UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                  For the fiscal year ended: November 30, 1998
                                       or
[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                        For the transition period from to

                        Commission file Number: 000-21623

                             OBIE MEDIA CORPORATION
                 (Name of small business issuer in its charter)

                                                                 93-0966515
                Oregon                                       (I.R.S. Employer
       (State of incorporation)                              Identification No.)

                   4211 West 11th Avenue, Eugene, Oregon 97402
                    (Address of principal executive offices)

                    Issuer's telephone number: (541) 686-8400

       Securities registered under Section 12(b) of the Exchange Act: None

       Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, without par value
                                (Title of class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.
         Yes  X    No     

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B contained in this Form 10-KSB, and no disclosure will
be contained,  to the best of  registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [   ]

         State issuer's revenues for its most recent fiscal year:  $22,717,745

         State  the  aggregate   market  value  of  the  voting  stock  held  by
nonaffiliates computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within 60
days  prior to the date of  filing:  $27,639,876  aggregate  market  value as of
December 31, 1998, based on the price at which the stock was sold.

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common equity, as of the latest practicable date: 4,321,321 shares of
Common Stock, without par value, on February 23, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE
None

   Transitional Small Business Disclosure Format  (Check One):  Yes   ; No  X
                                                                          ----


<PAGE>
                                TABLE OF CONTENTS




Part I

Item 1.    Description of Business........................................  2
Item 2.    Description of Properties......................................  9
Item 3.    Legal Proceedings.............................................. 10
Item 4.    Submission of Matters to a Vote of Shareholders................ 10


Part II

Item 5.    Market for Common Stock and Related Shareholder Matters........ 11
Item 6.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations ..................................... 12
Item 7.    Financial Statements........................................... 17
Item 8.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosures...................................... 17


Part III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act............... 18
Item 10.   Executive Compensation.......................................... 20
Item 11.   Security Ownership of Certain Beneficial Owners and Management.. 23
Item 12.   Certain Relationships and Related Transactions.................. 24
Item 13.   Exhibits and Reports of Form 8-K................................ 25
Signatures ................................................................ 26
Financial Statements....................................................... F-1



<PAGE>
FORM 10-KSB

This Annual Report includes  certain  forward-looking  statements that involve a
number of risks and  uncertainties.  The Company's  actual  results could differ
materially  from the  forward-looking  statements.  Factors  that could cause or
contribute to such differences  include: a decline in the demand for advertising
in the areas  where the  Company  conducts  its  business;  a  deterioration  of
business conditions  generally in such areas; slower that expected acceptance of
the  Company's  innovative  display  products;  competitive  factors,  including
increased  competition  and price  pressures;  changes  in  regulatory  or other
external  factors;  failure to  successfully  conclude  negotiations  on pending
transactions or to successfully  assimilate  expanded  operations,  inability to
generate advertising revenues to meet contractual  guarantees,  and cancellation
or  interruption  of  contracts  with  governmental  agencies,  as well as those
factors  listed from time to time in the Company's SEC reports,  including,  but
not limited to, the factors  discussed in Exhibit 99.1 filed in connection  with
this Annual  Report.  Readers are cautioned  not to place undue  reliance on the
Company's  forward-looking  statements,  which speak only as of the date of this
Annual Report. The Company does not update its forward-looking statements.

Unless otherwise indicated,  the information contained in this Annual Report has
been restated to give  retroactive  effect to 11-for-10 stock splits declared in
October  1997  and  November  1998.  Unless  the  context  otherwise   requires,
references in this Annual Report to "Obie Media," the  "Company,"  "we," "us" or
"our" are to Obie Media Corporation and its  subsidiaries.  We have derived some
information in this Annual Report from government and industry sources. Although
we believe this information is reliable, we have not independently verified it.



























                                       1

<PAGE>
PART I

ITEM 1.    DESCRIPTION OF BUSINESS

Company Overview

Obie Media  Corporation  is an  out-of-home  advertising  company  which markets
advertising space primarily on transit vehicles and outdoor advertising displays
(billboards  and  wallscapes).  As of  November  30,  1998,  the  Company had 33
exclusive  agreements with transit  districts in the United States and Canada to
operate  transit  advertising  displays.  The  markets  in which  these  transit
districts  are located  include  seven of the 30 largest  U.S.  markets--Dallas;
Portland,   Oregon;  Cleveland;   Sacramento;   Hartford;  Ft.  Lauderdale;  and
Cincinnati--and the third largest Canadian market, Vancouver,  British Columbia.
Since our  initial  public  offering  ("IPO") in  November  1996,  the number of
vehicles on which we have the right to operate transit advertising  displays has
increased from approximately  1,200 to over 7,000. We also operate and generally
own  approximately   760  advertising   displays  on  billboards  and  walls  in
Washington,  Oregon,  California and Idaho.  The Company was formed in 1987 as a
subsidiary of Obie Industries  Incorporated ("Obie Industries"),  a family-owned
outdoor advertising  business.  To facilitate its IPO, the Company was separated
from Obie Industries in November 1996.

In August 1998, our wholly-owned Canadian subsidiary,  Obie Media Limited, began
selling  transit  advertising  displays  for BC Transit on  approximately  1,500
transit vehicles in British  Columbia.  BC Transit is the transit  authority for
substantially  all of the  transit  districts  in  British  Columbia,  including
Vancouver (Canada's third largest market) and Victoria.

In September  1998, we acquired P & C Media ("P & C"), which has operated in the
out-of-home advertising industry for over 50 years. P & C has 19 agreements with
transit  districts,  including  districts  located  in  Hartford  and  Stamford,
Connecticut;  Fort  Lauderdale  and West Palm  Beach,  Florida;  Cincinnati  and
Cleveland,  Ohio; Richmond,  Virginia; and Milwaukee,  Wisconsin. As of November
30, 1998, P & C's transit agreements covered approximately 3,200 vehicles.

Obie Media began serving as the exclusive transit  advertising  provider for the
Tri-County Metropolitan Transit District of Oregon ("Tri-Met") in 1994, pursuant
to a five-year agreement. In 1996, Tri-Met extended its contract with Obie Media
through  June 30,  2001.  The  Federal  Transit  Administration  ("FTA"),  which
provides  substantial monies to transit  districts,  has taken the position that
transit  advertising  contracts  may not exceed  five  years in  length.  At the
request of the FTA,  Tri-Met and Obie Media have agreed that our agreement  with
Tri-Met will terminate on June 30, 1999.

In December  1998,  Tri-Met and Obie Media  negotiated a settlement  for damages
resulting  from the early  termination  of the contract.  Under the terms of the
settlement,  Obie Media will receive cash payments and other financial benefits,
and will  transfer  to  Tri-Met,  transit  benches  on which the  Company  sells
advertising.  In addition,  the Company will retain a significant residual value
of advertising  contracts in existence at June 30, 1999, for up to one year. The
Company expects the settlement to result in a pre-tax gain of more than $800,000
during fiscal 1999. As a result of the  settlement,  the Company does not expect
that  fiscal 1999  income and cash flows will be  significantly  affected in the
event we are unable to renew our  agreement  with  Tri-Met for the period  after
June 30, 1999. In December 1998,  Obie Media submitted its response to Tri-Met's
request for proposal for a new  multi-year  contract  beginning July 1, 1999. In
February  1999,  Tri-Met  advised us that Obie Media was in second  place in the
proposal process. Tri-Met is expected to make a final decision in March 1999.

Industry Overview

The out-of-home  advertising industry includes displays on buses, trains, taxis,
subways,  transit  benches  and  shelters,   billboards,   wallscapes  on  urban
buildings,  and displays in shopping centers, malls, airports,  stadiums,  movie
theaters and supermarkets. The industry has grown significantly in recent years.
According to estimates of the Outdoor  Advertising  Association  of America (the
"OAAA"),  between 1993 and 1997,  annual  revenues  generated by the out-of-home
advertising  industry  increased  35.6%  to $4.0  billion  from  $2.95  billion,
representing a compound annual growth rate of 8.0%.

                                       2
<PAGE>
The out-of-home  medium offers several  advantages to  advertisers.  As compared
with television,  newspapers,  magazines and direct mail marketing,  out-of-home
advertising   offers   repetitive   consumer   impacts  at  a   relatively   low
cost-per-thousand-impressions,  a commonly used advertising measurement. Because
of its cost-effective nature, out-of-home advertising is a good vehicle to build
mass-market  support.  Out-of-home  advertising  can  also be used to  target  a
defined  audience  in a specific  location.  This  allows  local  businesses  to
concentrate on a particular geographic area or demographic group.  Additionally,
increases in  automobile  travel times due to highway  congestion  and continued
migration  of  businesses  and  residences  from cities to outlying  suburbs has
increased consumer exposure to out-of-home advertising.

As of 1997,  the OAAA estimated that there were  approximately  396,000  outdoor
advertising displays in the United States, operated by more than 500 companies.

Transit  advertising   represents  a  significant  portion  of  the  out-of-home
advertising  industry.  The OAAA  estimated  that,  out of 60,000  transit buses
operating in 1997 in the United States,  37,600 carried  advertising.  Transport
Canada estimated that approximately 13,000 urban transit vehicles were in use in
Canada in 1996.  Transit  districts range in size from very large districts with
thousands of vehicles to small districts with 10 or fewer vehicles.  Advertising
displays represent a significant source of revenue to transit districts.

Agreements  with transit  districts are awarded  through a competitive  proposal
process.  Each  transit  district  evaluates  proposals  based  on a  number  of
criteria,  but  primarily  on the basis of the  minimum  amount  that the bidder
guarantees to pay to the district.  A transit agreement  typically  requires the
transit  advertising  operator  to  guarantee  to pay the transit  district  the
greater of a minimum  stated  amount or a percentage  (usually  over 50%) of the
advertising revenues generated by the operator's use of the district's vehicles.

The out-of-home  advertising  industry  includes  several large  advertising and
media companies with operations in multiple markets. It also includes many small
and local companies  operating a limited number of displays in a single or a few
local  markets.  There  has been,  and we  expect  there  will  continue  to be,
consolidation in the out-of-home advertising industry.

Obie Media Strategy

Obie Media's overall business  strategy is to expand upon our national  presence
to become a leader in the out-of-home  advertising industry.  Our strategy is to
increase our  revenues and improve our  profitability  by  delivering  to local,
regional and national  advertisers  efficient access to one or multiple markets.
The following are components of our strategy:

o    Growth   Strategy.   Obie  Media's  growth  strategy  is  to  increase  our
     penetration  and revenue within our existing  markets,  as well as to enter
     new  markets.  We  expect  to enter  new  markets  primarily  by  obtaining
     agreements with additional  transit districts  throughout the United States
     and Canada.  Once we enter a market, we seek to gain a greater share of the
     overall advertising  expenditures in the market by providing a wide variety
     of  products  and  services,   including   innovative  transit  advertising
     products, to a broad range of local, regional and national advertisers.  We
     believe that, by obtaining  additional transit advertising  agreements,  we
     will  increase our  operating  efficiencies  and  geographic  diversity and
     create  additional bases from which to achieve further market  penetration.
     Additionally,  we continuously evaluate  opportunities to enter new markets
     and  increase  our  presence in  existing  markets  through  the  selective
     acquisition of out-of-home advertising companies or assets.

o    Develop  Regional  Operating  Centers  ("Hubs").  We seek to  increase  our
     revenues,  profitability and operating efficiencies through our development
     and use of regional operating centers, or hubs. In developing hubs, we seek
     to  establish  an initial  base of  operations  in a  geographic  region by
     obtaining  exclusive  agreements  with  one  or  more  significant  transit
     districts.  We then seek to expand  our  market  presence  by  bidding  for
     contracts  with other transit  districts in the region and by expanding the
     range of non-transit  products and services we offer there.  We believe our
     hub strategy  results in revenue  growth and cost savings by enabling us to
     efficiently   provide   sales  and   administrative   services  to  several
     intra-regional markets from one strategically located operating base.

o    Maintain  a Large,  Proactive  Sales  Force.  We  believe  that our  large,
     proactive  sales force that sells directly to local  advertisers  and, more
     traditionally,  to  advertising  agencies,  enables us to increase

                                        3

<PAGE>
     display occupancy levels and maximize our advertising rates. We believe our
     ratio of sales  personnel to display  inventory is higher than the industry
     average.  We devote significant  resources to recruit and train individuals
     who  will  excel  in our  culture.  The  sales  force  is  motivated  by an
     incentive-based   compensation  program  and  supported  by  a  network  of
     experienced  local  managers  who  operate  under a  centrally  coordinated
     marketing  plan. We believe the size,  quality and  motivation of our sales
     force provide us a competitive advantage.

o    Increase  Revenues From  Existing  Display  Space.  We seek to increase the
     revenue potential of our available transit and outdoor  advertising display
     inventory  by offering  innovative  transit  products  and  increasing  the
     percentage  of time our  display  space  is  occupied.  Innovative  transit
     products we offer include vinyl  displays that are  physically  larger than
     traditional  transit  advertisements.  These vinyl displays offer customers
     greater impact while providing us more revenue from a given transit display
     space. We seek to sell  advertising on our transit and outdoor  displays by
     means of extended  contracts,  which enable us to fill  display  space that
     would normally be vacant between traditional advertising campaigns.

o    Attract New Advertisers  Through Direct Local Sales. By selling directly to
     local businesses not represented by advertising agencies, we seek to obtain
     a larger share of the overall  advertising  expenditures in our markets and
     broaden  our  customer  base  for  out-of-home  advertising.   We  dedicate
     substantial resources to directly target local businesses whose advertising
     expenditures  may  not  typically  include   out-of-home   advertising  and
     introduce them to the benefits of the medium. We offer comprehensive sales,
     marketing  and creative  services  that make it easier for these  potential
     customers to purchase out-of-home advertising.

