by foreign exchange gainsdue to favorable foreign exchange rates, reduced employee medical costs andoperating efficiencies achieved due to 2005 restructuring 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 “Acquisitions,Divestitures and Dispositions”).  In 2005, we vacated additional leased officespace 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 an offset to operating expensesof $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.

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In 2001, we integrated ourinternet sales, marketing, technology and operating functions.  These restructuring activities were completedby the end of 2001, except for facility lease costs, which continued throughJune 2010, including leasehold improvements from a vacated facility.  The facility lease obligation was settled inMay 2004 for less than amounts owed under the lease.  A $4.0 million favorable settlement (net offees and related expenses) of the lease obligation was recognized as an offsetto operating expenses in 2004.

Pre-tax restructuring charges incurred are asfollows:
| **(in thousands)**                         | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Facility exit  costs                            |       | $        | 2,339      |     | $          | 2,499    |       | $ | — |   |
| Favorable lease  settlement                     |       | —   |       | —   |       | (4,015   | )          |
| Employee  severance and other termination costs |       | (14      | )          | 2,272    |       | —   |       |
| Restructuring  charge (benefit)                 |       | $        | 2,325      |     | $          | 4,771    |       | $ | (4,015 | ) |

 

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 |   |

 

# *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*

Interestexpense in 2006 declined $5.9 million, or 6.7%, to $82.1 million from $88.1million in 2005 due to the decrease of $54.2 million in our weighted-averagedebt outstanding during the year. We repaid $20.4 million of Communications’term loans, $8.7 million of Communications’ fixed rate notes, and $117.8million of Communications’ floating rate notes in the second quarter of 2005with the proceeds from the sale of the Portfolio Group. See “Liquidityand Capital Resources —**Secondpriority secured and floating rate notes repayment.”

Communicationsincurred $0.6 million in costs related to the write off of unamortized deferredfinance costs related to the amendment and restatement of the Credit Facilityin May 2006 and repayment of floating rate notes in August 2006. See “Liquidityand Capital Resources — Credit facility amendment and restatement.”

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Communicationsincurred $12.6 million in costs related to the repurchase of Communications’fixed rate notes and floating rate notes in June 2005.  These costs include $8.6 million in tenderoffer premium and consent fees, the write off of $3.5 million in unamortizeddeferred financing costs, and $0.5 million in legal fees and expenses.  See “Presentation of Financial Information- Credit Facility Amendment and Credit Facility and Second PrioritySecured and Floating Rate Notes Repayment.”

At December 31,2006, $611.9 million, or 98% of our total debt is at a fixed rate with thebalance of our debt subject to interest rate fluctuations.   Wecurrently have no plans to hedge our interest expense related to our remainingfloating or fixed rate debt.

# *Interest income*

Interest incomeincreased to $1.9 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 $9.5 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 $15.6million.

See further information regarding divestitures included indscontinued operations in “Presentation of Financial Information —Acquisitions, Divestitures and Dispositions.”

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2005 COMPARED TO2004

# *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 millionfrom $145.6 million in 2004.  Revenuefrom our IVT conferences increased $1.6 million or 32.1% over 2004 due to thelaunch of 18 new conference tracks to address emerging topics of interest inthe FDA drug validation process.  Ourremaining Life Sciences publishing products revenue increased over 2004, withthe pace of growth 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 *LocumLife*, *Firstline*, *Modern Hygienist* and a dental conference and stopped holdingone small conference in the pharmaceutical markets in 2005 compared to 2004.Launches, other than the IVT conferences discussed above, generated $1.7million in revenue in 2005.  Theserevenue increases were partially offset by declines in our veterinary andcertain primary healthcare publications and healthcare custom projects of $4.3million.  Projects have a significantlead time from proposal to completion. The revenue decline reflects the impact on the 2005 sales cycle ofmarketing and fulfillment problems we experienced in 2004 and the restructuringof our operations, including healthcare properties and management in 2005.

Fashion and Licensing revenue of $90.0 million increased 12.5% or $10.0 million from $80.0 millionin 2004.  Our MAGIC Marketplaceevents increased revenue by **$**9.6 million or 13.9% and squarefootage increased by 7.1% over2004 due to development of new trend areas, the continued expansion of ourSourcing 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.

Powersports revenueof $39.5 million increased 15.8% or $5.4 million from $34.1 million in 2004.Revenue from the Powersports shows and conferences increased 12.5% over 2004due to new category initiatives, product launches and selected acquisitions.Development of new initiatives continued for American made motorcycle productsin our IMS motorcycle consumer events and the Big Twin West tradeshow,expanding sales in this category significantly. Dealer Expo increased revenue through price increases and expansion ofinternational exhibitors. Strong revenue growth also occurred in our automotiveand *Dealernews* publications.  Further contributing to our overall revenuegrowth was the continued development of *DirtSports* and *Off-Road Business,*launched in 2004.  The 2005 launch of the Off-Road Impacttradeshow and conferences, which complements the two publications launched in2004, the 2005 launch of*American Big Twin*and the acquisition of the Off-Road Expo also contributed to this growth. Theselaunches and acquisitions generated a combined $2.9 million of revenue growthin 2005. We did stopholding two small shows in the Powersports segment during 2005 causing aslight decline in revenue which served to partially offset the revenue growthdiscussed 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 production andselling 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 $100.4million in 2004.  This decrease is alsoattributable 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 our Otheroperations in 2005 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.

# *General and administrative expenses*

General andadministrative expenses increased $0.3 million, or 0.8%, to $41.7 million in2005 from $41.3 million in 2004.  The increase is due to various factorsincluding an increase in earned incentives of $3.7 million and foreign currencyfluctuations of $0.9 million.  Theseincreases were partially offset by a reduction in the IVT contingentcompensation accrual in 2005 over amounts in 2004 by $0.9 million and areduction in costs due to restructuring activities as discussed above.

# *Restructuring charge*

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 $4.2 million, or 4.5%, to$88.1 million in 2005 from $92.2 million in 2004 primarily due to a decrease of$70.2 million in our weighted-average debt outstanding during the year. Werepaid $20.4 million of Communications’ term loans, $8.7 million ofCommunications’ fixed rate notes, and $117.8 million of Communications’floating rate notes in the second quarter of 2005 with the proceeds from thesale of the Portfolio Group. See “Liquidity and Capital Resources —**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 $9.5 million in 2005 compared to a $6.3 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.

# *Discontinued operations*

See further information regarding divestitures included indiscontinued operations in “Presentation of Financial Information —Acquisitions, Divestitures and Dispositions.”

**Liquidity and Capital Resources**

The following discussion presents our liquidity andcapital resources on a consolidated basis, including that of our subsidiaries.

We are a holding company and have no direct materialoperations.  Our principal asset is ourownership of Communications and our only material liabilities are the seniordiscounts notes and our guarantee of the Communications Credit Facility.  Our principal liquidity needs are for debtservice on the senior discount notes.

Communications’ principal cash needs are for debtservice, capital expenditures, investments in our products and selectiveacquisitions, as well as to provide us with cash to finance our cashneeds.  Its principal sources ofliquidity will be cash flow from operations and borrowings under its CreditFacility.

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*Sources and uses of funds*

Operating cash flows may be significantly affected bythe working capital characteristics of our business. We generally operate withnegative working capital, excluding cash and current maturities of long-termdebt, due to the impact of deferred revenue from shows, which is billed andcollected as deposits up to one year in advance of the respective show.Deferred revenue increases on the balance sheet in the quarters immediatelypreceding our busy first quarter show season as we collect deposits for boothspace several months in advance of the shows. Revenue and contribution margin are recognized in the quarter that theevents are held, resulting in the reversal of the deferred revenue.

We anticipate that our operating cash flow, togetherwith borrowings under the Credit Facility and other future financings andrefinancings, will be sufficient to fund our anticipated future operatingexpenses, capital expenditures, debt service and other obligations as theybecome due.  However, our ability to makescheduled payments of principal, to pay interest on or to refinance ourindebtedness and to satisfy our other debt obligations will depend upon ourfuture operating performance.  Our futureperformance and continued compliance with the covenants contained inCommunications’ Credit Facility will be affected by general economic,financial, competitive, legislative, regulatory, business and other factorsbeyond our control.  We expect to be incompliance with our debt covenants during 2007.

Historically, our financing requirements have beenfunded primarily through cash generated by operating activities and borrowingsunder Communications’ revolving Credit Facility.  From time to time, we have also raisedadditional funds through sales of common stock, high yield offerings and termborrowings under Communications’ Credit Facility for purposes of completingselective acquisitions.

As of December 31, 2006, we had cash and cashequivalents of $37.0 million and also had $48.4 million in availability underCommunications’ revolving Credit Facility. The following table shows our cashflow activity for the years ended December 31, 2006, 2005 and 2004, includingthe results of discontinued operations, and should be read in conjunction withthe consolidated statements of cash flows:
| **(in thousands)**                               | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net cash  provided by operating activities       |       | $        | 10,522     |     | $          | 8,235    |       | $ | 18,550 |   |
| Net cash (used  in) provided by investing activities  |       | (14,338  | )          | 148,959  |       | 4,996    |       |
| Net cash used in  financing activities                |       | (5,141   | )          | (152,635 | )          | (12,515  | )          |
| Effect of  exchange rate changes on cash              |       | (681     | )          | 754      |       | 576      |       |
| Net (decrease)  increase in cash and cash equivalents |       | $        | (9,638     | )        | $          | 5,313    |       | $ | 11,607 |   |

 

*Cash flows from operating activities*

Net cash provided by operations increased to$10.5 million in 2006 compared to $8.2 million in 2005.  The$2.3 million increase in cash provided by operating activities in 2006 comparedto 2005 was due principally due to an increase in our outstanding accountspayable and other liabilities of $25.4 million, which includes $29.6 incontingent consideration payable in 2007, an increase in cash collected inadvance of our first quarter 2007 events of $4.7 million and $9.1 million innon-recurring cash fees and expenses related to Communications’ repayment of aportion of its outstanding debt in June 2005, partially offset by increase incash interest payments of $25.8 million for which payments commenced in 2006,and declines in operating results and prepaid expenses.

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Net cash provided by operations decreased $10.3 millionto $8.2 million in 2005 compared to $18.6 million in 2004.  This decline was due primarily to $9.1million of cash fees and expenses related to our repurchase of a portion of ouroutstanding debt in June 2005, severance payments of $1.5 million associated with restructuringactivities, and the reduction in cash flow attributable to discontinuedoperations.  During 2005, net cashprovided by discontinued operations was $1.7 million, which representsapproximately 20.6% of total net cash provided by operations.  The declines discussed above were partiallyoffset by a $6.8 million reduction in cash interest payments and a $3.5 millionincrease in operating income in 2005 compared to 2004.

*Cash flows from investing activities*

Net cash used in investing activities was a usage of $14.3 million in 2006 compared to$149.0 million provided by investing activities in 2005.  In 2005 we received $174.1 million ofproceeds from the sale of the PortfolioGroup.  This was partially offsetby $15.6 million of cash used for the acquisitions of Off-Road Expo, POOL,Project and two other small acquisitions in 2005.  Wealso increased capital expenditures in 2006 for computer upgrades,applications development and for build-outs and furnishing of our new downsizedoffice in New York.  We believe that thisamount of capital expenditure will be adequate to grow our business accordingto our business strategy and to maintain the key tradeshows, publications andbusiness of our continuing operations. We expect our 2007 capital expendituresto be approximately $11.5 million.

Net cash provided by investing activities increased $144.0 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 $7.9million in cash used for the acquisition of IVT in 2004.

We did not complete any acquisitions in 2006. Inconnection with any future acquisitions, as a part of our on-going businessstrategy, we may require additional funding, which may be provided in the formof additional debt or equity financing or a combination thereof.  There can be no assurance that any additionalfinancing will be available to us on acceptable terms or in a manner thatcomplies with the restrictive covenants in our debt instruments.  Consistent with our longstanding strategy, wecontinue to pursue potential acquisitions of complementary businesses.