Products and Markets

Obie Media offers advertisers a wide range of out-of-home  advertising products,
including transit advertising and outdoor advertising displays.  Our product mix
provides advertisers with significant  flexibility in their advertising programs
and  allows us to  cross-sell  multiple  products  and  leverage  our design and
production capabilities.  We have also benefited from improvements in production
technology, including the use of computerized design, vinyl advertising copy and
improved  lighting  techniques.  These  improvements  have  facilitated  a  more
dynamic, colorful and creative use of the out-of-home medium.

Transit  Advertising.  As of November  30,  1998,  the Company had 33  exclusive
agreements  with transit  districts  in the United  States and Canada to operate
transit  advertising  displays on over 7,000  transit  vehicles.  The markets in
which these transit  districts are located  include seven of the 30 largest U.S.
markets--Dallas;   Portland,  Oregon;  Cleveland;   Sacramento;   Hartford;  Ft.
Lauderdale;  and Cincinnati--and the third-largest  Canadian market,  Vancouver,
British  Columbia.  In January and February,  1999, we began  operating  transit
advertising  displays  for transit  districts  in Madison,  Wisconsin;  Spokane,
Washington;  Yakima,  Washington;  and London,  Ontario (representing a total of
approximately 495 vehicles).

Pursuant  to our transit  advertising  agreements,  Obie Media is the  exclusive
seller  of  exterior  advertising  on  the  transit  vehicles  operated  by  the
contracting transit districts.  Typically,  these agreements also provide us the
right to sell advertising on the interior of the vehicles.

Agreements  with transit  districts are awarded  through a competitive  proposal
process.  Each  transit  district  evaluates  proposals  based  on a  number  of
criteria,  but  primarily  on the basis of the  minimum  amount  that the bidder
guarantees to pay to the district.  A transit agreement  typically  requires the
transit  advertising  operator  to  guarantee  to pay the transit  district  the
greater of a minimum  stated  amount or a percentage  (usually  over 50%) of the
advertising revenues generated by the operator's use of the district's vehicles.
Transit advertising  operators often must post performance bonds to secure their
guarantees  under their  transit  agreements.  Obie Media's  transit  agreements
typically have terms of three to five years,  with renewals or extensions either
unilaterally  at the  discretion  of the  transit  district  or upon the  mutual
agreement of the district and Obie Media.

We also own and  sell  advertising  on over 700  transit  benches  in  Portland,
Oregon, approximately 100 transit shelters in Cincinnati and on approximately 22
walkway  dioramas (a display similar to a "cut-out"  billboard) in the Cleveland
airport.  We believe these products  complement our other product  offerings and
intend to secure  additional  shelters,  dioramas  and  transit  benches  in our
markets.

                                       4
<PAGE>
Transit  districts  range in size from very large  districts  with  thousands of
vehicles to small districts with 10 or fewer vehicles.  Through our hub strategy
and proactive  marketing to local  advertisers,  we are able to profitably offer
our services to both large and small transit districts. The following table sets
forth certain  information about Obie Media's transit district  agreements as of
November 30, 1998:

                                               No. of           Served
Transit District Agreements                   Vehicles           Since

British Columbia
    Vancouver                                    1136            1998 (1)
    Victoria and 27 smaller districts             380            1998 (1)
Ohio
    Cleveland                                     833            1997 (4)
    Cincinnati                                    385            1981 (4)
Texas
    Dallas                                        809            1997
    Austin                                        303            1998
Oregon
    Portland                                      726            1994 (2)
    Eugene and Springfield                        102            1980 (3)
    Salem                                          54            1994
Wisconsin
    Milwaukee                                     546            1992 (4)
    Racine                                         50            1997 (4)
    Kenosha                                        42            1996 (4)
Connecticut
    Hartford and Stamford                         380            1996 (4)
    Bridgeport                                     50            1981 (4)
    New Britain                                    30            1981 (4)
    Waterbury                                      25            1981 (4)
California
    Sacramento                                    246            1994
    Santa Cruz                                    112            1997
    Stockton                                      111            1989
    Paratransit, Inc. (Sacramento)                 86            1997
    Monterey                                       72            1995
    Yolo County                                    29            1997
Florida
    Ft. Lauderdale                                202            1998 (4)
    West Palm Beach                               139            1998 (4)
    Gainesville                                    50            1981 (4)
    Daytona Beach                                  45            1981 (4)
 Virginia
    Richmond                                      170            1984 (4)
    Norfolk                                       160            1984 (4)
    Roanoke                                        38            1984 (4)
    Lynchburg                                      25            1984 (4)
    Danville                                       14            1998 (4)
    Petersburg                                     12            1988 (4)
Washington
    Bremerton                                     115            1996

(1)  Operations  under these  agreements  began in August  1998;  the  Vancouver
agreement was signed in January 1999, and the Victoria  agreement is expected to
be signed in March 1999.

(2) This agreement,  by its terms, was scheduled to expire in 2001.  However, at
the request of the Federal Transit  Administration,  the district and Obie Media
have agreed that the agreement will terminate on June 30, 1999. The district has
agreed to compensate us for the early termination of the agreement. See "Company
Overview," above.

                                       5
<PAGE>
(3) This agreement was serviced by a division of Obie  Industries  (Obie Media's
parent corporation until 1996) prior to 1987, when Obie Media was formed.

(4) These dates reflect  periods of service under  agreements  with P & C, which
Obie Media acquired in September 1998.

The above transit district agreements are scheduled to expire as follows:

                                                    Approximate
                                                     Number of
                                                      Vehicles
                                  Number of         Covered Under
                                 Agreements          Agreements
              Calendar          Scheduled to        Scheduled to
               Year (1)            Expire            Expire (2)

               1999                   5                 1,025
               2000                  13                 3,245
               2001                   3                 1,025
               2002                   3                 1,300
               2003                   4                   400
               2005                   1                   380

(1) In addition,  four agreements covering a total of approximately 100 vehicles
are awarded on a year-to-year basis.

(2) Certain of our transit district  agreements provide that they may be renewed
for additional  one-year to five-year  periods  beyond the specified  expiration
date, either unilaterally by the transit district or by mutual agreement of Obie
Media and the transit district.  Some of our transit district agreements provide
that the transit  district may  terminate  the  agreement  before the end of the
specified  term at the  convenience of the transit  district,  or if the transit
district  determines  that such  termination  is in its best  interest or in the
public  interest.  We are not aware of any transit  district  agreement that has
been canceled under any such clause.

Transit Display Products.  We offer  traditional and innovative  non-traditional
transit advertising products.  Traditionally,  transit  advertisements have been
inserted  into  metal  frames  mounted on the  exterior  or  interior  of a bus.
Industry  standard sizes include "Kings,"  "Queens,"  "Tails" and "Heads." While
still offering traditional  advertising  products,  we also offer vinyl displays
that cover  almost the entire side and/or  rear of a bus.  These vinyl  products
create  significant  additional  revenue  potential  per bus  when  compared  to
traditional  products.  We believe  these  products  also give us a  competitive
advantage in bidding for transit advertising agreements in districts that use or
are willing to use them.

Outdoor  Advertising  Displays.  Obie Media owns and operates  approximately 760
billboards in Washington, Oregon, California and Idaho. Substantially all of our
billboards  are  bulletins.  We have no 30-sheet or 8-sheet  poster  units.  Our
bulletins  are  generally  located on major  thoroughfares  and provide  greater
impact and higher value than traditional posters.

We lease the property underlying our billboards,  generally under 10-year leases
that give us renewal rights for two  additional  five-year  periods.  The lessor
typically  reserves the right to cancel the lease if  construction  of permanent
improvements on the subject property conflicts with the billboard.

Most of our billboards  were designed and installed  within the last nine years,
and almost all are built of steel and engineered to withstand  high winds.  More
than  two-thirds of our  billboards  are  illuminated.  The displays are insured
against damage caused to them by storms, vandalism and other causes.

Obie Media also leases, from others, building walls in urban areas for wallscape
displays.  Wallscapes  are painted on vinyl surfaces or directly on the sides of
buildings. We currently lease 7 building walls for wallscape displays in Seattle
and own a 50% interest in a corporation  that leases,  from others,  18 building
walls for wallscape  displays in Portland.  Pending  regulatory  approval,  Obie
Media is also developing 19 wallscapes in Spokane.

                                       6
<PAGE>
The  following  table gives the number of our outdoor  displays,  including  the
wallscapes being developed in Spokane, at November 30, 1998:

           Market                                Displays

         Washington                                 458
         Oregon                                     170
         California                                  75
         Idaho                                       61
                                                   -----
                                                    764

Sales and Service

In each of our principal  markets,  Obie Media maintains a large,  high quality,
proactive  sales  force.  We  believe  our ratio of sales  personnel  to display
inventory is higher than the industry  average.  At November 30, 1998, we had 83
sales and marketing employees.  Our superior sales and service efforts are a key
element in maximizing our inventory occupancy levels.

We view our  proactive  sales  efforts as an important  part of our culture.  In
hiring our sales  force,  we carefully  screen  applicants.  We  typically  hire
college graduates who have demonstrated  their suitability and aptitude to excel
in our unique sales environment.  New sales employees undergo extensive training
and are supervised by regional sales managers with substantial advertising sales
experience.  Obie Media and each of our sales representatives  jointly establish
individual  sales  targets.   We  have  monthly  sales  meetings  with  all  our
salespeople to acknowledge  and reward  individuals who are meeting or exceeding
their targets. A sales  representative's  compensation depends  significantly on
meeting or exceeding individual targets.  Sales representatives also participate
in our broad-based stock option plan.

We are  significantly  expanding  our  national  presence  by growing in diverse
geographic  areas. To complement our growth, we have added to our national sales
team working out of certain of our local offices by establishing  national sales
and marketing  offices in Los Angeles,  Chicago and New York City.  Our national
sales team services national advertising  accounts,  calls on customers in major
cities where we do not have sales  offices and supports our sales force in local
markets.

We work directly with companies and  advertising  agencies in  coordinating  the
marketing,  production  and  installation  of  advertising  displays.  Our sales
personnel also serve as customer service  representatives,  maintaining frequent
and regular contact with our advertising  customers to resolve customer concerns
in the field. We believe that our high quality customer  service  contributes to
customer loyalty and improves renewal rates.

Out-of-home advertisements are traditionally sold for a few months at a time. To
increase occupancy, Obie Media employs several techniques to encourage customers
to commit to longer contracts,  including  offering  incentives through our rate
structure and pricing  policies.  We sell certain  innovative  transit  products
primarily by means of year-long  contracts.  We also sell space on almost all of
our outdoor advertising  displays by means of extended contracts,  and offer our
outdoor display customers the opportunity to rotate their  advertisements  among
several display faces within the same market.

Design and Production

We  maintain  our own design and  production  facilities.  We offer  advertisers
customized design and production services as well as display space.  Charges for
design and production are typically added to the cost of the space and billed to
customers over the life of the advertising  contract. We believe that our design
and  production  capabilities  give us a  significant  competitive  advantage in
direct  sales  to  advertisers  and  brings  new  customers  to the  out-of-home
advertising medium.

Obie Media's design and  production  services are used primarily by direct sales
customers  that  are  not  represented  by  advertising  agencies.   The  design
department works with these advertisers and our sales  representatives to create
advertising copy, design and layout.


                                       7
<PAGE>
We view transit  advertising  design and production as a distinct  activity.  We
attempt to achieve independent  profitability in this operation.  Customers that
are represented by advertising  agencies generally arrange for the production of
their ads, with Obie Media providing  installation services. We increasingly act
as a broker with respect to this production.

Customers

Obie Media  maintains a broad base of local,  regional and national  advertising
customers.  Most of our regional  and  national  customers  are  represented  by
advertising  agencies.  Customers  represented by advertising agencies accounted
for  approximately  66% of our pro forma gross revenues for fiscal 1998,  giving
effect to the  acquisition  of P & C as if it had  occurred on December 1, 1997.
Consistent with standard industry  practice,  advertising  agencies working with
Obie Media  typically  retain 15% of the gross  advertising  revenues from their
accounts.  Advertising agencies generally create the artistic design and written
content  of  their  customers'  advertising.   They  plan  and  implement  their
customers' overall advertising campaign,  including the selection of advertising
media.  Obie Media's sales  personnel,  including our national  sales team,  are
trained to work closely with advertising  agencies to service the needs of these
customers.