*Cash flows from financing activities*

Cash used in financing activities in 2006 was $5.1 million compared to$152.6 million in 2005.  In 2006, wepaid $3.3 million in dividends to our stockholder, Advanstar Holdings Corp. (“Holdings”),to be used to repurchase shares of Holdings held by a former Chief ExecutiveOfficer. We also repaid the remaining $9.8 million of Communications’ secondpriority floating rate notes at par in August 2006.  Communications borrowed $10.0 million andincurred financing costs of $1.7 million in connection with the amendment andrestatement of its Credit Facility in May 2006 (see “Credit facility amendmentand restatement”).  In March 2005,Communications repaid $4.6 million of its outstanding Term Loan B with theproceeds from the 2004 sale of a tradeshow business.  In June 2005, we repaid Communications’outstanding Term Loan B of $20.4 million and repurchased $126.5 million ofCommunications’ floating and fixed rate notes, using the proceeds fromPortfolio Group sale.

Net cash flowsused in financing activities was $152.6 million in 2005 compared to $12.5million in 2004.  In 2005, Communicationsrepaid its Term B Loan and repurchased a portion of its fixed and floating ratenotes as described above. We repaid $11.7 million of debt in 2004, including$8.0 million of Communications revolving Credit Facility borrowings.

*Debt service*

As of December 31, 2006, we had total indebtedness of $621.9 million and$48.4 million of borrowings available under Communications’ CreditFacility.  Our principal debtobligations are described below.

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*Credit facility amendment and restatement*

On May 24, 2006, Communications amended and restatedits existing Credit Facility. The amended Credit Facility reduced the revolvingloan commitment amount from $60.0 million to $50.0 million, added a $10.0million Term Loan, modified certain restrictive covenants and extended thematurity date from April 2007 to May 2009 for the entire Credit Facility.  The amendment also eliminated the minimum quarterly fixed charge coverage ratiocovenant.

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

As a result of the sale of the Portfolio Group, Communications’ secondpriority senior secured notes indenture required that Communications either usethe remaining net proceeds (after repayment of the Credit Facility borrowings)to invest in its business or to offer to purchase its second priority seniorsecured notes at par plus accrued interest. In June 2005, Communications offered to purchase up to $140.0 million ofthe second lien notes.  Holders of the$8.7 million principal amount of the 10.75% Second Priority Senior SecuredNotes (the “fixed rate notes”) tendered their notes for purchase, andCommunications purchased all such notes.

Also in June 2005, Communications completed a cash tender offer for anyand all of its outstanding Second Priority Senior Secured Floating Rate Notesdue 2008 (the “floating rate notes”). Holders of the $117.8 million aggregate outstanding principal amount ofthe floating rate notes tendered their notes for purchase, and Communicationspurchased all such notes at a price equal to 107.3% (including a 3% consentfee) of outstanding principal plus accrued interest.  In connection with the tender offer,Communications received consents to proposed amendments to the indenturegoverning the notes, resulting in the elimination of substantially all of therestrictive covenants and certain default provisions with respect to thefloating rate notes.

InAugust 2006, Communications used a portion ofthe proceeds from the Credit Facility Term Loan to redeem all ofits remaining $9.8 million of outstanding floating rate notes at par.

*Credit facility*

Communications’ Credit Facility consists of a$50.0 million revolving Credit Facility which terminates in May 2009, and$10.0 million term loan which matures in May 2009.  Borrowings under the Credit Facilitygenerally bear interest based on a margin over, at Communications’ option, thebase rate or LIBOR.  The applicablemargin for revolving credit loans varies based upon its ratio of consolidateddebt to EBITDA, as defined in the Credit Facility, and is currently 2.5% overLIBOR or 2.50% over the base rate. Communications incurs a daily commitment fee of 0.5% and 1.25% per annumfor unused revolving loan availability and standby letters of credit,respectively.

Communications’ obligations under the Credit Facilityare guaranteed by Advanstar Holdings Corp. (“Advanstar Holdings” or “Holdings”),our parent company, us, Communications, and all of Communications’ existing andfuture domestic subsidiaries. Communications’ obligations under the CreditFacility are collateralized by substantially all of the assets ofCommunications and the subsidiary guarantors, including a pledge of the capitalstock of all Communications existing and future domestic subsidiaries, a pledgeof no more than 65% of the voting stock of any foreign subsidiary directlyowned by Communications or any domestic subsidiary, a pledge of allintercompany indebtedness in favor of Communications and Communications’domestic subsidiaries, a pledge of Communications’ capital stock held by us anda pledge of our capital stock held by Advanstar Holdings.   The Credit Facility contains restrictivecovenants, including limitations on certain asset dispositions, dividends,investments and other restricted payments. Failure to complywith the covenants could cause an event of default under the Credit Facility.

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*Second priority senior secured notes*

Communications’ $292.0 million of fixed ratenotes mature in 2010.  The notes areguaranteed by each of Communications’ existing and future domestic restrictedsubsidiaries and collateralized by second-priority liens on the assetscollateralizing Communications’ Credit Facility (other than certain subsidiarystock and assets of its parent companies). The fixed rate notes bear interest at an annual rate of 10.75%, which ispayable semi-annually in cash.  The notescontain restrictive covenants that, among other things, limit Communications’ability to incur debt, pay dividends and make investments.

*Senior subordinated notes*

Communications’ $160 million 12% seniorsubordinated notes mature in 2011 and are guaranteed by each of Communications’existing and future domestic restricted subsidiaries.  Interest on the notes is payable semi-annuallyin cash.  The notes contain restrictivecovenants that, among other things, limit Communications’ ability to incurdebt, pay dividends and make investments.

*Senior discount notes*

As part of the financing for the acquisition ofsubstantially all of the common stock of Holdings by certain DLJ MerchantBanking funds in October 2000, we issued 15% senior discount notes dueOctober 2011 with a principal amount at maturity of$103.2 million.  Concurrently withthe closing of the offering of Communications’ 12% senior subordinated notes,we sold additional senior discount notes due October 2011 with anadditional aggregate principal amount at maturity of $68.6 million.  These notes require cash interest paymentsbeginning in April 2006 and contain restrictive covenants that, among otherthings, limit our ability and that of our subsidiaries to incur debt, paydividends and make investments.

We are a holding company and our ability to payinterest on these notes will be dependent upon the receipt of dividends fromour subsidiaries.  Communications’ CreditFacility, the senior subordinated notes and second priority senior securednotes impose substantial restrictions on our subsidiaries’ ability to paydividends.   The restricted paymentscovenants in Communications’ senior secured notes indenture and seniorsubordinated notes indenture provide that Communications can pay dividends onlyif its leverage ratio (as defined) is 6.0 to 1.0 or better and only from abasket equal to the amount by which its cumulative EBITDA (as defined) sinceJanuary 1, 2001 exceeds 150% of its cumulative interest expense in that sameperiod plus other items, including proceeds from equity offerings. In additionto such basket and notwithstanding the leverage ratio limitation on restrictedpayments, Communications can make additional restricted payments in anaggregate amount of up to $20 million to us, none of which has been usedas of December 31, 2006.   As of December31, 2006, Communications’ leverage ratio under the most restrictive ofthese indentures was 5.5 to 1.0.  Both in March 2006 and October2006, Communications declared and paid a dividend of $12.9 million to us to beused for servicing our debt obligations. In February 2007, Communicationsdeclared a dividend of $12.9 million payable to us to be used for servicing ourApril 2007 debt obligations.

We expect Communications’ results will allow it tocontinue to make dividend payments to us for purposes of debt service.  However, Communications’ results are subjectto a variety of factors, including general economic conditions and conditionsin its markets, and we cannot assure you Communications will be able to makefuture dividend payments.

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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:
| ** **                                    | ** ** | **Payments Due By Period** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------|------------|
| **(in millions)**                        | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **After** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | **2007**                                  | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2011** | ** ** | **Total** | ** ** |
| Indebtedness                                  |       | $                                         | —     |   | $ | — |   | $ | 10.0 |   | $ | 291.3 |   | $ | 331.8 |   | $ | — |   | $ | 633.1 |   |
| Interest on  indebtedness (1)                 |       | 77.4                                      |       | 77.4 |   | 76.9 |   | 68.5 |   | 30.0 |   | — |   | 330.2 |   |
| Acquisition  related compensation payable (2) |       | 29.6                                      |       | — |   | — |   | — |   | — |   | — |   | 29.6 |   |
| Operating leases                              |       | 4.7                                       |       | 4.5 |   | 3.1 |   | 2.7 |   | 2.1 |   | 5.8 |   | 22.9 |   |
|                                          |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total contractual cash  obligations           |       | $                                         | 111.7      |   | $ | 81.9 |   | $ | 90.0 |   | $ | 362.5 |   | $ | 363.9 |   | $ | 5.8 |   | $ | 1,015.8 |   |

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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 material capital lease obligations orpurchase obligations.  We have contingentobligations composed of $1.6 million of letters of credit securing ourlease facilities.

*Off-balance sheet arrangements.*

We have 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 valuemeasurements.  FAS 157 is effective forus on January 1, 2008. Wehave not completed our evaluation of FAS 157 and the effect its adoption willhave on its 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 offsetreported in other comprehensive income 

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(loss). If we had adopted FAS 158 on December 31, 2006, we would haverecorded an additional $1.2 million of other long term liabilities and othercomprehensive income on our consolidated balance sheet. We do not expect theactual impact upon adoption on December 31, 2007 to be materially differentfrom this impact.

 

In September 2006, theSecurities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB108”), Financial Statements — Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements. SAB 108 provides guidance on how prior year misstatements should betaken into consideration when quantifying misstatements in current yearfinancial statements for purposes of determining whether the current year’sfinancial statements are materially misstated. SAB No. 108 had no impact on ourconsolidated financial statements.

 

**Item 7A. — QUANTITATIVE ANDQUALITATIVE DISCLOSURE ABOUT MARKET RISK**

 

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

**Interest Rates**

At December 31, 2006, we had fixed rate debt of$611.9 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 assets and operations in theUnited Kingdom. These assets and operations, and our exposure to any currencygains or losses, are not material to our operating results.

**Item 8. — *FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA***

Please refer to Item 15. — Exhibits and FinancialStatement Schedules.

**Item 9. — *CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE***

No events have occurred which would require disclosureunder this Item.

**Item 9A. — *CONTROLS AND PROCEDURES***

**Evaluationof Disclosure Controls and Procedures**

Advanstar’s ChiefExecutive Officer and Chief Financial Officer, after evaluating theeffectiveness of the Company’s disclosure controls and procedures (as definedin 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.

 

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**Changesin Internal Controls**

There were nosignificant changes during the Company’s fourth fiscal quarter in our internalcontrols over financial reporting that have materially affected or arereasonably likely to materially affect the Company’s internal controls overfinancial reporting.

**Item 9B. —OTHER INFORMATION**

None.

**PART III**

**Item 10. — *DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT***

The following table sets forth the name, age andposition 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                                                                        |
|               |       |    |       |                                                                            |

 

Set forth below is a description of the backgrounds, including businessexperience over the past five years, for each of our directors and executiveofficers. There are no family relationships that exist between any of ourdirectors or executive officers. Under our bylaws, our officers are elected bythe Board of Directors and hold office until their respective successors areduly elected and 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.

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*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.

*TheodoreS. Alpert* has served as our Vice President-Finance, Chief FinancialOfficer, and Assistant Secretary since September 2006. From March 2005 toSeptember 2006, he served as Chief Financial Officer of IPS Corporation.  Previously, from October 2000 to September2004, Mr. Alpert was Executive Vice President and Chief Financial Officer ofTranstar Metal Holdings, Inc and from September 1988 to October 2000, he servedas Executive Vice President and Chief Financial Officer of Centis Inc. (f/k/a20th 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 ofWWDMAGIC from 2000 to 2002.  Since joining Advanstar in 1997, Ms.McConnell served in a variety of roles before being promoted to Vice Presidentof Marketing and Attendee 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.

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**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.