A key component of our sales and marketing  strategy is the proactive  marketing
of our services to local  advertisers.  Local  advertisers  tend to have smaller
advertising  budgets and to require  greater  assistance from our production and
creative personnel to design and produce advertising copy. With respect to local
sales,  we  often  expend  significant  sales  efforts  on  educating  potential
out-of-home  advertising  customers  about the  benefits  of the  medium  and on
developing advertising strategies. While price and availability of display space
are important  factors in local sales,  service and customer  relationships  are
also critical.  We believe that our strength in sales,  design and service gives
us an  advantage  in  local  sales,  and that our  direct  sales  focus on local
companies  significantly  contributes to increased  occupancy and renewal rates.
Further,  we  believe  this focus is an  important  competitive  advantage  that
enables us to profitably serve small transit districts.

Competition

Obie Media's markets are highly competitive.  In the transit advertising market,
we compete with other  out-of-home  advertising  companies that submit proposals
for exclusive  agreements  with transit  districts by means of a formal proposal
process.  In the  outdoor  advertising  display  market,  we compete  with other
out-of-home  advertising companies for customers.  We also compete for customers
with other advertising media,  including broadcast and cable television,  radio,
print media,  direct mail marketing and displays in shopping  centers and malls,
airports,  stadiums,  movie theaters and supermarkets  and on taxis,  trains and
subways.
















                                       8
<PAGE>
In recent years, there has been consolidation  among our competitors,  including
consolidation  between out-of-home  advertising companies and broadcast or other
media. Several of our competitors,  including  diversified media companies,  are
substantially larger,  better capitalized,  more widely known and have access to
substantially greater resources than we do. These traits may provide competitive
advantages, particularly in large advertising markets.

Transit.  The  transit  advertising  market has  historically  been  fragmented,
consisting of a few national  transit  advertising  companies with operations in
multiple  markets and  numerous  small  companies  operating  under one or a few
agreements.   In  large  advertising  markets,   Obie  Media  encounters  direct
competition for transit agreements from major transit advertising companies such
as TDI Worldwide,  Inc., one of the largest transit advertising companies in the
United  States and a dominant  competitor  in such  markets.  Competition  among
transit  advertising  companies is primarily  based on obtaining  and  retaining
agreements with transit districts. Agreements with transit districts are awarded
primarily  on the basis of the  minimum  amount  the  bidder  guarantees  to the
district.  Other  factors  which  transit  districts  may  consider  in awarding
agreements  are the financial  resources of the bidder  available to support its
minimum revenue guarantee, the bidder's business reputation and the soundness of
the bidder's  marketing  plan.  The  agreements  generally give the operator the
exclusive  right to provide  transit  advertising  services  within the  transit
district.  The number and nature of competitors  for each agreement  depend upon
the desirability of the market, including the number of vehicles operated by the
transit district, and the size and rank of the market.

Outdoor  Advertising  Displays.  The outdoor  advertising display market is also
fragmented.  Several  large outdoor  advertising  companies  have  operations in
multiple markets. Many more small companies operate a limited number of displays
in a single or a few local markets.  Although some consolidation has occurred in
this  segment of the  out-of-home  industry  over the past few  years,  the OAAA
estimated that, as of 1997, there were approximately 396,000 outdoor displays in
the United States operated by more than 500 companies.  The primary  competitive
factors  in the  outdoor  advertising  display  market  are  the  location  of a
company's displays and the price charged for their use.

Government Regulation

The government  extensively  regulates the outdoor  advertising  industry at the
federal,  state and local levels. These laws and regulations limit the growth of
outdoor  advertising  companies and operate as a substantial barrier to entry in
the industry and, in limited  circumstances,  may restrict  advertising content.
Construction  of new outdoor  structures  has been  substantially  restricted to
commercial and industrial  areas.  Many  jurisdictions  also have restricted the
location,  relocation,  height and size of outdoor advertising structures.  Some
jurisdictions   also  restrict  the  ability  to  enlarge  or  upgrade  existing
structures,  such as converting  from wood to steel or from  non-illuminated  to
illuminated  displays,  and restrict the  reconstruction  of structures that are
substantially   destroyed  as  a  result  of  storms  or  other   causes.   Some
jurisdictions  have enacted local laws and ordinances  that prohibit  wallscapes
and other outdoor advertising on urban buildings.

We believe our displays  conform to current laws and  regulations.  When leasing
property for the installation of new outdoor advertising  displays, we carefully
review applicable laws, including building, sign and zoning ordinances.  Because
billboards are typically  located adjacent to roads and highways,  they are also
subject  to  removal  through  condemnation  or other  actions  by  governmental
entities  in the  event  of road or  highway  improvement  or  expansion.  While
compensation for such actions is generally  available,  under existing state and
local regulations, we may not be permitted to relocate any condemned displays.

In limited  circumstances,  governmental  laws and regulations may also restrict
the content of outdoor  advertising.  For  example,  some states have banned all
outdoor  advertising of tobacco  products.  In November 1998, 46 states signed a
settlement  agreement with the four largest  American tobacco  companies.  Among
other  things,  the  agreement  bans  transit  and  outdoor  advertising  of the
companies'  tobacco  products  in the 46  states.  The  U.S  Congress  has  also
considered legislation that would severely restrict or ban such advertising.

The outdoor  advertising  industry is heavily  regulated  and existing or future
laws or regulations  could adversely affect us. To date, our operations have not
been materially adversely affected by such laws and regulations.


                                       9
<PAGE>
Employees

At November 30, 1998, we had 165 full-time and 5 part-time employees, of whom 83
were primarily engaged in sales and marketing, 19 were engaged in art design and
production,  35 were engaged in  installation,  construction  or  maintenance of
transit or outdoor  advertising  displays,  and 33 were  employed in  financial,
administrative  or  similar  capacities.  None of our  employees  is  covered by
collective bargaining  agreements,  except for 4 installers in Portland,  Oregon
and 13 installers in British Columbia.


ITEM 2.    DESCRIPTION OF PROPERTIES

Our headquarters are located in a 20,000 square foot facility in Eugene, Oregon.
The  headquarters  includes  space for our  centralized  design  and  production
departments,  as  well  as our  accounting,  credit,  marketing  and  management
personnel.  The headquarters is leased at market rates from Obie Industries,  an
affiliate  of Obie Media,  pursuant to a lease under which Obie Media moved into
the facility and began paying rent in May 1997. Lease payments were $123,000 and
$171,000 during fiscal 1997 and 1998, respectively.  Brian Obie, our Chairman of
the Board,  President and Chief Executive Officer, is the President,  a director
and the controlling shareholder of Obie Industries.  Delores Mord, our Secretary
and a director of Obie Media, is Vice President, a director and a shareholder of
Obie Industries.

We lease local operating offices for sales, service and installation in Spokane,
Yakima,  Bremerton and Silverdale,  Washington;  Portland and Salem, Oregon; Ft.
Lauderdale and Daytona Beach, Florida; Wallingford,  Connecticut;  Cleveland and
Cincinnati, Ohio; Langhorne, Pennsylvania; Dallas and Austin, Texas; Sacramento,
Monterey, Stockton and Santa Cruz, California;  Norfolk, Virginia; Milwaukee and
Madison,  Wisconsin;  Vancouver,  Victoria and Kamloops,  British Columbia;  and
London,  Ontario.  We also lease national sales offices in Los Angeles,  Chicago
and New York City. Total lease payments for the forgoing leases were $97,000 and
$359,000 for fiscal 1997 and 1998, respectively.

We also lease parcels of property beneath outdoor advertising structures.  Total
lease  expenses  for  these  leases in fiscal  1997 and 1998 were  $658,000  and
$714,000,  respectively.  Our site leases are generally for a term of ten years,
with two five-year renewal options at our discretion.


ITEM 3.    LEGAL PROCEEDINGS

We are not currently  subject to any material  litigation nor, to our knowledge,
is any material litigation threatened against Obie Media.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

No matters  were  submitted to a vote of Obie  Media's  shareholders  during the
fourth quarter of fiscal 1998.









                                       10
<PAGE>
PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Price Range of Common Stock

Since November 21, 1996, our Common Stock has been traded on the Nasdaq SmallCap
Market under the symbol  "OBIE." The following  table  presents the high and low
bid prices of our  Common  Stock as  reported  by The Nasdaq  Stock  Market,  as
adjusted to give  retroactive  effect to 11-for-10 stock splits declared by Obie
Media in October 1997 and November 1998:

        Fiscal 1997                                  High      Low
         First Quarter .......................      $ 6.41    $5.47
         Second Quarter ......................        6.20     5.16
         Third Quarter........................        5.58     5.16
         Fourth Quarter ......................        8.24     5.16

        Fiscal 1998                                  High      Low
         First Quarter .......................      $ 9.66    $8.18
         Second Quarter ......................       10.91     9.32
         Third Quarter .......................       15.00     9.32
         Fourth Quarter ......................       15.00     9.09

As of February 23, 1999,  there were  approximately  72 holders of record of the
Company's Common Stock. The Company believes the number of beneficial  owners is
substantially  greater than the number of record holders because a large portion
of the Company's outstanding Common Stock is held of record in "street name."

Dividends

The Company has not paid cash  dividends on its Common Stock during the last two
fiscal years and does not anticipate  doing so in the  foreseeable  future.  The
Company plans to retain any future earnings to finance operations.  In addition,
our  credit  agreements  may limit our  ability to pay  dividends  or make other
distributions on our Common Stock.

Recent Exempt Sales of Securities

In September  1998, as partial  consideration  for our acquisition of P & C, we:
(1) issued  55,000  shares of our Common  Stock to Wayne P.  Schur;  (2) granted
options to purchase a total of 137,500  shares of our Common Stock to Mr. Schur;
and (3) granted an option to purchase  11,000  shares of our Common Stock to Mr.
Schur's  attorney.  With respect to Mr. Schur's options,  the exercise price for
126,500 shares is $7.92 per share and for 11,000 shares is $9.32 per share.  The
exercise price for the attorney's option is $9.32 per share.  Options for 27,500
shares were exercisable on the date of grant,  and the remaining  121,000 shares
are exercisable in equal increments on the first four anniversaries of September
1,  1998,  subject  to  certain  provisions   regarding  Mr.  Schur's  continued
employment with us. We also have agreed to issue up to 82,500  additional shares
of our  Common  Stock to Mr.  Schur  depending  on P & C's  performance  through
November 30, 2001.

Issuance of the Common Stock and options was not registered under the Securities
Act of 1933, as amended (the "Securities Act") in reliance on the exemption from
registration  contained in Section 4(2) of the Securities Act. Mr. Schur was the
President and sole  shareholder  of P & C and is a person  sophisticated  in the
business of P & C and Obie Media. He has been named Executive Vice President and
a director  of Obie Media and will  continue as  President  of P & C, one of our
wholly  owned  subsidiaries.  Transfer  of the  shares  issued  to Mr.  Schur is
restricted. The options are not transferable.


                                       11
<PAGE>
ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINACIAL CONDITION AND 
           RESULTS OF OPERATIONS

Overview

Obie Media is an  out-of-home  advertising  company,  which markets  advertising
space primarily on transit vehicles and outdoor advertising displays (billboards
and  wallscapes).  As of November 30, 1998, we had 33 exclusive  agreements with
transit districts in the United States and Canada to operate transit advertising
displays.  Since our IPO in  November  1996,  the number of vehicles on which we
have the right to  operate  transit  advertising  displays  has  increased  from
approximately   1,200  to  over  7,000.   We  also  operate  and  generally  own
approximately  760  advertising  displays on billboards and walls in Washington,
Oregon, California and Idaho.

Our gross revenues  increased from $14.6 million in fiscal 1997 to $25.2 million
in fiscal 1998,  representing an increase of 72.4%.  EBITDA  increased from $2.8
million to $4.2 million in the same period,  representing  an increase of 48.6%.
Giving effect to the  acquisition  of P & C as if it had occurred on December 1,
1997,  we achieved  pro forma net  revenues of $28.2  million and EBITDA of $4.3
million for the fiscal year ended  November 30, 1998.  EBITDA  (earnings  before
interest,  taxes,  depreciation and amortization) is defined as operating income
before depreciation and amortization.

Our growth is  primarily  the result  of:  (i)  growth in our  existing  transit
advertising  business,  primarily  resulting  from  agreements  with  additional
transit districts; (ii) the acquisition of P & C on September 1, 1998; and (iii)
the  development  of new  outdoor  advertising  displays.  As a result  of these
factors,  our  operating   performance  is  not  necessarily   comparable  on  a
period-to-period basis. We plan to continue a strategy of expanding through both
internal growth and acquisitions.

Our operating  results are affected by general economic  conditions,  as well as
trends in the advertising  industry.  Based on industry sources, in recent years
outdoor  advertising  expenditures  in the United  States  have  increased  more
rapidly than total U.S. advertising  expenditures.  However,  this trend may not
continue and future outdoor  advertising  expenditures may grow more slowly than
expenditures for the advertising industry as a whole.