*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 mediafinance he served as Sr. M.D. and head of media investment banking at BearStearns, Schroder and Bankers Trust, and was also a founding partner of CompassPartners L.L.C. a $930 million private equity fund.  Mr. Marden holds a B.A. degree from Fordham 

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University and receivedan A.M. and conducted Ph.D. coursework in economics and social science at theUniversity of Chicago.

**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.

**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 and Analysis**

This CompensationDiscussion and Analysis provides a description and explanation of our compensationphilosophy, policies and practices with respect to our Chief Executive Officerand key members of senior management, who are collectively referred to as thenamed executive officers.

The objectives ofour executive 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 executive officers’performance-based compensation program has three components: a cash-basedannual salary, an annual cash incentive bonus award and long-term stock optionawards. The incentive components are designed to reward achievement ofmeasurable company, business segment and individual performance objectives andto align our named executive officers’ incentives with stockholder valuecreation. Our current compensation package is designed to provide a balance betweenachieving our business objectives and providing competitive compensation to ourexecutives. The equity compensation component is designed to closely align ourexecutives’ pay with the interests of our stockholders.

Except asdescribed below, our Board of Directors has not adopted any formal or informalpolicies or guidelines for allocating compensation between long-term andcurrently paid out compensation, between cash and non-cash compensation, oramong different forms of compensation. This is due to the relatively small sizeof our executive team and the need to tailor each executive’s award to attractand retain that executive.

To achieve theseobjectives, the company has maintained, and expects to further implement andmaintain, a compensation plan that ties a substantial portion of our executives’overall compensation to the achievement of key strategic goals. The companyevaluates individual executive performance with a goal of setting compensationat levels we believe are comparable to executives in other companies of similarsize and stage of development operating in this industry, while taking intoaccount our relative performance and our own strategic goals.

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***Elements of Compensation***

The principalcomponents of compensation of our named executive officers consist of thefollowing elements:

*BaseSalary*. Base salaries of our named executive officers aredetermined by evaluating the nature and responsibility of the position, theexpertise of the individual and the competitiveness of the market for theexecutive’s services, also taking into account comparison to internal peers. Wereview base salaries annually, and adjust them from time to time in order torealign our salaries with market levels, after taking into account individualperformance and contributions. An executive’s actual base salary recognizesindividual skills, experience, sustained job performance and impact on theorganization. This review occurred in the fourth quarter of the previous fiscalyear and the first quarter of the current fiscal year.

*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 hasthe authority 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 bonusplan provides for annual cash bonuses for executives for achievement ofcorporate and business segment financial and operational goals and forachievement of individual goals and performance objectives. The amount of thecash bonus depends 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.

The corporate goals for each named executive officer participating inthe Incentive Program are set each year by our Chief Executive Officer and setforth in writing. Individual goals for each named executive officer are set bythe Chief Executive Officer during the fourth quarter of the previous year orearly in the current year for each fiscal year. These objectives vary,depending on the role of each individual executive and the sector for whichhe/she is responsible and relate to financial goals and strategic factorsrelated to all levels of business activity such as EBITDA growth over prioryear, contribution growth for sector over prior year and strategic factorsrelated to sales, marketing, editorial and show operations, tied to qualitativescorecard metrics.

The level of achievement of both the corporate and individual goals ismonitored on an informal basis by the Chief Executive Officer on an ongoingbasis throughout the year. At the end of the year, as part of each namedexecutive officer’s evaluation and compensation review, the assessment ofperformance of an executive in achieving the individual goals, as well as theexecutive’s contribution to achieving the corporate goals, is finalized.

The annual bonusis paid in a single installment in the first quarter following the completionof a given fiscal year. Our Board of Directors approves the annual bonus awardfor the 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 

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to achievement of certainstrategic goals in 2006 along with the achievement of budgeted EBITDA, theBoard of Directors granted the Chief Executive Officer the maximum bonus. SeeIndividual Executive Employment Agreements and Arrangements section below foradditional discussion of the Chief Executive Officer’s compensation.

***Long-Term Incentives***

We believe thatlong-term performance is achieved through an ownership culture that encourageslong-term participation by our named executive officers in equity-based awards.We utilize 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.

The authority tomake equity-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 donot have any program, plan or practice that requires us to grant equity-basedawards to senior 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 vestbetween the grant date of the option grant up to a maximum of the ninthanniversary of the grant. Once vested, the options are fully exercisable.Options expire ten years from the grant date. We spread the vesting of ouroptions over a period of years to compensate executives for their contributionover a period of time.

***Other Benefits***

We believeestablishing competitive benefit packages for our employees is an importantfactor in attracting 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 aretirement savings plan, or a 401(k) Plan, for the benefit of our eligibleemployees. Employees eligible to participate in our 401(k) Plan are thoseemployees who have attained the age of 21. Currently, employees may elect todefer their compensation up to the statutorily prescribed limit. Highlycompensated employee participation levels are limited in accordance with thelimits set annually by the IRS.

After an employeehas completed one year of service, the company provides a matching contributionup to the first two percent of the participant’s paid compensation. Anadditional $.25 is matched on each dollar contributed, up to an additional fourpercent of paid compensation. Company contributions vest in equal installmentsover five years. An employee’s interests in his or her deferral are 100% vestedwhen contributed. The 401(k) Plan is a qualified plan under Sections 401(a) and501(a) of the Internal Revenue code. As such, contributions to the 401(k) Planand earnings on those contributions are not taxable to the employees untildistributed from the 401(k) Plan, and all contributions are deductible by uswhen made. We do not offer pension or retirement benefits to any of our namedexecutive officers.

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

Certain of ournamed executive officers have severance or change of control agreements with ustriggered by terminationof their employment without cause or following a change in our control.Those severance and change of control arrangements are described below.

***Executive Time Off***

Our namedexecutive officers receive time off in one of two ways, either according to theterms of the 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.

***Conclusion***

Our compensation policies are designed to retain andmotivate our named executive officers and to ultimately reward them foroutstanding individual and corporate performance.

***Subsequenteven***

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

The amendment tothe employment agreement would only become effective on consummation of themerger and would reduce the maximum bonus payable to the Chief ExecutiveOfficer 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 the amounts towhich he was previously entitled under the employment agreement as describedbelow in “- Individual Executive Employment Agreements and Arrangements”. TheAcceleration Agreement in essence accelerates these payments and removes theresignation 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 million in lieuof 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 $1.8million in the aggregate. Certain directors would be eligible for changeof control 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**

 

James M. Alic Joseph Loggia

OhSang Kwon

Douglas B. Fox

Charles PieperKamil Salame*

ScottMarden

 

*Mr. Salamedidnot participate in deliberationsregarding the CompensationDiscussion and Analysis.* *

 

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**Compensation Tables and Narratives**

***Summary Compensation***

The following table presents specific compensation orcomponents of paid compensation to our “named executive officers,” includingChief Executive Officer, Chief Financial Officers and the three other mosthighly paid executive officers in the current fiscal year, for the past threefiscal 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. Montgomery (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        |       |
|                                           |       |     |       |            |       |                |       |                                                          |       |                         |       |                                  |       |           |       |
| Daniel 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 SFAS 123R. Under SFAS 123R, our share based awards meetthe definition or liability awards and we have adopted the intrinsic valuemethod of accounting for our liability awards. Accordingly, compensationexpense and a related liability are recorded only if the fair value of theshares underlying our share based awards are greater than the awards’ exerciseprice as of the end of the applicable reporting period. Compensation expense in2006 was due to the fair value of our common stock underlying the share optionawards being greater than the exercise price of our options as December 31,2006. Prior to adoption of SFAS 123R, we accounted for our stock options andawards to executives under the provisions of Accounting Principles Board(“APB”) Opinion No. 25, *Accounting for Stock toEmployees*, and related

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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 signed a separation agreement with the Company which provided forhis severance benefits including a $250,000 transition services bonus, 12months of his base salary of $360,000 and reimbursement premiums paid for COBRAbenefits to continue his coverage under the Company’s medical plans for twelvemonths.

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

Inthe current fiscal year, the named executives, other than our Chief ExecutiveOfficer,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 EBITDA for the sector (“SectorPerformance” defined below), 30% based upon the positioning of the sector for futuregrowth, 10% based upon managing the core sector and 10% based upon individualaccomplishments.

*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”) overthe prior year. The Company Performance component is calculated as follows:

 
| **% 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 Agreements and 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. Loggiais entitled to an annual base salary of $625,000 and an annual bonus based onAdvanstar, Inc.’s EBITDA for any year compared to budget, up to a maximum bonusin any one year of 150% of base salary. The agreement provides for indemnification to the maximum extentpermitted by law.  If Mr. Loggia isterminated by Advanstar, Inc. without “cause” or terminates his employment for “goodreason,” each as defined in the agreement, he will be entitled to thecontinuation of his base salary for a period of two years following histermination, and the greater of his bonus that would have been payable to himhad he remained employed through the end of the fiscal year or the annual bonusreceived by Mr. Loggia in 2004. Mr. Loggia’s agreement also includes provisionstriggered by a qualifying change in control, as defined in the agreement,including accelerated vesting of his stock options, and change in controlbonus, calculated based upon the effective purchase price per 

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share,and not to exceed $4,000,000. Mr. Loggia’s agreement also provides for $2,000,000in life insurance coverage of which premiums are to be paid for by the Company.Mr. Loggia also has entered into a new non-compete and confidentialityagreement with Advanstar, Inc.  Thenon-compete period is one year, during which time Mr. Loggia will continueto receive his base salary unless he was terminated for cause or as a result ofhis death or disability.  For fiscal2006, Mr. Loggia earned a $937,500 annual bonus. This bonus was comprised of$627,227 based on 2006 actual EBITDA of $95,083,285 exceeding budgeted EBITDAof $95,015,571 and an additional strategic bonus of $310,273 which was grantedby the Board of Directors. If Mr. Loggia would have been involuntarilysevered effective December 31, 2006, his severance would have been $1,589,000.

Advanstar, Inc. currently has a severance arrangementwith Theodore S. Alpert, its Vice President-Finance, Chief FinancialOfficer and Assistant Secretary.  In theevent that Mr. Alpert’s employment is involuntarily terminated for anyreason other than for cause, the arrangement provides that Mr. Alpert willreceive a termination payment equal to twelve months of salary. If Mr. Alpert would have been involuntarily severedeffective 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 forth all plan-based awardsmade by Advanstar (consisting of cash incentive plans and 2000 ManagementIncentive Plan which grants options to purchase stock of Holdings) during theyear ended December 31, 2006 to each of the named executive officers.

 
| **Name**           | ** ** | **Grant  Date** | ** ** | **All Other  Option  Awards:  Number of  Securities  Underlying   Options  (#)** | ** ** | **Excersise  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                                                                             |       |
|                    |            |                 |            |                                                                                                 |            |                                                                       |            |                                                                                     |            |  |  |

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(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 no individual may be granted inany calendar year awards covering more than 900,000 shares of Holdings commonstock. As of December 31, 2006, a maximum of 4,072,789 shares are available forgranting to participants under the Plan, of which 3,575,000 have been grantedand are outstanding.  The Board ofDirectors may adjust the number and class of shares available under the Plan toprevent dilution or enlargement of rights in the event of various changes inHoldings’ capitalization.

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

If there is a change in control of Holdings, allunvested time vesting options granted pursuant to the Plan will vest and becomeimmediately exercisable.  A change incontrol generally means the acquisition by any person or group of persons,other than an affiliate or affiliates of the DLJ Merchant Banking funds, ofmore than 51% of the outstanding voting securities of Holdings or a sale of allor substantially all of 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 namedexecutive officers, number of shares underlying the named executive officer’sexercisable and unexercisable stock options as of December 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 |   |
|                    |            |                                                                                          |            |  |  |  |  |  |  |  |

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(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.

No options were exercised in 2006. Advanstar does nothave a pension plan which covers any of the named executive officers.