Our gross  revenues  are derived  from the sale of  advertising  on  out-of-home
advertising  displays,  primarily on transit vehicles under our transit district
agreements and on outdoor advertising displays we own or operate. Gross revenues
are a function of both the  occupancy of these  display  spaces and the rates we
charge.  We  focus  our  sales  effort  on  maximizing  occupancy  levels  while
maintaining  rate  integrity in our markets.  Over the past several  years,  our
transit  advertising  operations  have  expanded  more  rapidly than our outdoor
advertising operations. Revenues from transit advertising sales, as a percentage
of gross revenues,  increased from 63.3% in fiscal 1997 to 77.0% in fiscal 1998.
Increases in our gross revenues over the last two fiscal years are primarily the
result of the increased number of transit vehicles and outdoor displays on which
we market advertising space and, to a lesser extent, rate increases.

Net revenues represent gross revenues less agency  commissions.  Consistent with
standard  industry  practice,  advertising  agencies  working  with  Obie  Media
typically  retain 15% of the gross  advertising  revenues  from their  accounts.
While advertising agencies purchase the majority of the out-of-home  advertising
that we sell,  we believe our focus on direct  sales to  accounts  not served by
advertising  agencies has resulted in Obie Media recognizing  agency commissions
that,  as a  percentage  of our  aggregate  gross  revenues,  are lower than the
industry  average.  Customers  represented  by  advertising  agencies  currently
account for approximately 66% of our gross revenues.  Agency  commissions,  as a
percentage of our gross revenues,  have risen recently, in large part because we
have obtained new transit agreements in a number of districts where the previous
providers made substantially all sales through advertising agencies.

Direct  advertising  expenses  consist  primarily of occupancy,  production  and
installation,  and sales  costs.  Occupancy  expense  primarily  consists of two
elements:  (i) payments to transit  districts for the right to sell  advertising
displayed on their  vehicles;  and (ii) lease  payments to owners of property on
which  our  outdoor  advertising  structures  are  located.  Under  our  transit
agreements,  we typically guarantee to pay the transit district the greater of a
minimum  stated  amount or a percentage  (usually  over 50%) of the  advertising
revenues generated by our use of the district's vehicles. Occupancy expense also
includes the cost of  illuminating  outdoor  displays and property  taxes on the
outdoor  advertising  structures.  Production and installation  expenses consist
primarily of the costs of producing,  shipping and  installing  the  advertising
displays.  Sales  expenses  consist  primarily of the cost of staffing our sales
force.

                                       12
<PAGE>
General and administrative expenses include costs related to individual markets,
as well as corporate  expenses.  Expenses related to individual  markets include
expenses  for the  personnel  and  facilities  required to  administer  that and
neighboring  markets.  Corporate general and  administrative  expenses represent
personnel and facilities costs for our executive  offices and centralized  staff
functions.  We believe that,  although general and administrative  expenses will
increase on an absolute  dollar basis as our revenues  increase,  such  expenses
will decline as a percentage of revenues.

Start-up  costs  are the  costs  we  incur  in  pursuing  new  transit  district
agreements  and the costs of  establishing  a sales  force  and  office in a new
market prior to beginning to operate under a new agreement.  These costs consist
primarily of travel expenses,  various personnel costs, legal fees and the costs
of  preparing  our  proposals  in  response  to transit  district  requests  for
proposals.  The amount of start-up  costs we will incur in the future will vary,
both in total  amount and as a percentage  of revenues,  depending on the number
and  complexity  of proposals for new districts and our success in obtaining new
contracts.

Recent Developments

In August 1998, our wholly owned Canadian subsidiary,  Obie Media Limited, began
selling  transit  advertising  displays  for BC Transit on  approximately  1,500
transit vehicles in British  Columbia.  BC Transit is the transit  authority for
substantially  all of the  transit  districts  in  British  Columbia,  including
Vancouver (Canada's third largest market) and Victoria.

In  September  1998,  we acquired P & C, which has  operated in the  out-of-home
advertising  industry for over 50 years.  P & C has 19  agreements  with transit
districts,  including  districts located in Hartford and Stamford,  Connecticut;
Fort Lauderdale and West Palm Beach,  Florida;  Cincinnati and Cleveland,  Ohio;
Richmond,  Virginia; and Milwaukee,  Wisconsin. As of November 30, 1998, P & C's
transit agreements covered approximately 3,200 vehicles.

Obie Media  acquired P & C for an  aggregate  purchase  price of $7.6 million in
cash,  up to 137,500  shares of our Common  Stock and  options to purchase up to
148,500  additional shares of our Common Stock, of which $6.1 million and 55,000
shares  were paid at  closing,  and  options  to  purchase  27,500  shares  were
exercisable on the closing date. The remaining $1.5 million of the cash purchase
price will be paid as follows: $500,000 on or before each of January 1, 2000 and
2001,  and $250,000 on or before each of January 1, 2002 and 2003. The remaining
82,500 shares will be issued  depending on P & C's performance  through November
30, 2001,  and the unvested  options  will become  exercisable  over four years,
subject to the terms of an employment agreement with Wayne Schur, P & C's former
shareholder. We financed the acquisition with borrowings.

The  acquisition  of P & C has been  accounted for under the purchase  method of
accounting,  with Obie Media  recording  most of the purchase price as goodwill.
The amount of goodwill may increase in the future as  additional  stock  options
vest  and  if  additional  shares  are  issued  as a  result  of P & C's  future
performance.

Obie Media began  serving as the  exclusive  transit  advertising  provider  for
Tri-Met in 1994,  pursuant to a five-year  agreement.  In 1996, Tri-Met extended
its contract  with Obie Media  through June 30, 2001.  The FTA,  which  provides
substantial  monies to transit  districts,  has taken the position  that transit
advertising contracts may not exceed five years in length. At the request of the
FTA,  Tri-Met and Obie Media have agreed that our  agreement  with  Tri-Met will
terminate on June 30, 1999.

In December  1998,  Tri-Met and Obie Media  negotiated a settlement  for damages
resulting  from the early  termination  of the contract.  Under the terms of the
settlement,  Obie Media will receive cash payments and other financial benefits,
and will  transfer  to  Tri-Met,  transit  benches  on which the  Company  sells
advertising.  In addition,  the Company will retain a significant residual value
of advertising  contracts in existence at June 30, 1999, for up to one year. The
Company expects the settlement to result in a pre-tax gain of more than $800,000
during fiscal 1999. As a result of the  settlement,  the Company does not expect
that  fiscal 1999  income and cash flows will be  significantly  affected in the
event we are unable to renew our  agreement  with  Tri-Met for the period  after
June 30, 1999. In December 1998,  Obie Media submitted its response to Tri-Met's
request for proposal for a new  multi-year  contract  beginning July 1, 1999. In
February  1999,  Tri-Met  advised us that Obie Media was in second  place in the
proposal process. Tri-Met is expected to make a final decision in March 1999.

In January 1999, we began  operating  transit  advertising  displays for transit
districts  in  Madison,  Wisconsin;  Spokane,  Washington  and  London,  Ontario
(representing a total of approximately 475 vehicles).  In addition,  in February
1999, we began operating transit advertising  displays for a transit district in
Yakima, Washington (representing approximately 20 vehicles).

                                       13
<PAGE>
Operating Results

Comparison of Years Ended November 30, 1997 and 1998

The following table presents certain items from our  consolidated  statements of
income (and EBITDA) as a percentage of gross revenues.

                                                                  Year Ended
                                                                 November 30,
                                                           ---------------------
                                                              1997         1998
                                                           ----------   --------
         Transit advertising revenue..................       63.3 %       77.0 %
         Outdoor advertising revenue..................       36.7         23.0
                                                           --------     --------
         Gross revenue................................      100.0        100.0
         Less agency commissions......................        9.0          9.9
                                                           --------     --------
         Net revenues.................................       91.0         90.1
         Operating expenses:
             Direct advertising expense...............       54.7         58.7
             General and administrative...............       15.4         14.4
             Start-up costs...........................        1.6          0.4
                                                           --------     --------
         EBITDA.......................................       19.3         16.6
         Depreciation and amortization................        4.6          3.7
                                                           --------     --------
         Operating income.............................       14.7         12.9
         Interest expense.............................        4.0          3.1
         Minority interest............................        0.1            -
         Other income.................................        0.4            -
                                                           --------     --------
         Income before income taxes and extraordinary item   11.0          9.8
         Provision for income taxes...................        4.2          3.8
                                                           --------     --------
         Net income...................................        6.8 %        6.0 %
                                                           ========     ========

Revenues.  Gross revenues increased $10.6 million,  or 72.4%, from $14.6 million
in fiscal 1997 to $25.2 million in fiscal 1998.  This  increase was  principally
due to transit  advertising  revenues  associated  with the  operations of P & C
(which we acquired September 1, 1998), as well as the addition of new districts,
such as British  Columbia (which we began operating in August 1998), and transit
districts  operating less than a full year in 1997,  primarily  Dallas (which we
began operating in July 1997).  Transit  revenues  increased  $10.2 million,  or
109.9%,  from $9.3  million  in fiscal  1997 to $19.4  million  in fiscal  1998,
primarily  due to the above  factors.  Outdoor  advertising  revenues  increased
$423,000,  or 7.9%,  from $5.4  million in fiscal 1997 to $5.8 million in fiscal
1998, primarily due to higher rates and increased occupancy.  Agency commissions
increased  $1.2  million,  or 89.1%,  from $1.3  million in fiscal  1997 to $2.5
million in fiscal 1998, primarily due to the large proportion of existing agency
business in our new markets. As a result of the foregoing reasons,  net revenues
increased  $9.4  million,  or 70.8%,  from $13.3 million in fiscal 1997 to $22.7
million in fiscal 1998.

Direct Advertising Expenses. Direct advertising expenses increased $6.8 million,
or 84.8%, from $8.0 million in fiscal 1997 to $14.8 million in fiscal 1998. This
increase was  primarily  the result of increased  revenues.  Direct  advertising
expenses increased, as a percentage of gross revenues, from 54.7% in fiscal 1997
to 58.7% in fiscal  1998,  primarily  due to the  faster  growth of the  transit
advertising business,  where costs,  especially occupancy costs, are higher than
in the outdoor advertising business.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  $1.4  million,  or 61.8%,  from $2.2  million in fiscal  1997 to $3.6
million in fiscal 1998. The increase resulted  primarily from increased costs of
administering  new transit  districts and districts which operated for less than
all of fiscal 1997.  General and  administrative  expenses,  as a percentage  of
gross revenues, decreased from 15.3% in fiscal 1997 to 14.4% in fiscal 1998.

                                       14
<PAGE>
Start-Up Costs.  Start-up costs decreased  $130,000,  or 55.1%, from $237,000 in
fiscal  1997 to  $106,000  in fiscal  1998,  primarily  because  of the costs we
incurred in fiscal 1997 when the then incumbent transit advertising  operator in
Dallas, Texas unsuccessfully challenged the award of the Dallas contract to us.

Depreciation and Amortization  Expenses.  Depreciation and amortization expenses
increased $271,000, or 40.9%, from $664,000 in fiscal 1997 to $936,000 in fiscal
1998, primarily due to our investment in equipment in new markets, our upgrading
of computer  capabilities  in our existing  operations and the  amortization  of
goodwill  associated with the P & C acquisition.  Depreciation  and amortization
expenses  are expected to increase in fiscal 1999 when  goodwill  from the P & C
acquisition  will be  amortized  for a full year as compared to three  months in
fiscal 1998.  We are  amortizing  goodwill  from the P & C  acquisition  of $7.8
million over 15 years using the straight-line method of amortization.

Operating  Income.  Due to the above factors,  operating  income  increased $1.1
million,  or 51.0%,  from $2.2  million in fiscal 1997 to $3.3 million in fiscal
1998.

Interest Expense.  Interest expense increased $192,000,  or 32.8%, from $584,000
in fiscal 1997 to $776,000 in fiscal  1998,  primarily  due to the  indebtedness
incurred in connection with the acquisition of P & C.

Provision for Income Taxes.  Provision for income taxes increased  $363,000,  or
59.1%,  from $614,000 for fiscal 1997 to $978,000 in fiscal 1998,  primarily due
to the increase in income before income taxes. The increase in the provision for
income taxes is greater, in percentage terms, than the increase in income before
income  taxes due to  increased  operations  in higher  tax rate  jurisdictions,
including Canada.

Net Income. As a result of the foregoing factors, net income increased $501,000,
or 50.1%, from $1.0 million for fiscal 1997 to $1.5 million for 1998.

Seasonality

Obie Media's  revenues and operating  results  historically  have  fluctuated by
season. Typically, our results of operations are strongest in the fourth quarter
and  weakest in the first  quarter of our fiscal year  ending  November  30. Our
transit  advertising  operations are more seasonal than our outdoor  advertising
operations  as  our  outdoor  advertising  display  space,  unlike  our  transit
advertising  display space, is and has been sold nearly  exclusively by means of
12-month  contracts.  We  believe  that  the  seasonality  of our  revenues  and
operating results will increase as our transit  advertising  operations continue
to  expand  more  rapidly  than  our  outdoor   advertising   operations.   This
seasonality,  together  with  fluctuations  in  general  and  regional  economic
conditions and the timing and expenses related to acquisitions, the obtaining of
new transit  agreements  and other actions we have taken to implement our growth
strategy,  have contributed to fluctuations in our periodic  operating  results.
These fluctuations likely will continue.  Accordingly, our results of operations
in any period may not be indicative of the results to be expected for any future
period.