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***Director Compensation***

The following table presents specific compensation orcomponents paid to our Board of Directors in the current 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               |       |
|                                                |            |                                                             |            |                              |            |                                       |            |                      |            |  |  |  |  |

----

(1)            Options were granted in the current and priorfiscal years. We follow SFAS 123R. Under SFAS 123R, our share based awards meetthe definition or liability awards and we have adopted the intrinsic valuemethod of accounting for our liability awards. Accordingly, compensationexpense and a related liability are recorded only if the fair value of theshares underlying our share based awards are greater than the awards’ exerciseprice as of the end of the applicable reporting period. Compensation expense in2006 was due to the fair value of our common stock underlying the share basedoption awards being greater than the exercise price of our options as ofDecember 31, 2006. Prior to adoption of SFASs 123R, we accounted for our stockoptions and awards to executives under the provisions of Accounting PrinciplesBoard (“APB”) Option No. 25, *Accounting for StockIssued to Employees,*and related interpretations. No compensationexpense relating to stock options granted was recorded for fiscal years 2005and 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 allreasonable out-of-pocket expenses incurred in connection with his service as adirector of the Company.

56

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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 haveno standard arrangements pursuant to which our directors would be compensatedfor their services as a director.

**Compensation Committee Interlocks and InsiderParticipation**

During the periods up to and including 2006, we didnot have a compensation committee. During the fiscal year ended December 31, 2006, Messrs. Loggia and Alicparticipated in deliberations of our Board of Directors concerning executiveofficer compensation.

**Item 12. — *SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT***

All of our common stock is owned by Holdings.  The following table sets forth informationwith respect to the beneficial ownership of Holdings’ common stock as of April2, 2007 by (a) any person or group who beneficially owns more than fivepercent of Holdings common stock, (b) each of our directors and executiveofficers and (c) all directors and officers as a group.

In accordance with the rules of the SEC, beneficialownership includes voting or investment power with respect to securities andincludes shares issuable pursuant to warrants that are exercisable within60 days of April 2, 2007.  Sharesissuable pursuant to warrants are deemed outstanding in computing thepercentage held by the person holding the warrants but are not deemedoutstanding in computing the percentage held by any other person.

57

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| **Name of Beneficial Owner:**                                                        | ** ** | **Number of  Shares of  Common Stock  Beneficially  Owned** | ** ** | **Percentage of  Outstanding  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 lessthan 1% of the outstanding shares of common stock

 

(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., and DLJ Partners III GmbH & Co. KG

58

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and warrants topurchase 866,117 shares of common stock issued to DLJ Investment Partners, II,L.P. and the following related investors: DLJ ESC II, L.P., DLJ InvestmentFunding II, Inc. and DLJ Investment Partners, L.P. See “Item 13. CertainRelationships and Related Party Transactions.” The address of each of these investors is Eleven Madison Avenue, NewYork, New York 10010, except that the address of Offshore Partners is John B.Gorsiraweg 14, Willemstad, Curacao, Netherlands Antilles.

(2)            Consistsof shares issuable pursuant to stock options exercisable within 60 days.

(3)            Consistsof 108,516 shares, warrants to purchase 34,787 shares and 249,220 sharesissuable pursuant to stock options exercisable within 60 days.

(4)            Sharesshown for Messrs. Kwon, Pieper, Salame, and Marden exclude shares shown asheld by the DLJ Merchant Banking funds and the DLJ 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 employeesat Credit Suisse Securities (USA) LLC where they are Managing Directors withDLJ Merchant Banking 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.

Advanstar has no securities authorized for issuanceunder equity compensation plans; all equity issued as compensation consists ofequity of Holdings.

**Item 13.— *CERTAIN RELATIONSHIPS AND RELATED PARTYTRANSACTIONS***

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 and Agreements**

Advanstar Holdings, was acquiredby the DLJ Merchant Banking Partners III, L.P. and related funds in October2000 (“The Acquisition”).

Credit Suisse Securities (USA), LLC (“CSS (USA)”), anaffiliate of the DLJ Merchant Banking funds, has received customary fees andreimbursement of expenses in connection with the arrangement and syndication ofthe Credit Facility and as a lender thereunder. CSS (USA) acts as our financial advisor and acted as our financialadvisor in connection with the sale of the Portfolio Group.  In May 2005, we paid a consulting fee of $1.5million to CSS (USA) related to this sale.In June 2005, the Company repurchased $7.1 million of its fixed ratenotes at par, and $4.6 million of its floating rate notes at a price equal to107.3% of principal, from CSS (USA) pursuant to our tender offer.  No fees were 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)           an initial public offering ofAdvanstar 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.

59

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

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**

Holdings, the DLJ Merchant Banking funds, the DLJInvestment Partners funds and the other stockholders of Advanstar Holdings(collectively, including Mr. Alic, the “Advanstar Holdings Stockholders”) enteredinto a stockholders’ agreement at the closing of the DLJMB acquisition.  The stockholders’ agreement provides that anyperson acquiring shares of common stock of Advanstar Holdings who is requiredby the stockholders’ agreement or by any other agreement or plan of AdvanstarHoldings to become a party to the stockholders’ agreement will execute anagreement to be bound by the stockholders’ 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:

·                  theother stockholders to participate in specified sales of shares of AdvanstarHoldings capital 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 six 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 AdvanstarHoldings Stockholders entered into a registration rights agreement withAdvanstar Holdings.  Under thatagreement, the DLJ Merchant Banking funds will have the right to six demandregistrations (or five if the holders of the warrants issued with the parentcompany notes have exercised a demand), and the holders of the warrants issuedwith the parent company notes will have the right to one demand registration ofcommon stock after an initial public offering. In addition, all of the holders will be entitled to 

60

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piggyback registration rights, subject to customarycutback and deferral provisions.  Theagreement also provides that Advanstar Holdings will indemnify the partiesagainst specified liabilities, including liabilities under the Securities Act.

**Item 14. — *PRINCIPAL ACCOUNTING FEESAND SERVICES.***

**PrincipalAccounting Fees and Services**

The Audit Committee engagedPricewaterhouseCoopers LLP (“PwC”) to perform an annual audit of Advanstar’sfinancial statements in 2005 and 2006. The following table presents information concerning fees paid to PwC ineach 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 relatedservices performed by PwC that are reasonably related to the performance of theaudit or review of Advanstar’s financial statements but not described in item(1) above, primarily attributable to 2004 audit of our employee benefit plan,and third-party workpaper 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 andprocedures prohibit PwC from performing any services for Advanstar or itssubsidiaries without the prior specific approval of the audit committee, exceptthat the audit 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.

61

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**PART IV**

**Item 15. — *EXHIBITS AND FINANCIALSTATEMENT SCHEDULES***

**A.****            Documents Filed asPart 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 StatementSchedules:**
| The following schedules are  included in this Annual Report on the page indicated:   |   |   |
|--------------------------------------------------------------------------------------|--------|--------|
|                                                                                 |   |   |
| Schedule I—Condensed Financial Information of  Advanstar, Inc. (Parent Company) |   | II-1   |
| Schedule II—Valuation and Qualifying Accounts                                   |   | II-2   |
|                                                                                 |   |   |
| All other  schedules have been omitted because they are not applicable.              |   |   |

 

 

62

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** **

**Reportof Independent Registered Public Accounting Firm**

To the Stockholder and Board of Directors

of Advanstar Inc.

In our opinion, the consolidated financial statements listed in theindex appearing under Item 15(a)(1) present fairly, in all material respects,the financial position of Advanstar, Inc., a wholly owned subsidiary ofAdvanstar Holdings Corp., and its subsidiaries at December 31, 2006 and 2005,and the results of their operations and their cash flows for each of the threeyears in the period ended December 31, 2006, in conformity with accountingprinciples generally accepted in the United States of America. In addition, inour opinion, the financial statement schedules listed in the index appearingunder Item 15(a)(2) presents fairly, in all material respects, the informationset forth therein when read in conjunction with the related consolidatedfinancial statements. These financial statements and financial statementschedules are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements andfinancial statement schedules based on our audits. We conducted our audits ofthese statements in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

As discussed in Note 7 to the consolidated financial statements, in2006 the Company changed the manner in which it accounts for share-basedcompensation.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota

March 29, 2007

 

F-1

----

 

**Advanstar, 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                                                                                                                |       | $          | 37,003     |       | $          | 46,641 |   |
| 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                                                                                                                     |       | 71,700     |       | 81,084     |       |
| Due from parent                                                                                                                           |       | 934        |       | 804        |       |
| Property, plant and  equipment, net                                                                                                       |       | 25,026     |       | 21,306     |       |
| Intangible and other  assets                                                                                                              |       |       |       |       |       |
| Goodwill                                                                                                                                  |       | 598,398    |       | 594,982    |       |
| Intangibles and  other, net                                                                                                               |       | 39,052     |       | 63,157     |       |
| Total intangible  and other assets, net                                                                                                   |       | 637,450    |       | 658,139    |       |
| Non-current assets held  for sale                                                                                                         |       | 3,670      |       | 4,620      |       |
|                                                                                                                                      |       | $          | 738,780    |       | $          | 765,953 |   |
| **Liabilities and Stockholder’s  Equity**                                                                                            |       |       |       |       |       |
| Current liabilities                                                                                                                       |       |       |       |       |       |
| Current  maturities of long-term debt                                                                                                     |       | $          | —     |       | $          | 201 |   |
| Accounts payable                                                                                                                          |       | 15,571     |       | 12,507     |       |
| Accrued  compensation                                                                                                                     |       | 11,306     |       | 7,236      |       |
| Other accrued  expenses                                                                                                                   |       | 60,098     |       | 36,126     |       |
| Deferred revenue                                                                                                                          |       | 51,167     |       | 46,472     |       |
| Total current  liabilities                                                                                                                |       | 138,142    |       | 102,542    |       |
| Long-term debt, net of  current maturities                                                                                                |       | 621,909    |       | 620,391    |       |
| 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, 10,000 shares authorized; 100 shares  issued and outstanding at December 31, 2006  and 2005 |       | —     |       | —     |       |
| Capital in  excess of par value                                                                                                           |       | 367,136    |       | 370,424    |       |
| Accumulated  deficit                                                                                                                      |       | (441,359   | )          | (372,250   | )          |
| Accumulated  other comprehensive income                                                                                                   |       | 10,862     |       | 8,413      |       |
| Total  stockholder’s equity                                                                                                          |       | (63,361    | )          | 6,587      |       |
|                                                                                                                                      |       | $          | 738,780    |       | $          | 765,953 |   |

 

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

F-2

----

 

**Advanstar, Inc.**

**ConsolidatedStatements of Operations**

**YearsEnded December 31, 2006, 2005 and 2004**
| **(in thousands)**                                      | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 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)         |       | 75,225     |       | 41,677     |       | 41,334     |       |
| Restructuring charge  (benefit)                              |       | 2,325      |       | 4,771      |       | (4,015     | )          |
| Depreciation and  amortization                               |       | 32,265     |       | 37,755     |       | 43,089     |       |
| Total operating  expenses                                    |       | 303,466    |       | 252,902    |       | 238,585    |       |
| Operating income                                             |       | 20,256     |       | 36,011     |       | 32,481     |       |
|                                                         |       |       |       |       |       |       |       |
| Other income (expense)                                       |       |       |       |       |       |       |       |
| Interest expense                                             |       | (82,137    | )          | (88,060    | )          | (92,225    | )          |
| Interest income                                              |       | 1,864      |       | 1,476      |       | 468        |       |
| Loss on  extinguishment of debt (Note 6)                     |       | (599       | )          | (12,581    | )          | -          |       |
| Other (expense)  income, net                                 |       | (240       | )          | 83         |       | 826        |       |
| Loss from  continuing operations before income taxes         |       | (60,856    | )          | (63,071    | )          | (58,450    | )          |
|                                                         |       |       |       |       |       |       |       |
| Income  tax provision (benefit)                              |       | 8,334      |       | (9,524     | )          | 6,259      |       |
| Loss from continuing  operations                             |       | (69,190    | )          | (53,547    | )          | (64,709    | )          |
|                                                         |       |       |       |       |       |       |       |
| Income  (loss) income from operations of discontinued        |       |       |       |       |       |       |       |
| businesses, net of tax  (Note 4)                             |       | 81         |       | 31,743     |       | (2,418     | )          |
| Net loss                                                     |       | $          | (69,109    | )          | $          | (21,804    | )          | $ | (67,127 | ) |
|                                                         |       |       |       |       |       |       |       |

 

The accompanying notesare an integral part of these consolidated financial statements.

F-3

----

 

**Advanstar, Inc.**

**ConsolidatedStatements of Stockholder’s Equity**

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

* *
| **(in thousands,  except share and  per share data)**     | ** ** | ** **            | ** ** | ** **         | ** ** | ** **          | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|----------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|---------------------|------------|-------------------|------------|------------------------|------------|------------|------------|
| ** **                                                     | ** ** | ** **            | ** ** | ** **         | ** ** | **Capital in** | ** ** | ** **        | ** ** | **Other**              | ** ** | ** ** | ** ** |
| ** **                                                     | ** ** | **Common Stock** | ** ** | **Excess of** | ** ** | **Accumulated**     | ** ** | **Comprehensive** | ** ** | ** **             | ** ** |
| ** **                                                     | ** ** | **Shares**            | ** ** | **Amount**         | ** ** | **Par Value**  | ** ** | **Deficit**       | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
|                                                           |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| **Balances at  December 31, 2003**                   |       | 100                   |       | $                  | —     |                | $          | 370,424           |       | $                      | (283,319   | )          | $          | 3,513 |   | $ | 90,618 |   |
| Comprehensive loss                                             |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Net loss                                                       |       | —                |       | —             |       | —              |       | (67,127           | )          | —                 |       | —     |       |
| Translation adjustment                                         |       | —                |       | —             |       | —              |       | —            |       | 2,587                  |       | —     |       |
| Change in  unrealized loss on derivative financial instruments |       | —                |       | —             |       | —              |       | —            |       | 145                    |       | —     |       |
| Total comprehensive  loss                                      |       | —                |       | —             |       | —              |       | —            |       | —                 |       | (64,395    | )          |
|                                                           |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| **Balances at  December 31, 2004**                   |       | 100                   |       | —             |       | 370,424             |       | (350,446          | )          | 6,245                  |       | 26,223     |       |
| Comprehensive loss                                             |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Net  loss                                                      |       | —                |       | —             |       | —              |       | (21,804           | )          | —                 |       | —     |       |
| Translation adjustment                                         |       | —                |       | —             |       | —              |       | —            |       | 2,271                  |       | —     |       |
| Change in unrealized  loss on derivative financial instruments |       | —                |       | —             |       | —              |       | —            |       | (103                   | )          | —     |       |
| Total comprehensive  loss                                      |       | —                |       | —             |       | —              |       | —            |       | —                 |       | (19,636    | )          |
|                                                           |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| **Balances at  December 31, 2005**                   |       | 100                   |       | —             |       | 370,424             |       | (372,250          | )          | 8,413                  |       | 6,587      |       |
| ** **                                                     |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Comprehensive loss                                             |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Net loss                                                       |       | —                |       | —             |       | —              |       | (69,109           | )          | —                 |       | —     |       |
| Translation  adjustment                                        |       |                  |       | —             |       | —              |       | —            |       | 2,449                  |       | —     |       |
|                                                           |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Total comprehensive  loss                                      |       | —                |       | —             |       | —              |       | —            |       | —                 |       | (66,660    | )          |
|                                                           |       |                  |       |               |       |                |       |              |       |                   |       |       |       |
| Dividend to parent                                             |       | —                |       | —             |       | (3,288              | )          | —            |       | —                 |       | (3,288     | )          |
| **Balances at  December 31, 2006**                   |       | 100                   |       | $                  | —     |                | $          | 367,136           |       | $                      | (441,359   | )          | $          | 10,862 |   | $ | (63,361 | ) |

 

The accompanying notesare an integral part of these consolidated financial statements.

F-4

----

**Advanstar,Inc.Consolidated Statements of Cash FlowsYears Ended December 31, 2006, 2005 and 2004**

 

 
| **(in thousands)**                                                          | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Cash flows from operating  activities**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net loss                                                                         |       | $          | (69,109    | )          | $          | (21,804    | )          | $ | (67,127 | ) |
| Adjustments to  reconcile net loss to net cash provided by  operating activities |       |       |       |       |       |       |       |
| Impairment  of intangible and assets held for sale (Note 4)                      |       | 950        |       | 2,272      |       | —     |       |
| Write-off  of deferred financing costs                                           |       | 599        |       | 3,517      |       | —     |       |
| Restructuring  charge                                                            |       | —     |       | —     |       | (4,015     | )          |
| Impairment  of goodwill                                                          |       | —     |       | —     |       | 15,570     |       |
| 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                                                       |       | 4,011      |       | 22,474     |       | 24,489     |       |
| 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                                           |       | 25,385     |       | 3,515      |       | (10,776    | )          |
| Deferred  revenue                                                                |       | 4,695      |       | (3,926     | )          | (6,902     | )          |
| Other                                                                            |       | 3,940      |       | (1,258     | )          | 1,733      |       |
| Net cash  provided by operating activities                                       |       | 10,522     |       | 8,235      |       | 18,550     |       |
| **Cash flows from investing  activities**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Additions to property,  plant and equipment                                      |       | (14,046    | )          | (9,564     | )          | (9,576     | )          |
| Acquisition 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                                                   |       | (3,288     | )          | —     |       | —     |       |
| Dividends paid to  minority interest holders                                     |       | —     |       | (900       | )          | (500       | )          |
| Net cash used in  financing activities                                           |       | (5,141     | )          | (152,635   | )          | (12,515    | )          |
| Effect of exchange rate  changes on cash                                         |       | (681       | )          | 754        |       | 576        |       |
| Net (decrease)  increase in cash and cash equivalents                            |       | (9,638     | )          | 5,313      |       | 11,607     |       |
| **Cash and cash equivalents**                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Beginning of year                                                                |       | 46,641     |       | 41,328     |       | 29,721     |       |
| End of year                                                                      |       | $          | 37,003     |       | $          | 46,641     |       | $ | 41,328 |   |

 

 

 

The accompanying notesare an integral part of these consolidated financial statements.

F-5

----

**Advanstar Inc.Notes to Consolidated Financial StatementsDecember 31, 2006, 2005 and 2004**

 

**1.**                          Nature of Business

The accompanyingconsolidated financial statements include the accounts of Advanstar, Inc. (“Advanstar”),a wholly owned subsidiary of Advanstar Holdings Corporation (“Holdings”), andits wholly owned subsidiary, Advanstar Communications Inc. (“Communications”),(collectively, the “Company”).  Allintercompany accounts and transactions between consolidated entities have beeneliminated.

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 consistprimarily of prepaid show and conference expenses, prepaid publicationproduction costs and miscellaneous deposits. Event and publication expenses are charged to operations at the time ofthe related event and at the time of publication issuance.  Other current assets consist primarily ofpaper 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 andequipment is stated at its original cost and is depreciated on thestraight-line basis over the following estimated 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                              |       | 16,527   |       | 16,629   |       |
| 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         |       | $        | 60,098     |     | $          | 36,126 |   |

 

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 |   |

** **

**Foreign Currency Translation**

The Company accounts fortranslation adjustments related to its investments in foreign entities inaccordance with 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 generallyaccepted in the United States of America requires management to make estimatesand assumptions 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 the effect itsadoption 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 itsevaluation of FAS 157 and the effect its adoption will have on its consolidatedfinancial statements.

TheFASB also issued in September 2006 Statement of Financial Accounting StandardsNo. 158, *Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans*(“FAS 158”). The new standardrequires companies to recognize the overfunded or underfunded status of adefined benefit postretirement plan as an asset or liability on the balancesheet and to recognize changes in that funded status in the year in which thechange occurs through comprehensive income. FAS 158 provides for adoptioneffective December 31, 2007 for companies that do not have publicly tradedequity securities.  As such, ourconsolidated balance sheet as of December 31, 2007 will reflect the fundedstatus of our postretirement benefit plans, with the offset reported in othercomprehensive income (loss) in its consolidated balance sheet. If the Companyhad adopted FAS 158 on December 31, 2006, the Company would have recorded anadditional $1.2 million of other long term liabilities and other comprehensiveincome. Upon its adoption of FAS 158 as of December 31, 2007, the Company doesnot expect the actual impact to be materially different from this amount.

InSeptember 2006, the Securities and Exchange Commission issued Staff AccountingBulletin 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 108 had no impact on the Company’sconsolidated financial statements.

F-9

----

**3.**                          Goodwill and Other Intangible 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              |       | 17,600   |       | 19,789   |       |
|                                   |       | 96,553   |       | 227,914  |       |
| Accumulated  amortization              |       | (57,501  | )          | (164,757 | )          |
| Total intangible and other assets, net |       | $        | 39,052     |     | $          | 63,157 |   |

 

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

----

The allocated fair valueof intangible assets acquired during the year ended December 31, 2005 was asfollows:
| **(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 ended December 31, 2006, 2005and 2004, was $22.6 million, $29.8 million and $34.8 million.

**4.**                          Acquisitions, Divestitures and AssetsHeld for Sale

**Acquisitions**

All acquisitions(collectively, the “Acquired Businesses”) have been accounted for using thepurchase method of accounting and, accordingly, the assets acquired andliabilities assumed have been recorded at their fair values as of the dates ofthe acquisitions.  The excess of thepurchase price over the fair value of the assets acquired and liabilitiesassumed has been recorded as goodwill. Results of operations for the Acquired Businesses have been included inthe accompanying 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

----

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 ofPOOL and 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 combinedoperating results of the AcquiredBusinesses and the Company for the years ended December 31, 2006, 2005 and 2004are not materially different from the Company’s consolidated results ofoperations.

**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 TradeshowAcquired from 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.

Revenueof East Coast Fashion included in discontinued operations in the consolidatedstatements of operations was $0.9 million and $6.1 million for the years endedDecember 31, 2005 and 2004.

F-13

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*Portfolio Group*

On May 23, 2005, theCompany completed the sale of virtually all business assets and liabilitiesassociated with its tradeshows and conferences, trade publications and directmarketing products in the following primary industries: Information Technology& Communications, Travel/Hospitality, Beauty, Home Entertainment, Abilitiesand Portfolio, including the shares of the Company’s Hong Kongsubsidiaries.  The shares of the Company’sBrazilian subsidiary were sold to the same buyer in July 2005 after finalregulatory approval. Collectively, all of the above properties are referred toas “the Portfolio Group.” The sale price for these assets and shares was $185.0million in cash less selling expenses and working capital adjustments of $11.2million.  The Company recorded a gainon the sale of $52.9 million.  In 2006,the Company received a refund of $0.2 million for taxes paid in 2005 related tothe gain on sale of the Portfolio Group which was reported in income (loss)from discontinued operations.

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

*DMS*

On September 8, 2004, theCompany sold its German tradeshow business (“DMS”) for $1.7 million incash.  In connection with the sale, theCompany recorded a goodwill impairment charge of $6.2 million.  The amount of the impairment charge wasdetermined based upon the excess of the carrying value of DMS over the sellingprice, 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, includedin discontinued operations in the consolidated statements of operations, was$0.1 million for the period from January 1, 2004 to September 8, 2004.

*SeCA*

On August 5, 2004, theCompany completed the sale of its 65% ownership in its French joint venture (“SeCA”)for a total selling price of $3.1 million in cash.  In connection with the sale, the Companyrecorded a goodwill impairment charge of $9.4 million, net of minority interesteffect 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, includedin discontinued operations in the consolidated statements of operations, was$2.9 million for the period from January 1, 2004 to August 5, 2004.

*Post*

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

Revenue of Post, includedin discontinued operations in the consolidated statements of operations, was$0.7 million for the period from January 1, 2004 to July 2, 2004.

F-14

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*Art Group*

On March 12, 2004, theCompany completed the sale of its art industry tradeshows and magazinesbusiness (the “Art Group”) for a total selling price of $19.6 million incash.  The Company recorded a gain aftertaxes on the sale of $3.4 million.