Liquidity and Capital Resources

We have historically  satisfied our working capital  requirements with cash from
operations and revolving credit borrowings.  Our working capital at November 30,
1997 and 1998 was  $647,000 and $1.0  million,  respectively.  Acquisitions  and
capital expenditures,  primarily for the construction of new outdoor advertising
displays,  have been financed  primarily  with borrowed  funds.  At November 30,
1998,  Obie Media had  outstanding  borrowings of $16.3 million,  of which $13.4
million was pursuant to long-term credit  agreements,  $1.5 million was pursuant
to the  agreement  to  acquire  P & C,  and $1.4  million  was  pursuant  to our
operating line of credit.  Our indebtedness is  collateralized  by substantially
all of our  assets.  See Note 5 to our  consolidated  financial  statements.  At
November 30, 1998,  available borrowing capacity under the line of credit, based
on collateralized accounts, was $2.6 million.

Obie Media's net cash  provided by  operations  was $817,000 and $1.8 million in
fiscal 1997 and 1998, respectively.  The increase was primarily due to increases
in net income,  accrued  expenses,  accounts  payable and income taxes  payable,
offset in part by an increase in accounts receivable.

Net cash used in  investing  activities  was $1.4  million  and $8.0  million in
fiscal 1997 and 1998, respectively.  The increase from fiscal 1997 was primarily
due to the $6.3 million used in the  acquisition of P & C. Capital  expenditures
totaled  $1.4  million and $1.7  million in fiscal 1997 and 1998,  respectively.

                                       15
<PAGE>
Capital   expenditures  consist  primarily  of  the  cost  of  building  outdoor
advertising  displays and the cost of opening new  offices.  We have no material
future  commitments  for capital  expenditures  but anticipate  that our capital
expenditures,  exclusive  of  those  related  to any  future  acquisition,  will
approximate $1.4 million in fiscal 1999.

Net cash  provided by  financing  activities  was  $148,000  and $6.6 million in
fiscal 1997 and 1998,  respectively.  Cash provided in fiscal 1997 was primarily
from the float on Obie Media's payments. The increase from fiscal 1997 to fiscal
1998 was primarily due to borrowings used to finance the acquisition of P & C.

We expect to pursue a policy of continued  growth through  obtaining new transit
district agreements,  acquiring out-of-home  advertising companies or assets and
constructing new outdoor advertising  displays.  We intend to finance our future
expansion  activities using a combination of internal and external  sources.  We
believe that internally  generated funds and funds available for borrowing under
our bank  credit  facilities  will be  sufficient  to satisfy  all debt  service
obligations  and  finance  our   operations,   including   anticipated   capital
expenditures,  but excluding possible acquisitions,  through fiscal 1999. Future
acquisitions  by Obie  Media,  if any,  may  require  additional  debt or equity
financing.

Year 2000 Compliance

The Year 2000  problem  is the result of the  inability  of some  computers  and
computer software programs to accurately recognize,  for dates after 1999, dates
which are often  expressed as a two-digit  number.  The  inability to accurately
recognize  date  information  could  adversely  affect  computer  operations and
calculations or cause computer systems and computer-dependent mechanical systems
not to operate at all.

We are in various stages of assessing our internal  technical and  non-technical
systems to ascertain  whether  they are Year 2000  compliant.  After  conducting
certain tests, we have identified one information  processing system that is not
Year 2000 compliant and have  determined  that the cost of replacing or updating
the system should not exceed $25,000. We believe that our information processing
systems used in financial reporting and record-keeping,  and the majority of our
incidental software systems, are Year 2000 compliant or can be made compliant on
a timely basis without  material  cost. We are in the process of phasing out all
of our personal computer  workstations  that are not Year 2000 compliant.  We do
not believe that a material number of our workstations will need to be replaced.
We have not yet  definitively  determined  the  extent to which our  information
processing  systems  used in  designing  and  producing  artwork  are Year  2000
compliant.  Further,  we have only generally assessed our non-technical  systems
that  may  be  dependent  upon  computer  components,  including  telephone  and
voice-mail  systems,  in  order to  identify  systems  that  are not  Year  2000
compliant.

We have engaged the services of a full-time  information  processing manager to,
among other duties, assist in identifying any Year 2000 issues that may arise in
our   technical   and   non-technical   systems  and   implement  any  necessary
modifications.  We intend to complete our Year 2000  assessment  of our internal
technical  and  non-technical  systems  by May  31,  1999  and to be  Year  2000
compliant by November 30, 1999.

We have only  generally  assessed our  relationships  with third  parties  whose
inability to achieve timely Year 2000 compliance  could have a material  adverse
effect on our financial condition or results of operations.  These third parties
are primarily transit districts, advertising agencies, vendors, banks, utilities
and freight companies whose failure to achieve timely Year 2000 compliance could
delay customer  orders for our services,  delay receipt of payments by customers
for services rendered and disrupt other aspects of our operations.  We expect to
continue to evaluate Year 2000 issues with regard to our material  relationships
with third parties  through  1999.  Certain of such third parties are subject to
stringent   regulations  which  mandate  that  they  achieve  timely  Year  2000
compliance.  We do not believe that the  commodities  and services upon which we
rely  are of a kind or  nature  which is  particularly  sensitive  to Year  2000
issues. In addition,  we believe that our diversified customer and supplier base
should  prevent one or a few of our  vendors' or  customers'  failure to be Year
2000 compliant from having a material adverse effect on our financial  condition
or results of operations.

We have yet to determine the total  estimated  cost of our Year 2000  compliance
program. Expenditures through November 30, 1998 are immaterial. We do not expect
that Year 2000 compliance will have a material  adverse effect on us. We believe
that a reasonably  likely worst case scenario as to the effect on us

                                       16
<PAGE>
of the Year 2000 compliance issue is that several of our large customers fail to
become Year 2000 compliant,  thus delaying their advertising orders and reducing
our  revenues.  In  addition,  as  stated  above,  we may  replace  or update an
information processing system which is not Year 2000 compliant at a cost that we
believe should not exceed $25,000.

We have not  developed  a  contingency  plan in the event we or any of the third
parties with which we have a material  relationship  fail to achieve timely Year
2000  compliance.  We may develop a Year 2000  contingency plan depending on the
results of our  internal and external  assessment  of Year 2000 issues.  We will
continue  to update  our  assessment  of our Year 2000  readiness  as we receive
updated information from our Year 2000 compliance program.

New Accounting Pronouncements

New  accounting  pronouncements  are  discussed  in  Note 1 to our  consolidated
financial statements.


ITEM 7.    FINANCIAL STATEMENTS

The  financial  statements  and  supplementary  data  required  by this item are
included on pages F-1 to F-19 of this Annual Report.


ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Not applicable




























                                       17
<PAGE>
PART III

ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL 
            PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

                                   MANAGEMENT

Directors and Executive Officers

Our directors and executive officers are as follows:

         Name                   Age   Position

         Brian B. Obie          57    Chairman of the Board, President and
                                          Chief Executive Officer (1)
         Wayne P. Schur         53    Executive Vice President and Director (2)
         Stephen F. Grover      57    Vice President and General Manager
         James W. Callahan      46    Chief Financial Officer and Treasurer
         Delores M. Mord        65    Secretary and Director (2)
         Randall C. Pape        48    Director (3)
         Stephen A. Wendell     57    Director (3)
         Richard C. Williams    59    Director (1)

(1) Term on the Board of Directors expires in 2001.
(2) Term on the Board of Directors expires in 1999.
(3) Term on the Board of Directors expires in 2000.

Brian B. Obie is the  Chairman  of the  Board,  President  and  Chief  Executive
Officer of Obie Media.  He is a  co-founder  of Obie Media and has served as our
President and as a director since our inception in 1987.  Since January 1998, he
has  served  as  the  Treasurer  of  Obie  Media  Limited,  a  British  Columbia
corporation and one of our wholly owned subsidiaries, and, since September 1998,
as a director  of P & C,  another  wholly  owned  subsidiary.  Mr.  Obie is also
employed  by and is a  director  of Obie  Industries,  where  he has  served  as
President  since  1968.  Obie  Industries,  which now  operates as a real estate
management company, was Obie Media's parent corporation until 1996. Mr. Obie has
39 years of  experience in the  out-of-home  advertising  industry.  He has been
Chairman of the Board of Centennial Bancorp, a bank holding company, since 1981.
He is a former mayor of Eugene, Oregon.

Wayne P. Schur was appointed Executive Vice President of Obie Media in September
1998.  He was  appointed a director of Obie Media in October  1998 and is also a
director of P & C. He was the President and sole or principal shareholder of P &
C from August 1981 to September  1998, when P & C was acquired by Obie Media. He
continues as President  of P & C.  Mr. Schur has 25 years of  experience  in the
out-of-home advertising industry.

Stephen F. Grover was appointed  Vice  President of Obie Media in September 1996
and has served as Obie Media's General  Manager since 1994.  Since July 1998, he
has also served as President of Obie Media Limited.  He was Obie Media's General
Sales  Manager from 1993 to 1994 and a Regional  Manager from 1991 to 1992.  Mr.
Grover has 32 years of experience in the out-of-home advertising industry.

James W. Callahan was appointed  Chief  Financial  Officer and Treasurer of Obie
Media  in 1996.  Since  September  1998,  he has  served  as a  director  and as
Secretary and Treasurer of P & C. From 1994 to 1996, he was a consultant filling
the role of chief  financial  officer  of Obie  Media.  From  1994 to 1997,  Mr.
Callahan  also  served  in the  capacity  of  chief  financial  officer  of Obie
Industries and its subsidiaries. From 1990 to 1994, he served as Chief Financial
Officer of Springfield Forest Products, Inc. Mr. Callahan was employed by Arthur
Andersen LLP from 1975 to 1990, most recently as a tax partner.

Delores M. Mord is a  co-founder  of Obie Media and has served as our  Secretary
and as a director  since our inception in 1987.  She served as Vice President of
Obie Media until  1996.  Ms.  Mord has served as an officer  (currently  as Vice
President)  and a director of Obie  Industries  since its formation in 1960. Ms.
Mord has 37 years of experience in the out-of-home advertising industry. 

Randall C. Pape became a director of Obie Media in 1996.  In 1981,  he was named
President  of Pape  Bros.,  Inc.,  and since  1990 he has held the  position  of
President and Chief Executive Officer of The Pape Group,

                                       18
<PAGE>
Inc., a supplier of capital equipment and services,  which operates as a holding
company for Pape Bros.,  Inc.,  Flightcraft,  Inc.,  Hyster Sales Company,  Pape
Properties,  Inc.  and  Industrial  Finance  Company.  Since  1973,  he has been
President and Chief Executive  Officer of Liberty  Financial  Group,  which is a
holding  company for Liberty  Federal Bank, SB, EcoSort LLC,  Sanipac,  Inc. and
Commercial  Equipment Lease Corporation.  Mr. Pape has also served as a director
of Northwest  Natural Gas Company,  a  distributor  of natural gas in Oregon and
Washington, since 1996.

Stephen A. Wendell became a director of Obie Media in 1996. Since November 1998,
Mr. Wendell has been a registered  representative and investment  advisory agent
with KMS Financial  Services,  Inc., an independent  privately  owned  financial
services firm based in Seattle,  Washington.  From 1995 to February 1998, he was
Chief  Financial  Officer and a director of Umpqua  Feather  Merchants,  Inc., a
manufacturer and distributor of fishing flies and related accessories. From 1992
to 1995, Mr. Wendell  served as a consultant to Umpqua Feather  Merchants,  Inc.
and  other  companies,   including  companies  providing  advertising  and  food
services.  Since  1993,  Mr.  Wendell  has been the  principal  shareholder  and
President of  Continental  Land and Cattle  Company,  a residential  real estate
development company.

Richard C.  Williams  became a director of Obie Media in 1996.  He has served as
President,  Chief Executive  Officer and a director of Centennial  Bancorp since
1981.  He has  served  as Vice  Chairman  of  Centennial  Bank,  a wholly  owned
subsidiary of Centennial  Bancorp,  since 1992, was its Chief Executive  Officer
from 1992 until  January 1998,  and was its President  from 1977 to 1992. He has
been a director of Centennial Bank since 1977. Mr. Williams also recently became
a  director  of  Elmer's  Restaurants,   Inc.,  a  franchisor  and  operator  of
full-service, family-oriented restaurants.

Compliance with Section 16(a) of the Securities Exchange Act.

Our  Articles  provide  that  when we have six or more  directors,  our Board of
Directors  will be divided  into three  classes  (Class 1, Class 2 and Class 3),
with the members of each class serving for staggered  three-year  terms. We have
six directors, and our Chief Executive Officer, as authorized by our Bylaws, has
made  the  initial  designation  of  directors  to  each of the  three  classes.
Accordingly, at each annual meeting of our shareholders, the number of directors
equal to the number of the directors in the class whose term expires at the time
of the meeting will be elected to hold office until the third succeeding  annual
meeting. Our Articles limit the number of directors to nine.