Revenue of the Art Group,included in discontinued operations in the consolidated statements ofoperations, was $8.5 million for the period from January 1, 2004 to March 12,2004.

The financial results ofthe Disposed Businesses included in the discontinued operations in theaccompanying consolidated statements of operations for the years ended December31 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     | )          | 23,652   |       | 5,705    |       |
| Minority  interests                           |       | -—  |       | (566     | )          | 4,264    |       |
| Income (loss)  from discontinued businesses   |       | $        | 81         |     | $          | 31,743   |       | $ | (2,418 | ) |

 

The Company allocatedgoodwill to the Disposed Businesses and included the allocated goodwill in itsdetermined gain or loss on disposal. Goodwill allocated to the Art Group, Post, and the Portfolio Group is basedon the relative fair values of the Disposed Business to the entire reportingunit prior to disposal.  SeCA and DMS were never integrated into the Company’sbroader reporting units. Thus, the carrying amount of acquired goodwill forthose businesses was included in the calculation of any gain or loss ondisposal.

Goodwill allocated to thebusinesses disposed of and used in the calculation of the gain or loss on saleof the Disposed Businesses was $121.8 million and $23.5 million for the yearsended December 31, 2005 and 2004. Subsequent to the sale of the DisposedBusinesses, management changed its reportable segments (see Note 11). TheCompany’s new reporting segments do not include a segment which would containthe goodwill allocated to the Disposed Businesses.

**Non-Current Assets Held for Sale**

Inthe second quarter of 2005, the Company committed to a plan to sell itsCleveland office building and land (“the Cleveland Office”). The Company ceaseddepreciation of these assets, effective the second quarter of 2005. During2006, the Company recognized a $1.0 million impairment, which is included ingeneral and administrative expense in the accompanying consolidated statementsof operations, on the Cleveland Office to write its carrying value down to itsestimated selling price less selling costs. The fair value was estimated primarily based upon terms of a letter of intent between the Company anda buyer of the building and a portion of the land.  As of December 31, 2006 and 2005, the Companyreported 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 hasperiodically used derivative instruments to manage exposure to interest rateand foreign currency risks.  The Company’sobjectives for holding derivatives are to minimize the risks, using whatmanagement believes are the most effective methods to eliminate or reduce theimpact of these exposures.

**Interest Rate Risk**

Variable rate debtinstruments are subject to interest rate risk. The Company periodically enters into interest rate collar and swapagreements to manage its exposure to interest rate movements on its variablerate debt obligations.  The effectiveportion of the cumulative gain or loss on these agreements are reported as acomponent of accumulated other comprehensive income in stockholder’s equity andrecognized in earnings as the underlying interest expense is incurred.  The ineffective portion of these agreementsare recognized in current earnings. Gains and losses on the undesignated portion of these agreements at theend of each fiscal quarter (which are calculated as the net amount payable upontermination at the date of determination) are recognized in current earningsuntil expired.

In 2001 the Companyentered into an interest rate collar agreement which expired in February 2004to manage its exposure to interest rate movements on a portion of its variablerate debt obligations.

In May 2003 the Companyentered into an interest rate swap agreement expiring November 2005, andsubsequently terminated the agreement in December 2003.  The net gain at termination of approximately$0.2 million was reported in accumulated other comprehensive income and wasamortized into earnings over the original contract term.

**Foreign Currency Risk**

The Company periodicallyuses forward contracts to manage its exposure associated with forecastedinternational revenue and expense transactions denominated in euro and BritishPound Sterling for up to 15 months in the future.  Changes in the fair value of theseinstruments 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, theCompany had no foreign exchange derivative contracts.

**Statement of Operations**

The following tablesummarizes the gains included in other income effects on the Company’sstatement of operations related to the ineffective portion of the Company’sinterest rate collar agreements and changes in the fair value of foreignexchange contracts not designated as hedging instruments for the years endedDecember 31:
| **(in thousands)**       | ** ** | **Interest Rate  Collar  Agreements** | ** ** | **Foreign  Exchange  Contracts** | ** ** | **Total** | ** ** |
|-------------------------------|------------|--------------------------------------------|------------|----------------------------------|------------|-----------|------------|
| Year ended  December 31, 2005 |       | $                                          | 103        |                             | $          | —    |       | $ | 103 |   |
|                          |       |                                       |       |                             |       |      |       |
| Year ended  December 31, 2004 |       | $                                          | 1,319      |                             | $          | 71        |       | $ | 1,390 |   |

 

F-16

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**6.**                          Debt

**Credit Facility**

Communications is party to a credit facility (the “CreditFacility”) with a group of financial institutions acting as lenders. On May 24,2006, Communications amended and restated its existing credit facility. Theamended Credit Facility reduced the revolving loan from $60.0 million to $50.0million, added a $10.0 million Term Loan, modified or eliminated certainrestrictive covenants and extended the maturity date from April 2007 to May2009 for the entire Credit Facility.  TheCredit Facility is guaranteed by Holdings, the Company and Communications’domestic subsidiaries and is collateralized by first priority liens onsubstantially all of the assets of Communications and the guarantors.  As a result of the amendment and restatementof the Credit Facility, Communications expensed unamortized deferred financecosts of $0.6 million and capitalized additional deferred finance costs of $1.7million.

The Credit Facilitycontains restrictive covenants, including limitations on certain assetdispositions, dividends, investments and other restricted payments.  Failure to comply with thecovenants could cause an event of default under the Credit Facility.  Communications incurs a daily commitment fee of 0.5% and 1.25% perannum for unused revolving loan availability and standby letters of credit,respectively. As of December 31, 2006, Communications had $1.6 million ofstandby letters of credit, which reduced borrowings available under the CreditFacility to $48.4 million.

Prior to June 2005, theCredit Facility consisted of (i) $25.0 million of term B loans dueOctober 11, 2008, and (ii) $60.0 million of revolving loanavailability through April 11, 2007. In June 2005, Communications repaid the outstanding term B loans withproceeds from the sale of the Portfolio Group (see Note 4).

**Senior Secured Notes**

Communications’ Senior Secured Notes initially consisted of $130.0million of Second Priority Senior Secured Floating Rate Notes due 2008, whichrequired quarterly amortization equal to 0.25% of the principal amount thereof(the “floating rate notes”), and $300.0 million of 10.75% Second PrioritySenior Secured Notes due 2010 (the “fixed rate notes”).

The fixed rate notes arefully and unconditionally guaranteed on a senior basis, jointly and severally,by Communications’ wholly owned domestic subsidiaries and collateralized by second priorityliens on substantially all the collateral pledged against borrowings underCommunications’ Credit Facility (other than the capital stock of certain of itssubsidiaries and assets of its parent companies, including the Company and Holdings,the Company’s parent).   The covenantsunder the notes include limitations, among other things, on Communications’ability to make payments, incur debt, pay dividends, and make other restrictedpayments.

In June 2005, Communications used a portion of the proceeds from thePortfolio Group sale to repurchase $8.7 million of the fixed rate notes at aprice equal to 100% of the principal amount plus accrued interest.  Communications also consummated a tenderoffer in June 2005 for the floating rate notes and repurchased $117.8 millionof the floating rate notes at a price equal to $1,073 per $1,000 principalamount tendered plus accrued and unpaid interest to the date ofsettlement.  In the second quarter of2005, Communications recognized a $12.6 million loss on extinguishment ofdebt related to therepurchase, including $8.6 million in tender offer premium and consent fees, awrite-off of $3.5 million in unamortized deferred financing costs, and $0.5million in legal fees and expenses.

F-17

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In August 2006, Communications used a portion of the proceeds from theTerm Loan to redeemall of its remaining $9.8 million of outstanding floating rate notes atpar.  As a result of the redemption,Communications recognized a $0.1 million loss on extinguishmentof debt related to the redemption due to the write off of unamortized deferredfinancing costs.

**Senior Subordinated Notes**

Communications’$160.0 million unsecured, 12% senior subordinated notes due 2011 (the “SeniorSubordinated Notes”) bear interest payable semiannually on February 15 andAugust 15 of each year.  The SeniorSubordinated Notes are fully and unconditionally guaranteed on a seniorsubordinated basis, jointly and severally, by Communications’ wholly owneddomestic subsidiaries.  The covenantsunder the Senior Subordinated Notes include limitations on certain assetdispositions, payments, debt incurrence, dividends and other restrictedpayments.

**Senior Discount Notes**

The Company’s seniordiscount notes due October 2011 (the “Discount Notes”) with a principalamount at maturity of $171.8 million bear interest at 15%, payablesemiannually beginning October 2005, and have an implied yield to maturityof approximately 17.2%.  The notes areredeemable at the Company’s option at specified premiums through 2007 and atpar thereafter.  The notes may also beredeemed at a premium upon a qualifying change of control of the Company.

The Discount Notes arenot guaranteed by the Company’s subsidiaries and require semi-annual cashinterest payments. The Discount Notes contain restrictive covenants that, amongother things, limit the Company’s ability and that of its subsidiaries to incurdebt, pay dividends and make investments. Since the Company is a holding company and its subsidiaries serve as itsonly source of cash flow, its ability to pay interest on these notes will bedependent upon the receipt of dividends from its subsidiaries.  The Credit Facility, the Senior Secured Notesand the Senior Subordinated Notes impose substantial restrictions on theCompany’s subsidiaries’ ability to pay dividends to the Company.

The restricted paymentscovenants in Communications’ Senior Secured Notes indenture and SeniorSubordinated Notes indenture provide that Communications can pay dividends onlyif its leverage ratio (as defined) is 6.0 to 1.0 or better and only from a “basket”defined as the amount by which Communications’ cumulative EBITDA (as defined)since January 1, 2001 exceeds 150% of Communications’ cumulative interestexpense in that period plus certain other items, including proceeds from equityofferings.  The Company cannot provide assurance that Communications’results will allow it to make future distributions in light of theserestrictions.  Failure to pay interest on these notes will be a default under the notesand also result in a default under Communications’ Credit Facility, which couldhave a material adverse effect on the Company’s financial position, results ofoperations, and cash flows and/or could impact the Company’s ability to continueto operate without an amendment or restructuring of its credit facilityand the notes.  Notwithstanding the leverage ratio limitationon restricted payments, Communications can make restricted payments in anaggregate amount of up to $20 million to the Company, none of which hasbeen used as of December 31, 2006. Both on March 14, 2006 and on October 14, 2006, Communications declared andpaid a dividend of $12.9 million to the Company to be used for the Company’sApril 2006 and October 2006 interest payments on the Discount Notes.  Debt service on the discount noteswill be $25.8 million in 2007.  Althoughthere can be no assurance, the Company expects Communications’ results willallow Communications to continue to make dividend payments to satisfy the Company’sdebt service obligations. In February 2007, Communications’ declared a dividendof $12.9 million payable to the Company to be used for servicing its April 2007debt obligations.

F-18

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Accretionof the debt discount on the Discount Notes was $1.4 million, $19.5 million, and $21.1 million duringthe years ended December 31, 2006, 2005, and 2004.  These amounts are included in interestexpense in the respective accompanying consolidated statements of operations.

Long-term debt consistsof 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  |       |
| Senior discount  notes, interest at 15%, due October 2011, net of unamortized discount of  $11,751 and $13,187 at December 31, 2006 and 2005, respectively |       | 160,041  |       | 158,605  |       |
| Acquisition note                                                                                                                                           |       | —   |       | 100      |       |
|                                                                                                                                                       |       | 621,909  |       | 620,592  |       |
| Less: Current  maturities                                                                                                                                  |       | —   |       | (201     | )          |
|                                                                                                                                                       |       | $        | 621,909    |     | $          | 620,391 |   |

 

Based on the borrowingrates currently available to the Company for debt instruments with similarterms and average maturities, the fair value of long-term debt exceeded itscarrying value by $48.1 million and $56.7 million at December 31, 2006 and2005.

Cash paid for interestfor the years ended December 31, 2006, 2005 and 2004 was approximately$78.2 million, $60.4 million and $67.2 million.

Annual maturities oflong-term debt for the next five years (excluding amortization of premium) areas follows:

 
| **(in thousands)** | ** ** | ** ** | ** ** |
|-------------------------|------------|------------|------------|
| 2007                    |       | $          | —     |   |
| 2008                    |       | —     |       |
| 2009                    |       | 10,000     |       |
| 2010                    |       | 291,335    |       |
| 2011                    |       | 331,792    |       |
|                    |       | $          | 633,127    |   |

 

F-19

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**7.**                          Stockholder’s Equity

**2000 Management 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 options canbe 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 optionactivity 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, theoutstanding stock options had a weighted average remaining contractual life of5.8 years and an exercise price of $10.00 per option.  Of the options outstanding at December 31,2006, 2,353,018 were exercisable with a remaining contractual life of 4.9years, and an exercise price of $10.00 per option.

OnJanuary 1, 2006, the Company adopted Statements of Financial AccountingStandards No. 123R, *Share-Based Payment*(“SFAS 123R”).  Under SFAS 123R, theCompany’s share based awards meet the definition of liability awards.  As allowed under the provisions of thisstatement for entities not meeting the public company definition, the Companyadopted the intrinsic value method of accounting for its liability awards.  Accordingly, compensation expense and arelated liability is recorded to the extent the fair value of the Company’sshares underlying its share based awards are greater than the awards’ exerciseprice as of the end of the applicable reporting period.  

Asof December 31, 2006, management estimated that the fair value of Holdings'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. The Company’s management determined the fairvalue of its options based on numerous factors including comparable companies,management valuation estimates, and recent discussions with third parties.

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

As of December 31, 2006,the aggregate intrinsic value of all stock options outstanding was $5.5million. Any change in the aggregate intrinsic value of vested stock optionswill be included in operations in the period of the change. As of December 31,2006, the aggregate intrinsic value of unvested stock options was $1.9 million,which, subject to any changes in the intrinsic value of the options, will becharged to operations as the options vest. As of December 31, 2006 the weighted-average remaining vesting term ofunvested options was 2.4 years, although earlier vesting may occur based uponterms of the Plan.

F-20

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**8.**                          401(k) Plan

The Company has a 401(k)savings plan and trust (the “401(k) Plan”) available to employees of theCompany and its domestic subsidiaries. All domestic employees who are at least 21 years of age are eligible toparticipate in the 401(k) Plan.  TheCompany is required to make a matching contribution, after the employeecompletes one year of service, to the 401(k) Plan and may make discretionarycontributions to the 401(k) Plan. Eligible employees are vested 100% in their own contributions.  Contributions made by the Company vest inequal installments over five years. Total contribution expense was $1.1 million, $1.4 million, and $1.6million for the years ended December 31, 2006, 2005 and 2004.

**9.**                          Income Taxes

The Company’s taxableincome or loss is included in the consolidated federal income tax return ofHoldings.  Federal income taxes are paidor refunded pursuant to the terms of a tax sharing agreement under which taxesapproximate the amount that would have been computed on a separate companybasis.  Taxes payable to Holdings of $0.1million at December 31, 2006 and 2005 are included in Due from parent inthe accompanying consolidated balance sheet.

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

The summary of loss fromcontinuing operations before (benefit) provision for income taxes was asfollows for the years ended December 31:

 
| **(in thousands)** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|----------|------------|
| Domestic                |       | $        | (60,916    | )        | $          | (61,220  | )          | $ | (58,201 | ) |
| Foreign                 |       | 60       |       | (1,851   | )          | (249     | )          |
|                    |       | $        | (60,856    | )        | $          | (63,071  | )          | $ | (58,450 | ) |

 

The (benefit) provisionfor income taxes is comprised of the following for the years ended December 31:
| **(in thousands)**   | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|----------|------------|
| Current                   |       |     |       |     |       |     |       |
| Federal                   |       | $        | —     |     | $          | —   |       | $ | — |   |
| State                     |       | 570      |       | 14       |       | 7        |       |
| Foreign                   |       | 20       |       | (675     | )          | 20       |       |
| Deferred                  |       | 7,744    |       | (8,863   | )          | 6,232    |       |
| Total provision (benefit) |       | $        | 8,334      |     | $          | (9,524   | )          | $ | 6,259 |   |

 

The Company accounts forincome taxes following the provisions of SFAS No. 109, *Accounting for Income Taxes*, which requires recognition ofdeferred tax assets and liabilities for the expected future tax consequences ofdiffering amounts that have been included in the financial statements or

F-21

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tax returns.  Under this method, deferred tax assets andliabilities are determined based on the difference between the financialstatement and tax bases of assets and liabilities using currently enacted taxrates at which the differences are expected to reverse.

Significant components ofthe Company’s deferred income taxes were as follows 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                             |       | 22,276   |       | 17,598   |       |
| Goodwill                                                   |       | (39,244  | )          | (31,500  | )          |
| Deferred change in tax capitalization versus book  expense |       | 11,063   |       | -        |       |
| U.S. net operating loss carryforwards                      |       | 44,637   |       | 40,314   |       |
| Foreign jurisdiction net operating loss  carryforwards     |       | 10,424   |       | 8,600    |       |
| Debt discount                                              |       | 27,350   |       | 23,331   |       |
| AMT credit carryforwards                                   |       | 510      |       | 453      |       |
| Total net noncurrent deferred tax asset                    |       | 78,531   |       | 60,042   |       |
| Valuation  allowance                                       |       | (123,195 | )          | (96,176  | )          |
| Net deferred income tax  liabilities                       |       | $        | (39,244    | )        | $          | (31,500 | ) |

 

The Company hasestablished a valuation allowance to offset all of the net deferred tax assets.The amortization of goodwill for income tax purposes resulted in the tax basisof goodwill 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.

F-22

----

 

At December 31,2006 and 2005, the Company had net operating loss carryforwards of $156.0million and $132.9 million.  Of theselosses, $26.1 million and $21.5 million are related to losses generated bythe Company’s operations in foreign tax jurisdictions whose use are subject tothe tax laws of such foreign jurisdictions and will be limited by the abilityof such foreign entities to generate taxable income.  Of the total operating loss carryforwards atDecember 31, 2006, $26.1 million have no expiration date and $129.9 millionexpire at various dates beginning in 2021. The Company has recorded a valuation allowance to offset the potentialtax benefits of the loss carryforwards and all other deferred tax assetsbecause their realization is uncertain based on the Company’s operatinghistory.  In the event of a change inownership, there could be a limitation on net operating loss carryforwards.

A reconciliation of theCompany’s (benefit) provision for income taxes at the federal statutory rate tothe reported income tax (benefit) provision is as follows:
| **(in thousands)**                                                  | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Income tax  benefit at statutory rates                                   |       | $        | (21,300    | )        | $          | (22,075  | )          | $ | (20,458 | ) |
| Change in  valuation allowance                                           |       | 27,019   |       | 2,087    |       | 27,580   |       |
| State taxes, net  of federal benefit                                     |       | (1,521   | )          | (1,577   | )          | (1,461   | )          |
| Nondeductible interest                                                   |       | 3,380    |       | 3,084    |       | 2,616    |       |
| 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      |       | 1,007    |       |
| Other, net                                                               |       | 466      |       | 98       |       | (3,238   | )          |
| Provision (benefit) for  income taxes                                    |       | $        | 8,334      |     | $          | (9,524   | )          | $ | 6,259 |   |

 

F-23

----

** **

**10.**                   Commitments and Contingencies

**Leases**

The Company has long-termoperating leases for office space and office equipment.  The leases generally require the Company topay maintenance, insurance, taxes and other expenses in addition to minimumannual rentals.  Building and equipmentrent expense, including an allocation of certain facility operating expensesnet of sublease rent income of $1.8 million, $2.7 million, and $0.2 million,was $7.1 million, $7.0 million and $9.1 million for the years ended December 31,2006, 2005 and 2004.  Future minimum rentcommitments under operating leases with initial terms of one year or more areas follows:
| **(in thousands of dollars)** | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|------------|------------|
| 2007                                         |       | $          | 4,726      |   |
| 2008                                         |       | 4,497      |       |
| 2009                                         |       | 3,060      |       |
| 2010                                         |       | 2,682      |       |
| 2011                                         |       | 2,119      |       |
| Thereafter                                   |       | 5,832      |       |
|                                         |       |       |       |
|                                              |            |            |            |  |

**Litigation**

The Company is adefendant in legal proceedings arising in the ordinary course of business.  Based on information presently available,management has determined that the accruals for these routine actions andclaims are adequate.  Although recordedaccruals include management’s best estimates of probable outcome, theresolution of these matters cannot be predicted with certainty.  Management believes, however, that it isunlikely that any identified matters, either individually or in the aggregate,will have a material adverse effect on the Company’s results of operations,financial position or cash flows.

F-24

----

 

**11.**                   Segments

The Company follows theprovisions of SFAS No. 131, “Disclosures about Segments of an Enterpriseand Related Information.” In 2006, the Company undertook a strategic change inthe monitoring and management of the business to better reflect management’sfocus and commitment to its three industry-focused segments: Fashion &Licensing, Life Sciences, and Powersports. This change was prompted as a result of a substantial change in thebusiness organization following the divestiture of the Portfolio Group (seeNote 4).  The Company has included itsnon reportable 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 theperformance of, and allocates resources to, its segments based on contributionmargin, which is a non-GAAP measure — defined as revenue lesscost of production; selling, editorial and circulation; and certain allocatedgeneral and administrative costs.  The accountingpolicies of the reportable segments are the same as those described in thesummary of significant accounting policies. The segments derive revenue from shows and conferences; trade,professional and consumer periodicals; marketing, direct mail and databaseproducts 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 the Company’sreportable segments are as follows for the years ended December 31:

 
| **(in thousands)**      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|----------|------------|
| 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-25

----

 

The reconciliation of total segment contribution margin to consolidatedloss from continuing operations before income taxes is as follows:
| **(in thousands)**                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Total segment  contribution margin                                           |       | $        | 125,315    |     | $          | 115,860  |       | $ | 108,750 |   |
| General and administrative expense not  allocated to segment operations |       | (70,469  | )          | (37,323  | )          | (37,195  | )          |
| Restructuring  charge                                                        |       | (2,325   | )          | (4,771   | )          | 4,015    |       |
| Depreciation and  amortization                                               |       | (32,265  | )          | (37,755  | )          | (43,089  | )          |
| Other expense  (primarily interest)                                          |       | (81,112  | )          | (99,082  | )          | (90,931  | )          |
| Loss from  continuing operations before income taxes                         |       | $        | (60,856    | )        | $          | (63,071  | )          | $ | (58,450 | ) |

The Company’s revenue from continuing operations by product type is asfollows for the three years ended December 31:
| **(in thousands)**    | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------|------------|----------|------------|----------|------------|----------|------------|
| 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** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|----------|------------|
| Revenue                 |       |     |       |     |       |     |       |
| United States           |       | $        | 312,975    |     | $          | 280,059  |       | $ | 262,618 |   |
| International           |       | 10,747   |       | 8,854    |       | 8,448    |       |
|                    |       | $        | 323,722    |     | $          | 288,913  |       | $ | 271,066 |   |

** **

F-26

----

**12.**                   Restructuring Activity and Contract Termination Costs

Relatedto the sale of the Portfolio Group (see Note 4), in May 2005, the Companyceased use of certain leased office space in New York, NY, Milford, CT, andSanta Ana, CA.  In the third quarter of 2005, the 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.

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

During2005 the Company terminated 117 employees from the Company in connection withthe sale of the Portfolio Group and the reorganization of the Company’soperating and support department management team. The Company took a charge tooperations during theyear ended December 31, 2005 for severanceand other termination costs.

TheCompany integrated many of the sales, marketing, technology and operatingfunctions and its core activities in publishing, shows and direct marketingproducts.  These restructuring activitieswere completed by the end of 2001, except for facility lease costs.  The facility lease obligation was settled inMay 2004 for less than amounts owed under the lease.  A $4.0 million favorable settlement (net offees and related expenses) of the lease obligation was recognized as areduction in operating expenses in 2004.