Each officer  serves at the  discretion of our Board of  Directors.  No officer,
other than Mr.  Schur,  is subject to an agreement  that requires the officer to
serve Obie Media for a specified  number of years.  Mr. Schur and Mr. Grover are
subject to non-competition  agreements.  There are no family relationships among
any of our  directors or executive  officers,  except that Mr. Obie and Ms. Mord
are cousins.

Board Committees

Obie Media has two standing  committees,  an Audit  Committee and a Compensation
Committee.  It does not have a standing Nominating  Committee.  Stephen Wendell,
Randall Pape and Richard Williams serve on the Audit and Compensation Committees
of the Board of Directors.  Mr. Wendell is chairman of the Audit Committee.  Mr.
Williams is chairman of the Compensation Committee.

Section  16(a) of the  Securities  Exchange Act of 1934  requires our  officers,
directors and 10%  shareholders to file reports of stock ownership with the SEC.
Our officers,  directors and 10% shareholders are required by SEC regulations to
furnish us with all Section 16(a) forms they file.

Based  solely on our review of the copies of such  forms  that we  received  and
written  representations  from our officers and  directors,  we believe that all
required  forms were  timely  filed with  respect to fiscal  1998,  except  that
Stephen  Wendell filed one report late (covering  three purchases of shares) and
Richard Williams filed one report late (covering two purchases of shares).


                                       19
<PAGE>
ITEM 10.    EXECUTIVE COMPENSATION

   Compensation of Directors

Executive  officers  receive no  compensation  for serving as  directors of Obie
Media. All non-employee  directors  receive $5,000 for each year they serve as a
director.  Upon  becoming  a  director,  Obie Media  grants to each  nonemployee
director a  nonqualified  stock option to purchase  5,000 shares of Common Stock
under our Restated 1996 Stock Incentive Plan (the "Stock Plan").  On the date of
each  annual  shareholder  meeting,  each  nonemployee  director  is  granted an
additional  option to purchase  1,000  shares.  Options  granted to  nonemployee
directors have a term of 15 years and an exercise price equal to the fair market
value of our Common Stock on the grant date. The options  become  exercisable by
the director at the rate of 20% per year of service.

Executive Compensation

The following table  summarizes the compensation we paid during each of the last
three  fiscal  years to our chief  executive  officer  and our  other  executive
officers whose salary and bonus exceeded  $100,000 during fiscal 1998,  together
with Wayne Schur,  who became our Executive  Vice President on September 1, 1998
in connection with the P & C acquisition (the "Named Executive Officers"):
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                                                                             Securities      All Other
                                         Fiscal      Salary       Bonus      Underlying    Compensation
                                          Year        ($)          ($)        Options         ($)(1)
                                         --------  -----------  ----------- ------------- ----------------
<S>                                       <C>        <C>           <C>           <C>              <C>
Brian B. Obie,
Chairman of the Board, President          1998       $166,632      $25,000           456           $3,749
   and Chief Executive Officer            1997        157,200       25,000           -              3,568

Stephen F. Grover,
Vice President and                        1998       $109,360      $25,774        11,324           $3,558
    General Manager                       1997         96,000       18,000           -              3,020

James W. Callahan,
Chief Financial Officer and               1998        $84,270      $16,000           236           $2,326
    Treasurer                             1997         79,500       15,000           -                -

Wayne P. Schur,
Executive Vice President (2)              1998        $37,500          -         137,500           $  250
                                          1997            -            -             -                -
</TABLE>


(1) Represents contributions made by us under our profit sharing and 401(k) plan
on behalf of the applicable Named Executive Officer.

(2) Schur did not receive any  compensation  from us during  fiscal 1996 or 1997
and only received salary from us for the last three months of fiscal 1998. P & C
paid him an annual base  salary of  $200,000  in each of calendar  1997 and 1998
(paid through August 31, 1998), with bonuses of $110,000 and $30,000 in 1997 and
1998,  respectively.  In addition,  P & C contributed  $4,000 and $4,396  on his
behalf  under a P & C  profit  sharing  and  401(k)  plan  for  1997  and  1998,
respectively.  Pursuant to Mr. Schur's employment  agreement with us, his annual
salary  from  September  1998 to  September  1999 is  $150,000,  with his salary
increasing  by $25,000 each year through the  five-year  term of his  employment
agreement.


                                       20
<PAGE>
Stock Option Information

None of the Named Executive Officers exercised any options during fiscal 1998.

The following table sets forth certain information  regarding options granted to
the Named Executive Officers during fiscal 1998:
<TABLE>
<CAPTION>
                        Option Grants in Last Fiscal Year

                                  % of Total
                                   Options      Per     Market                  Potential Realizable Value at
                                                                          
                                  Granted to   Share    Price on                Assumed Annual Rates of Stock

                      Options    Employees   Exercise   Grant   Expiration  Price Appreciation for Option Term
                                                                            --------------------------------
Name                  Granted      in 1998     Price     Date       Date       0% ($)     5%  ($)   10% ($)
------------------- -----------  ---------   --------  -------- ----------  --------- ----------- ----------
<S>                 <C>             <C>       <C>       <C>      <C>        <C>       <C>         <C>  
Brian B. Obie           456 (1)       0.2%    $ 9.55    $9.55    1/1/13         205       3,046       7,474
Stephen F. Grover    11,000 (2)       5.2%                       7/8/13                  88,110     223,190
                                               12.73    12.73                 -
                        324 (1)       0.2%                       1/1/13         146       2,164       5,310
                                                9.55     9.55
James W. Callahan       236 (1)       0.1%                       1/1/13         106       1,576       3,868
                                                9.55     9.55
Wayne P. Schur      126,500 (3)      59.4%                       9/1/13     378,235   1,246,025   2,578,070
                                                7.92    10.91
                     11,000 (3)       5.2%                       9/1/13      17,490      92,950     208,780
                                                9.32    10.91
</TABLE>

(1) These options have a fifteen-year term and the shares subject to the options
become  exercisable at a rate of 25%, 35% and 40%,  respectively,  on the third,
fourth and fifth anniversaries of the date of grant.

(2) This option has a fifteen-year term and becomes exercisable at a rate of 20%
of the shares subject to the option each year beginning on the first anniversary
of the date of grant.

(3) Mr.  Schur's  options  have a ten-year  term and become  exercisable  at the
following rate: 20% of the shares subject to the option immediately upon date of
grant;  22% of the  shares  subject to the option per year on each of the first,
second  and  third  anniversaries  of the date of grant;  and 14% of the  shares
subject to the option on the fourth anniversary of the date of grant.

The following table sets forth certain information regarding options held by the
Named Executive Officers at November 30, 1998:
<TABLE>
<CAPTION>
                 Aggregated Option Values at End of Fiscal Year

                                              Number of Securities
                                           Underlying Unexercised              Value of Unexercised
                                                     Options at              In-the-Money Options at
                                              November 30, 19980             November 30, 1998 ($)(1)
                                    ----------------------------------   ---------------------------------
Name                                 Exercisable      Unexercisable       Exercisable     Unexercisable
                                    ---------------  -----------------   --------------  -----------------
<S>                                     <C>             <C>                <C>              <C>
Brian B. Obie......................                         456                               $2,031
Stephen F. Grover..................     12,100           29,474            $102,900         $169,793
James W. Callahan..................      7,260           11,126             $61,740          $93,661
Wayne P. Schur.....................     27,500          110,000            $167,250         $653,600
</TABLE>
(1) On November  30,  1998,  the market price of our Common Stock was $14.00 per
share. For purposes of the foregoing table, stock options with an exercise price
less than that amount are considered to be "in-the-money"  and are considered to
have a value equal to (i) the  difference  between  that amount and the exercise
price of the option  multiplied by (ii) the number of the shares  covered by the
stock option.

Restated 1996 Stock  Incentive Plan. Our Stock Plan provides for the issuance of
363,000  shares of Common Stock to our  employees,  directors  and  consultants.
Shares may be issued pursuant to: (i) incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended ("ISO's");  (ii)
nonqualified stock options ("NSOs");  (iii) stock bonuses; and (iv) direct sales
of stock.  ISOs may be issued only to our employees and will have a maximum term
of 10 years from the date of grant.  The exercise price for ISOs may not be less
than 100% of the fair market value of our Common Stock at the time of the grant,
and the aggregate  fair market value (as determined at the time of the grant) of
shares issuable upon the exercise of ISOs for the first time in any one calendar
year may not  exceed  
                                       21
<PAGE>
$100,000.  In the case of ISOs granted to holders of more than 10% of our Common
Stock,  the exercise price may not be less than 110% of the fair market value of
our Common  Stock at the time of the  grant,  and the term of the option may not
exceed five years.  Under the Stock Plan,  NSOs have a maximum  term of 15 years
from the date of grant and must be  granted at an  exercise  price not less than
85% of the fair market value of our Common  Stock at the date of grant.  Options
become  exercisable  in whole or in part from time to time as  determined by the
Board's Compensation Committee, which administers the Stock Plan.

At November 30, 1998, options covering 191,461 shares were outstanding under the
Stock Plan, with a weighted  average  exercise price of $7.45 per share,  and an
additional  159,560 shares  remained  available for future  issuances  under the
Stock Plan.

Schur Employment and Noncompetition Agreement; Change-in-Control Arrangement

Schur  Employment  and   Noncompetition   Agreement.   In  connection  with  our
acquisition of P & C in September  1998, we entered into a five-year  employment
and noncompetition  agreement with Wayne Schur, the Executive Vice President and
a  director  of Obie Media and the former  shareholder  of P & C. The  agreement
contains noncompetition and nondisclosure  provisions.  Under the agreement, Mr.
Schur's annual salary initially is $150,000 and will increase by $25,000 in each
of the second through fifth years of his employment. The agreement provides that
we may  terminate  Mr.  Schur's  contract  at any time after  September  1, 2001
without  "cause," as defined in the agreement.  In that case, we generally would
be liable to Mr.  Schur for a  severance  benefit  payment  equal to his  annual
salary for the then upcoming  contract year. The agreement further provides that
we may terminate  his contract at any time for cause.  In such case, we would be
liable to him only for salary and  benefits  earned by him  through  the date of
such termination.  Pursuant to Mr. Schur's employment agreement, on September 1,
1998, we granted him an NSO for 137,500  shares of our Common Stock (the "Option
Shares"),  of which 27,500 Option Shares were  exercisable  upon the grant date.
The remaining  110,000 Option Shares will be exercisable in equal  increments on
the first,  second,  third and fourth anniversaries of September 1, 1998. If Mr.
Schur  terminates his employment with Obie Media during the first three years of
his employment agreement,  other than for breach of the agreement by us, he will
forfeit any Option Shares not  exercisable  as of the date of such  termination.
Termination of Mr.  Schur's  employment for any other reason will not affect his
right to receive the Option Shares.

Change-in-Control  Arrangement.  Under the terms of the acquisition agreement by
which we acquired all of the  outstanding  stock of P & C from Mr.  Schur,  $1.5
million of the base purchase price and 82,500 shares of our common stock payable
to Mr. Schur were deferred. The acquisition agreement provides that a portion of
the  deferred  base  purchase  price is payable by us  annually,  with the final
payment to be made to Mr.  Schur no later than  January  1, 2003.  However,  the
agreement  further provides that the entire unpaid purchase price is immediately
payable to Mr. Schur upon a "Change of  Management"  of Obie Media (other than a
Change of Management  which results from the death or disability of Brian Obie).
Under the agreement,  the term "Change of  Management"  means that Brian Obie no
longer  serves as our Chief  Executive  Officer or that Mr.  Obie  (directly  or
indirectly  through  immediate  family members) fails to own at least 25% of our
outstanding Common Stock.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth  certain  information  regarding the  beneficial
ownership of Obie  Media's  Common Stock as of November 30, 1998 (i) each person
who is known by us to own  beneficially  more than 5% of our Common Stock;  (ii)
each director of Obie Media;  (iii) each of the Named  Executive  Officers;  and
(iv) all directors and executive officers of Obie Media as a group.

Name and Address                      Amount and Nature          Percentage of
of Beneficial Owner                of Beneficial Ownership       Common Stock

Brian B. Obie                          2,119,270 (2)(3)              49.1
Eugene, Oregon

Delores M. Mord                        426,471 (2)(3)                 9.9
Eugene, Oregon

                                       22
<PAGE>
Douglas D. Obie                        273,818 (4)                    6.3
Seattle, Washington

Christine Obie-Barrett                 268,978 (5)                    6.2
Eugene, Oregon

Wayne P. Schur                          82,500 (6)                    1.9
Langhorne, Pennsylvania

Randall C. Pape                         14,520 (6)                    *
Coburg, Oregon

Stephen A. Wendell                      10,670 (2)(6)                 *
Eugene, Oregon

Richard C. Williams                     32,606 (2)(6)                 *
Eugene, Oregon

Steven F. Grover                        12,100 (6)                    *
Eugene, Oregon

James W. Callahan                        9,680 (6)                    *
Eugene, Oregon

All executive officers and directors
as a group (8 persons)               2,694,704 (2)(3)(6)             61.7

* Less than 1 percent of the outstanding shares.

(1)      A person is considered to "beneficially own" any shares: (a) over which
         such person exercises sole or shared voting or investment power; or (b)
         of which such  person has the right to  acquire  ownership  at any time
         within 60 days (e.g.,  through  exercise of stock options).  Voting and
         investment  power relating to the shares  referenced in the table above
         is  exercised  solely by the  beneficial  owner,  except  as  indicated
         otherwise.
(2)      Includes  shares owned by the spouses of the named  persons as follows:
         Brian B. Obie, 30,250 shares;  Delores M. Mord, 103,713 shares; Stephen
         A. Wendell,  4,730 shares;  Richard C. Williams,  2,207 shares; and for
         all  officers  and  directors  as a group,  140,900  shares.  All named
         persons disclaim beneficial ownership of shares owned by their spouses.

(3)      Includes  13,113 shares owned by Obie Media's profit sharing and 401(k)
         plan.  Brian B. Obie and  Delores M. Mord  serve on the  administrative
         committee with responsibility for plan decisions.

(4)      Includes  36,476  shares  held by Douglas  D. Obie as  trustee  for the
         benefit of Christine Obie-Barrett's minor children. Also includes 6,369
         shares  beneficially  owned by Douglas D. Obie's minor children,  which
         are held by Christine Obie-Barrett as trustee.
(5)      Includes 6,369 shares held by Christine Obie-Barrett as trustee for the
         benefit of Douglas D.  Obie's  minor  children.  Also  includes  36,476
         shares beneficially owned by Christine  Obie-Barrett's  minor children,
         which are held by Douglas D. Obie as trustee.
(6)      Includes  shares  subject to options  exercisable  within 60 days after
         November 30, 1998, as follows:  Wayne P. Schur, 27,500 shares;  Randall
         C. Pape,  2,420 shares;  Stephen A. Wendell,  2,420 shares;  Richard C.
         Williams,  2,420 shares;  Stephen F. Grover,  12,100  shares;  James W.
         Callahan  7,260 shares;  and for all officers and directors as a group,
         54,120 shares.


                                       23
<PAGE>
ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our  policy for  transactions  with  affiliates,  adopted  following  our IPO in
November  1996,  provides  that all  proposed  transactions  by Obie  Media with
directors,  officers,  5% shareholders and their affiliates be entered into only
if such transactions are (i) on terms no less favorable to Obie Media than could
be obtained from unaffiliated  parties, (ii) reasonably expected to benefit Obie
Media and (iii) approved by a majority of the disinterested, independent members
of our  Board  of  Directors.  Set  forth  below  are  descriptions  of  certain
transactions  between Obie Media and our directors,  officers or 5% shareholders
or their affiliates since December 1, 1996

Outdoor Advertising Displays

Until December 31, 1997, Obie Media leased outdoor advertising  displays from MO
Partners,  in which Brian Obie and Delores  Mord hold  partnership  interests of
approximately 85% and 15%,  respectively.  The lease agreement  required monthly
payments of a minimum  base rent plus  additional  rent equal to 5% of the gross
revenues  derived by Obie Media from  advertising  on the displays.  The minimum
base rental  payments were $9,000 per month in calendar  1997. The lease expired
at the end of 1997.  Total lease  expenses  were  $108,000 and $18,000 in fiscal
1997 and 1998,  respectively.  On December  31, 1997,  we exercised  our option,
granted in fiscal  1996,  to  purchase  the outdoor  advertising  displays of MO
Partners for  $698,000.  Prior to the purchase of the outdoor  displays  from MO
Partners, we had guaranteed certain indebtedness of MO Partners, the outstanding
balance of which was  $415,000 at November  30,  1997.  We paid for the displays
with a  promissory  note.  Upon the note's  payment in full in April  1998,  our
guaranty of the MO Partners debt was  released.  We believe the option price was
at least as favorable to us as would have been available from an unrelated party
through arms-length negotiations.

MO Partners also leases land to us for two outdoor advertising  displays.  Lease
payments for these  properties  equal 20% of the annual  revenues we derive from
these displays.  Lease payments were $12,000 in each of fiscal 1997 and 1998. We
believe  that the terms of these leases are at least as favorable to us as would
be available with an unrelated third party through arms-length negotiations.

Office and Production Space

Prior to April 1997,  Obie Media  rented  office and  production  space in three
locations in Eugene,  Oregon from Obie  Industries,  our parent until 1996,  and
another  affiliated  company.  In April 1997, we consolidated  our operations in
Eugene in a headquarters  building at one of these  locations.  The headquarters
building is leased from Obie  Industries at market  rates.  Our rental and lease
payments on these properties were $123,000 and $171,000 in fiscal 1997 and 1998,
respectively.

Personal Services

Brian Obie, our Chairman of the Board,  President and Chief  Executive  Officer,
provides limited services to Obie Industries and its  subsidiaries.  Mr. Obie is
the President, a director and the controlling shareholder of Obie Industries. It
is estimated that Mr. Obie spends on average less than 5% of his time working on
Obie Industries matters.

ITEM 13.    EXHIBITS AND REPORTS ON FORM  8-K

(a)(1)   Financial  Statements.       The Financial Statements are listed in the
Index to Consolidated  Financial Statements on page F-1 of this Annual Report.

(a)(2)   Exhibits:

Exhibit Description 

3.1      Restated Articles of Incorporation, as amended (1)

3.2      Restated Bylaws, as amended (1)

4.1      See Articles 3, 4 and 8 of Exhibit 3.1 and Articles 1, 2, 5, 6 and 7 of
         Exhibit 3.2(1)

                                       24
<PAGE>
10.1*    Restated 1996 Stock Incentive Plan

10.2     Form of Indemnification Agreement between the Company and its directors

10.3     Form of Indemnification Agreement between the Company and its officers

10.4     Lease between Obie Industries Incorporated and the Company, dated 
         November 12, 1996(2)

10.5     Amendment, dated July 15, 1997, to lease agreement between Obie 
         Industries Incorporated and the Company (2)

10.6     Restated  and Amended  Loan  Agreement,  dated as of September 1, 1998,
         among the Company, Obie Media Limited,  Philbin & Coine, Inc., and U.S.
         Bank National Association, and related documents

10.7     Stock Purchase Agreement among Registrant and Philbin & Coine, Inc. and
         Wayne P. Schur dated August 25, 1998 (3)

10.8*    Employment Agreement, dated September 1, 1998, between the Company and 
         Wayne P. Schur

10.9*    Non-Qualified Stock Option Agreement, dated September 1, 1998, between 
         the Company and Wayne P. Schur

21.1     List of Subsidiaries

23.1     Consent of Arthur Andersen LLP, Independent Accountants

27.1     Financial Data Schedule

99.1     Safe Harbor for Forward-Looking Statements under Private Securities 
         Litigation Reform Act of 1995:  Certain Cautionary Statements

----------

*Management Contract or Compensatory Plan or Arrangement.

(1)  Incorporated herein by reference from the Company's  Registration Statement
     on Form SB-2 (Registration No. 333-5728-LA), declared effective on November
     21, 1996.

(2)  Incorporated  by  reference to the  Company's  Annual Report on Form 10-KSB
     for the year ended  November 30, 1997 filed February 27, 1998.

(3)  Incorporated  by reference to the  Company's  Form 8-K filed  September 14,
1998.

     Upon written request to James W. Callahan,  Chief Financial Officer of Obie
Media Corporation, 4211 West 11th Avenue, Eugene, OR 97402, shareholders will be
furnished  a copy  of  any  exhibit,  upon  payment  of $ .25  per  page,  which
represents the Company's reasonable expense in furnishing the exhibit requested.

(b)      Reports on Form 8-K. In September and November  1998, the Company filed
         Forms 8-K and 8-K/A announcing the acquisition of Philbin & Coine, Inc.
         dba P&C Media, which forms  are  hereby  incorporated by reference into
         this annual report.







                                       25
<PAGE>
SIGNATURES

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

OBIE MEDIA CORPORATION

Dated:   February 26, 1999          By/s/ Brian B. Obie
                                       ----------------
                                       Brian B. Obie, President

In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed below by the  following  persons on behalf of the  Registrant  and in the
capacities and on the dates indicated.

                                    PRINCIPAL EXECUTIVE OFFICER AND
                                    DIRECTOR:

Dated:   February 26, 1999          By/s/ Brian B. Obie
                                       ----------------
                                      Brian B. Obie, Chairman, President
                                      and Chief Executive Officer

                                    PRINCIPAL FINANCIAL AND ACCOUNTING
                                    OFFICERS:

Dated:   February 26, 1999          By/s/ James W. Callahan
                                       --------------------
                                      James W. Callahan,
                                      Chief Financial Officer and Treasurer

Dated:   February 26, 1999          By/s/ Michael E. Hubbard
                                       ---------------------
                                      Michael E. Hubbard,
                                      Corporate Controller

                                    DIRECTORS:

Dated:   February 26, 1999          By/s/ Delores M. Mord
                                       ------------------
                                     Delores M. Mord, Director

Dated:   February   , 1999          By 
                                       ------------------
                                     Randall C. Pape, Director

Dated:   February 26, 1999          By/s/ Stephen A. Wendell
                                       ---------------------
                                     Stephen A. Wendell, Director

Dated:   February 26, 1999          By/s/ Richard C. Williams
                                       ----------------------
                                     Richard C. Williams, Director

Dated:   March 1, 1999              By/s/ Wayne P. Schur
                                       -----------------
                                     Wayne P. Schur, Director



                                       26
<PAGE>
EXHIBIT INDEX

Exhibit*

10.1     Restated 1996 Stock Incentive Plan

10.2     Form of Indemnification Agreement between the Company and its directors

10.3     Form of Indemnification Agreement between the Company and its officers

10.6     Restated  and Amended  Loan  Agreement,  dated as of September 1, 1998,
         among the Company, Obie Media Limited,  Philbin & Coine, Inc., and U.S.
         Bank National Association, and related documents

10.8     Employment Agreement, dated September 1, 1998, between the Company and 
         Wayne P. Schur

10.9     Non-Qualified Stock Option Agreement, dated September 1, 1998, between 
         the Company and Wayne P. Schur

21.1     List of Subsidiaries

23.1     Consent of Arthur Andersen LLP, Independent Accountants

27.1     Financial Data Schedule

99.1     Safe Harbor for  Forward-Looking  Statements  Under Private  Securities
         Litigation  Reform Act of 1995:  Certain Cautionary Statements
--------------

* See Item 13(a)(2) of this Annual Report for a list of all exhibits,  including
those incorporated by reference.























                                       27
<PAGE>
                             OBIE MEDIA CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Accountants                                        F-2

Consolidated Balance Sheet as of November 30, 1997 and 1998              F-3

Consolidated Statements of Income for the years ended
         November 30, 1997 and 1998                                      F-4

Consolidated Statements of Changes in Shareholders'Equity
         (Deficit) for the years ended November 30, 1997 and 1998        F-5

Consolidated Statements of Cash Flows for the years ended
         November 30, 1997 and 1998                                      F-6

Notes to Consolidated Financial Statements                               F-8



















<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders
of Obie Media Corporation:

We have  audited  the  accompanying  consolidated  balance  sheets of Obie Media
Corporation (an Oregon corporation) and subsidiaries as of November 30, 1997 and
1998,   and  the  related   consolidated   statements  of  income,   changes  in
shareholders'  equity  (deficit) and cash flows for each of the two years in the
period  ended   November 30,   1998.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Obie Media  Corporation  and
subsidiaries  as of  November 30,  1997  and  1998,  and the  results  of  their
operations  and their cash  flows for each of the two years in the period  ended
November 30, 1998 in conformity with generally accepted accounting principles.