Restructuringcharges incurred are as follows for the years ended December 31:

 
| **(in thousands)**                         | ** ** | **2006** | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|-------------------------------------------------|------------|----------|------------|------------|------------|------------|------------|
| 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-27

----

 

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 and 2005.

**Long-Term Contract Termination**

In October 2006, theCompany and one of its vendors entered into an agreement to terminate along-term contract originally effective through December 31, 2008.  The termination agreement calls for atermination fee of $1.9 million to be paid by the Company in March 2007 andprovides for services to be performed by the vendor through April 1, 2007.  The Company took a charge to operations of$1.9 million during the fourth quarter of 2006, which is included in accountspayable in the accompanying consolidated balance sheet.

**13.**                   Related-Party Transactions

**Financial Advisory Fees andAgreements**

In May 2005, the Companypaid a consulting fee of $1.5 million to Credit Suisse Securities (USA), LLC (“CSS(USA)”), affiliate of Credit Suisse Corporation (“CS Corp.”), an affiliate ofthe DLJ Merchant Banking funds, related to the sale of the Portfolio Group (seeNote 4).

InJune 2005, theCompany repurchased $7.1 million of its fixed rate notes at par, and $4.6million of its floating rate notes at a price equal to 107.3% of principal,from CSS (USA) pursuant to Communications’ tender offer (see Note 6).

**Stockholder dividend**

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

F-28

----

**14.**                   SubsequentEvent

On March 28, 2007, the Board of Directors ofHoldings, unanimously approved, and Holdings entered into, a definitive mergeragreement (the “Merger Agreement”) among Holdings, VSS-AHC ConsolidatedHoldings Corp. (“Buyer”), VSS-AHC Acquisition Corp. (“Merger Sub”), being awholly owned subsidiary of the Buyer, and DLJ Merchant Banking III, Inc., asthe stockholders’ representative.  Pursuant to the Merger Agreement andsubject to the terms and conditions set forth therein, as of the closing of themerger, the Merger Sub will be merged with and into Holdings, with Holdingsbeing 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.  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, and subject to the post-closing workingcapital adjustment.  

Under the Merger Agreement, as soon aspracticable after signing, Holdings has agreed to cause Communications tocommence a tender offer and consent solicitation for its outstanding 10-3/4%Second Priority Senior Secured Notes due 2010 and 12% Senior Subordinated Notesdue 2011 and to cause the Company to commence a tender offer for itsoutstanding 15% Senior Secured Discount Notes due 2011.

F-29

----

** **

**2.    Financial StatementSchedules**

**ScheduleI****3⁄4 Condensed FinancialInformation of Advanstar, Inc. (Parent Company)**
| ** **                                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Condensed Balance Sheet - December 31,** | ** ** | **2006**   | ** ** | **2005**   | ** ** |
| **(in thousands)**                                                  | * *   | * *   | * *   | * *   | * *   |
| Cash and cash  equivalents                                          |       | $          | 85         |       | $          | 32 |   |
|                                                                |       |       |       |       |       |
| Total current  assets                                               |       | 85         |       | 32         |       |
|                                                                |       |       |       |       |       |
| Investment in  subsidiaries                                         |       | 107,303    |       | 187,804    |       |
| Debt issuance costs                                                 |       | 388        |       | 513        |       |
|                                                                |       |       |       |       |       |
| Total assets                                                        |       | $          | 107,776    |       | $          | 188,349 |   |
|                                                                |       |       |       |       |       |
| Total current  liabilities                                          |       | 5,383      |       | 5,534      |       |
| Long-term debt                                                      |       | 164,088    |       | 158,605    |       |
| Due to affiliate, net                                               |       | 1,666      |       | 17,623     |       |
| Stockholder’s (deficit)  equity                                |       | (63,361    | )          | 6,587      |       |
|                                                                |       |       |       |       |       |
| Total  liabilities and stockholder’s equity                    |       | $          | 107,776    |       | $          | 188,349 |   |
|                                                                |       |       |       |       |       |

 
| **Condensed Statements of Operations** | ** ** | **Year Ended** | ** ** |
|-------------------------------------------------------|------------|---------------------|------------|
| ** **                                            | ** ** | **2006**            | ** ** | **2005** | ** ** | **2004** | ** ** |
| **(in thousands)**                               | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                               |       | $                   | —     |   | $ | — |   | $ | — |   |
| Operating loss                                        |       | (85                 | )          | (762 | ) | (706 | ) |
| Interest expense, net                                 |       | (27,332             | )          | (25,002 | ) | (21,233 | ) |
| Other expense                                         |       | —              |       | — |   | — |   |
| Provision (benefit) for  income taxes                 |       | —              |       | — |   | — |   |
| Equity in losses of  subsidiaries                     |       | (41,692             | )          | 3,960 |   | (45,188 | ) |
|                                                  |       |                |       |   |   |   |   |
| Net loss                                              |       | $                   | (69,109    | ) | $ | (21,804 | ) | $ | (67,127 | ) |
|                                                  |       |                |       |   |   |   |   |

 
| **Condensed Statements of Cash Flow** | ** ** | **Year Ended** | ** ** |
|-----------------------------------------------------------|------------|---------------------|------------|
| ** **                                                | ** ** | **2006**            | ** ** | **2005** | ** ** | **2004** | ** ** |
| **(in thousands)**                                   | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash (used in)  provided by operating activities          |       | $                   | (25,771    | ) | $ | — |   | $ | 1 |   |
|                                                      |       |                |       |   |   |   |   |
| Dividends from  subsidiary                                |       | 25,824              |       | — |   | — |   |
| Cash provided by  financing activities                    |       | 25,824              |       | — |   | — |   |
|                                                      |       |                |       |   |   |   |   |
| Cash at  beginning of year                                |       | 32                  |       | 32 |   | 31 |   |
| Cash at end of  year                                      |       | $                   | 85         |   | $ | 32 |   | $ | 32 |   |
|                                                      |       |                |       |   |   |   |   |

 
| Notes to Condensed Financial Statements |   |
|-----------------------------------------|--------|
|                                    |   |   |
| 1                                       |   | Basis of presentation: |
|                                    |   | In the parent-Company-only financial statements, the  Company’s investment in subsidiaries is stated at |
|                                    |   | cost plus equity in undistributed earnings of  subsidiaries, plus additional investment in subsidiaries. |
|                                    |   | These Parent-Company-only financial statements  should be read in conjunction with the Company’s consolidated |
|                                    |   | financial statements. |
|                                    |   |   |
| 2                                       |   | Long-term debt: |
|                                    |   | Long-term debt consists of the Discount Notes (see  Note 6 to the consolidated financial statements - Debt). |
|                                         |        |  |  |

 

II-1

----

 

**ScheduleII****3⁄4 Valuation and QualifyingAccounts**

**Advanstar, Inc.**

**Valuationand Qualifying Accounts**
| ** **                       | ** ** | **Balance at**   | ** ** | **Charged to** | ** ** | **Charged to** | ** ** | ** **              | ** ** | **Balance at** | ** ** |
|----------------------------------|------------|-----------------------|------------|---------------------|------------|---------------------|------------|-------------------------|------------|---------------------|------------|
| ** **                       | ** ** | **Beginning of** | ** ** | **Costs and**  | ** ** | **Other**           | ** ** | ** **              | ** ** | **End of**     | ** ** |
| ** **                       | ** ** | **Period**            | ** ** | **Expenses**        | ** ** | **Accounts**        | ** ** | **Deductions (1)** | ** ** | **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 theyare not applicable or the information is included in the financial statementsor related notes.

 

II-2

----

 

**3****.  Exhibits**
| Exhibit No. | ** ** | **Document**                                                                                                                                                                                                                                                                                                                                                      |
|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                                                                                                                              |
| 2.1         |       | Agreement and Plan of Merger dated August 14, 2000  among Advanstar, Inc., Advanstar Holdings Corp. (formerly known as Jetman  Acquisition Corp.), Junior Jetman Corp. and AHI Advanstar LLC (filed as  Exhibit 2.1 to Form 8-K of Advanstar, Inc. filed with the Securities and  Exchange Commission on October 26, 2000, and incorporated by reference  herein) |
| 2.2         |       | 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 the  Company’s current report on Form 8-K filed on October 16, 2003 and  incorporated by reference herein)                                               |
| 2.2.1       |       | 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 the Company’s current report on Form 8-K  filed on October 16, 2003 and incorporated by reference herein)  |
| 2.3         |       | 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 Communications Inc.’s Current  Report on Form 8-K filed on April 6, 2005 and incorporated by reference  herein)                                                             |
| 2.4         |       | 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, 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 Certificate of  Incorporation of Advanstar, Inc. (Previously filed as an exhibit to the  Company’s Quarterly Report on Form 10-Q for June 30, 1999 and  incorporated by reference herein)                                                                                                                               |
| 3.2         |       | By-Laws of Advanstar, Inc. (Previously filed  as an exhibit to the Company’s Registration Statement on Form S-4 (333-57201)  and incorporated by reference herein)                                                                                                                                                                                           |
| 3.2.1       |       | Amended and Restated By-Laws of Advanstar,  Inc. (Previously filed as an exhibit to the Company’s Registration Statement  on Form S-4 (333-57201) 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 Advanstar Communications Inc.’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 Advanstar Communications Inc.’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  Advanstar Communications Inc.’s Registration Statement (333-109648) and  incorporated by reference herein)                           |
| 4.4         |       | Indenture dated as of February 21, 2001 between  Advanstar, Inc. and the Trustee (Previously filed).                                                                                                                                                                                                                                                              |
| 4.4.1       |       | Registration Rights Agreement dated as of February  21, 2001 between Advanstar, Inc. and Credit Suisse First Boston Corporation,  as Initial Purchaser (Previously filed)                                                                                                                                                                                         |
| 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 the Company’s  Annual Report on Form 10-K for 2004 and incorporated by reference herein)+                                                                                                                                                     |

 

II-3

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|         |   |                                                                                                                                                                                                                                                                                         |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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)                                                                    |
| 10.2.1  |   | First Amendment and Waiver to Shareholders’  Agreement dated as of February 21, 2001 (Previously filed as an Exhibit  to Advanstar Communications’ 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  Advanstar Communications’ 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 Communications’  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 Communications’ 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 Advanstar Communications Inc. 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 (Previously  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 Advanstar Communications Inc.’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 Advanstar Communications Inc.’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  Advanstar Communications Inc.’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 Advanstar Communications Inc.’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 Advanstar Communications Inc.’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 Advanstar Communications Inc. 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 Advanstar Communications Inc.’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 (filed as an exhibit to the Advanstar Communications Inc.  Annual Report on Form 10-K for 2006 and incorporated by reference herein) +                                                             |
| 10.12   |   | Agreement, dated February 19, 1999, by and among  Advanstar, Inc., Advanstar Communications Inc. and Eric I. Lisman (filed as  an exhibit to the Advanstar Communications Inc. Annual Report                                                                                                 |

 

II-4

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|       |   | on Form 10-K for 2002 and incorporated by reference  herein) +                                                                                                                                                                               |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.13 |   | Agreement dated September 3, 1996 between Advanstar  Communications Inc. and Danny Phillips + (filed as an exhibit to the  Advanstar Communications Inc.’s Annual Report on Form 10-K for 2006 and  incorporated by reference herein) + |
| 12.1  |   | Computation of Ratio of Earnings to Fixed Charges *                                                                                                                                                                                          |
| 21.1  |   | Subsidiaries of Advanstar, Inc. *                                                                                                                                                                                                            |
| 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

+              Denotesmanagement contract or compensatory plan

 

II-5

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**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) ofthe Exchange Act of 1934, the registrant has duly caused this Report to besigned on its behalf by the undersigned, thereunto duly authorized.
|        | Advanstar, 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 the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theRegistrant, in the capacities indicated, on the 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   |                                       |               |          |   |
|                     |                |                                            |                    |               |  |  |  |

 

 

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