                                                             ARTHUR ANDERSEN LLP
                                                          /s/Arthur Andersen LLP



Portland, Oregon,
  January 15, 1999 (except with respect to the matter
                    discussed in Note 10, as to which
                    the date is February 12, 1999)
 

<PAGE>
<TABLE>
<CAPTION>
                             OBIE MEDIA CORPORATION
                             ----------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                        AS OF NOVEMBER 30, 1997 AND 1998
                        --------------------------------

                                     ASSETS
                                     ------
                                                                 1997               1998
                                                             -----------        -----------
<S>                                                          <C>                <C>
CURRENT ASSETS:
  Cash                                                       $      -           $   326,140
  Accounts receivable, net of allowance for doubtful
    accounts of $146,692 and $291,938, respectively            2,878,360          6,719,218
  Prepaid expenses and other current assets                      790,234          1,156,061
  Deferred income taxes                                        1,105,240            758,832
                                                             -----------        -----------
          Total current assets                                 4,773,834          8,960,251

PROPERTY AND EQUIPMENT, net                                    9,264,855         10,493,174

OTHER ASSETS:
  Goodwill, net                                                        -          7,696,394
  Other assets, net                                              245,733            497,512
                                                             -----------        -----------
                                                             $14,284,422        $27,647,331
                                                             ===========        ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
CURRENT LIABILITIES:
  Checks outstanding in excess of cash deposits              $   173,611           $      -
  Current portion of long-term debt                              859,323          1,511,276
  Line of credit                                                 742,864          1,414,877
  Accounts payable                                               403,449            780,268
  Accrued expenses                                             1,166,883          2,674,287
  Income taxes payable                                                 -            299,090
  Deferred revenue                                               781,204          1,247,470
                                                             -----------        -----------
          Total current liabilities                            4,127,334          7,927,268
                                                             -----------        -----------
DEFERRED INCOME TAXES                                            630,551            783,502

LONG-TERM DEBT, less current portion                           5,695,219         13,354,395
                                                             -----------        -----------
          Total liabilities                                   10,453,104         22,065,165

MINORITY INTEREST IN SUBSIDIARY                                   35,424             35,424

COMMITMENTS (Note 8)

SHAREHOLDERS' EQUITY:
  Preferred stock, without par value, 10,000,000 shares
    authorized, no shares issued and outstanding                       -                  -
  Common stock, without par value; 20,000,000 shares
    authorized, 4,241,034 and 4,315,728 shares
    issued and outstanding, respectively                       6,173,967          6,851,053
  Options issued for common stock                                      -            211,763
  Accumulated deficit                                         (2,378,073)        (1,516,074)
                                                             -----------        -----------
          Total shareholders' equity                           3,795,894          5,546,742
                                                             -----------        -----------
                                                             $14,284,422        $27,647,331
                                                             ===========        ===========
</TABLE>



                                      F-3
<PAGE>
                             OBIE MEDIA CORPORATION
                             ----------------------
                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
                 FOR THE YEARS ENDED NOVEMBER 30, 1997 AND 1998
                 ----------------------------------------------


                                                     1997               1998
                                                 -----------        -----------
REVENUES:
  Outdoor advertising                            $ 5,373,609        $ 5,796,230
  Transit advertising                              9,251,346         19,421,970
  Less- Agency commissions                        (1,322,129)        (2,500,455)
                                                 -----------        -----------
          Net revenues                            13,302,826         22,717,745

OPERATING EXPENSES:
  Direct advertising expenses                      8,004,869         14,792,952
  General and administrative                       2,241,849          3,628,028
  Start-up costs                                     236,743            106,375
  Depreciation and amortization                      664,207            935,545
                                                 -----------        -----------
          Operating income                         2,155,158          3,254,845

OTHER (INCOME) EXPENSE:
  Interest expense                                   584,258            776,001
  Minority interest in subsidiary                      8,017                  -
  Other                                              (51,492)                 -
                                                 -----------        -----------
INCOME BEFORE INCOME TAXES                         1,614,375          2,478,844

PROVISION FOR INCOME TAXES                           614,311            977,665
                                                 -----------        -----------
NET INCOME                                       $ 1,000,064        $ 1,501,179
                                                 ===========        ===========

BASIC NET INCOME PER SHARE                       $       .24        $       .35
                                                 ===========        ===========

DILUTED NET INCOME PER SHARE                     $       .23        $       .35
                                                 ===========        ===========


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

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                             OBIE MEDIA CORPORATION
                             ----------------------
      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
      --------------------------------------------------------------------
                 FOR THE YEARS ENDED NOVEMBER 30, 1997 AND 1998
                 ----------------------------------------------


                                                           Options
                                                          Issued for
                                                            Common       Accumulated
                            Shares           Amount          Stock         Deficit           Total
                           ---------       ----------     ----------     ------------      ----------
<S>                        <C>             <C>            <C>            <C>               <C>
BALANCE, November 30,
  1996                     4,235,000       $6,161,992     $    -          $(3,378,137)     $2,783,855

  Additional initial
    public offering
    expenses                    -             (24,788)         -                 -            (24,788)
  Issuance of common
    stock                      6,050           36,875          -                 -             36,875
  Purchase of
    fractional shares
    of common stock              (16)            (112)         -                 -               (112)
  Net income                    -                -             -            1,000,064       1,000,064
                           ---------       ----------     ----------     -------------     ----------
BALANCE, November 30,
  1997                     4,241,034        6,173,967          -           (2,378,073)      3,795,894

  Issuance of common
    stock for benefit
    plan and stock
    option exercises          19,694          127,788          -                 -            127,788
  Issuance of common
    stock for the
    acquisition of
    business                  55,000          512,500          -                 -            512,500
  Purchase of property
    from related party
    in excess of net
     book value                  -               -             -             (639,180)       (639,180)
  Options issued for
    common stock for
    the acquisition of
    business                     -               -          211,763              -            211,763
  Income tax benefit of
    nonqualified stock
    option exercises             -             36,798          -                 -             36,798
  Net income                     -               -             -            1,501,179       1,501,179
                           ---------       ----------     ----------      ------------     ----------
BALANCE, November 30,
  1998                     4,315,728       $6,851,053     $ 211,763       $(1,516,074)     $5,546,742
                           =========       ==========     ==========      ============     ===========

</TABLE>
The accompanying notes are an integral part of these consolidated statements.

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                             OBIE MEDIA CORPORATION
                             ----------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                 FOR THE YEARS ENDED NOVEMBER 30, 1997 AND 1998
                 ----------------------------------------------

                                                           1997                1998
                                                       ------------         ------------
<S>                                                    <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                           $ 1,000,064          $ 1,501,179
  Adjustments to reconcile net income to net cash
    provided by operating activities-
      Depreciation and amortization                        664,207              935,545
      Deferred income taxes                                614,311              499,359
      Minority interest in subsidiary                        8,017                    -
      Change in assets and liabilities
        net of effect of acquisition:
          (Increase) decrease in-
            Accounts receivable                         (1,328,167)          (2,759,773)
            Prepaid expenses and other assets             (106,961)            (231,977)
          Increase (decrease) in-
            Accounts payable                              (316,696)             337,735
            Income taxes payable                                 -              335,888
            Accrued expenses                                96,443              927,378
            Deferred revenue                               185,902              230,859
                                                       ------------         ------------
          Net cash provided by operating activities        817,120            1,776,193

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                  (1,439,617)          (1,679,981)
  Acquisition of business, net of cash acquired                  -           (6,288,846)
  Other investing activities                                     -              (36,259)
                                                       ------------         ------------
          Net cash used in investing activities         (1,439,617)          (8,005,086)
                                                       ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock                         -               55,885
  Costs to issue common stock                              (24,788)                   -
  Net borrowings (payments) on lines of credit             742,864              672,013
  Checks outstanding in excess of cash deposits            173,611             (173,611)
  Proceeds from long-term debt                                   -            7,698,000
  Net payments on long-term debt                          (744,018)          (1,584,871)
  Payments of debt issuance costs                                -              (69,371)
  Other financing activities                                  (112)             (43,012)
                                                       ------------         ------------
          Net cash provided by financing activities        147,557            6,555,033
                                                       ------------         ------------
NET INCREASE IN CASH                                      (474,940)             326,140

CASH, beginning of period                                  474,940                    -
                                                       ------------         ------------
CASH, end of period                                       $      -          $   326,140
                                                       ============         ============
                                                                              (Continued)

                                       F-6
<PAGE>
                             OBIE MEDIA CORPORATION
                             ----------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                 FOR THE YEARS ENDED NOVEMBER 30, 1997 AND 1998
                 ----------------------------------------------
                                   (Continued)


                                                           1997                 1998
                                                       ------------         ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Issuance of stock to employee benefit plan           $    36,875          $    71,903
  Note payable issued to acquire outdoor advertising
    structures                                                   -              698,000
  Issuance of common stock and stock options for the
    acquisition of business                                      -              724,263
  Issuance of note payable for the acquisition of
    business                                                     -            1,500,000
  Costs associated with financing activities                     -              131,855
  Income tax benefit of nonqualified stock option
    exercises                                                    -               36,798
  Interest capitalized                                      10,637               14,104

CASH PAID FOR INTEREST                                     571,445              850,626

CASH PAID FOR TAXES                                          7,890              138,216

</TABLE>

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

                                      F-7
<PAGE>
                             OBIE MEDIA CORPORATION
                             ----------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                           NOVEMBER 30, 1997 AND 1998
                           --------------------------


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
    -------------------------------------------

Company
-------

Obie Media Corporation (the Company) is a full service  out-of-home  advertising
company  which  markets  advertising  space  primarily  on transit  vehicles and
outdoor advertising displays (billboards and wallscapes).  At November 30, 1998,
the Company had 33 exclusive  agreements  with  transit  districts in the United
States  and  Canada to  operate  transit  advertising  displays.  These  transit
districts are located in, among other  advertising  markets:  Dallas;  Portland,
Oregon;  Cleveland;  Sacramento;   Hartford;  Ft.  Lauderdale;   Cincinnati  and
Vancouver,  British  Columbia.  The Company  also  operates and  generally  owns
advertising displays on billboards and walls in Washington,  Oregon,  California
and Idaho.

On November 21, 1996,  the Company  completed an initial  public  offering  (the
"IPO") of  1,210,000  shares of its common  stock,  raising  $5,887,204,  net of
expenses  of  $1,112,796.  The  net  proceeds  were  used to  reduce  previously
outstanding debt.

Spin-Off
--------

Prior to November 20,  1996,  the Company was a  subsidiary  of Obie  Industries
Incorporated.  To  facilitate  the IPO,  the Company was  spun-off as a separate
entity.

Prior  to the  spin-off,  the  Company  engaged  in  various  transactions  with
affiliates under common control. These transactions included advances of working
capital to affiliates for a discontinued  business and for capital expenditures.
Such transactions  resulted in a net receivable consisting of amounts receivable
from and  payable to  affiliated  companies.  As part of the  spin-off,  the net
receivable   from  affiliates   totaling   $1,752,480  was  distributed  by  the
declaration of a dividend and, accordingly,  increased the Company's accumulated
deficit.

Philbin & Coine, Inc. Acquisition
---------------------------------

On  September 1, 1998,  the Company  acquired  all of the  outstanding  stock of
Philbin  & Coine,  Inc.,  a New York  corporation  doing  business  as P&C Media
("P&C") in exchange for 55,000 newly issued shares of the Company's common stock
valued at $512,500,  stock  options for 27,500  shares of the  Company's  common
stock valued at $211,763 (Note 7), cash of approximately  $6,100,000, a note for
$1,500,000  due in future  years  (Note 5) and fees and  expenses  of  $191,497.
Additionally,  subject  to certain  performance  contingencies  in the  purchase
agreement,  the Company  will be required  to issue up to an  additional  82,500
shares of the  Company's  common stock to the former P&C  shareholder  in future
years.  The  value  of any  subsequently  issued  shares  will be  allocated  to
goodwill.

Included in accounts  receivable in the accompanying  balance sheets at November
30, 1998 is a receivable  from the former  shareholder of P&C for  approximately
$76,000, which relates to the acquisition of P&C.

The  transaction  has been  accounted  for as a purchase  with the excess of the
purchase  price  over the fair value  (which  approximated  historical  carrying
value) of the net assets acquired  allocated to goodwill.  The operations of P&C
have been included in the  accompanying  financial  statements since the date of
acquisition.

                                      F-8
<PAGE>
A summary of the net assets acquired follows:

               Working capital                            $  408,123
               Property and equipment                        273,564
               Other assets                                   11,680
               Intangibles                                 7,822,393
                                                          ----------
                                                          $8,515,760
                                                          ==========

The following  unaudited pro forma consolidated  results of operations have been
prepared as if the acquisition of P&C had occurred as of the beginning of fiscal
year 1997 and 1998:

                                             1997            1998
                                         -----------     -----------
               Net revenue               $19,422,850     $28,197,250
               Operating income            1,266,971       2,847,366
               Net income                    621,396       1,054,648
               Net income per share-
                 Basic                          $.14            $.24
                 Diluted                        $.14            $.24

These pro forma results are not  necessarily  indicative of what actually  would
have occurred had the acquisition  been completed as of the beginning of each of
the periods presented,  nor are they necessarily  indicative of the results that
will be obtained in the future.

Basis of Presentation

The  consolidated  financial  statements  include the Company,  its wholly owned
subsidiary, Obie Media Limited, and its 50% owned subsidiary, OB Walls, Inc. All
significant  intercompany  accounts and transactions between the Company and its
subsidiaries have been eliminated in consolidation.

Foreign Currency Translation

The  financial  statements  of the  Company's  foreign  subsidiary,  Obie  Media
Limited,  are translated  into United States dollars using exchange rates at the
balance sheet date for assets and  liabilities,  and average  exchange rates for
the  period for  revenues  and  expenses.  The  effect of the  foreign  currency
translation was insignificant for the year ended November 30, 1998.

Use of Estimates

The  preparation  of  consolidated   financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.
Actual results could differ from those estimates.

Revenue Recognition

The  Company has  contracts  to provide  future  advertising  to its  customers.
Advertising  revenue is recognized  ratably over the period the  advertising  is
displayed.  Payments  received  and amounts  billed for  advertising  revenue in
advance  of  display  are  deferred.  Costs  incurred  for  the  production  and
installation  of  outdoor  advertising  displays,  which  are  not  specifically
recoverable  in the event the related  contract  is  canceled,  are  expensed as
incurred.  Costs incurred for the production  and  installation  of displays for
transit advertising, which are paid for by the customer ratably over the term of
the advertising contract and are

                                      F-9
<PAGE>
specifically  recoverable  in the event the related  contract is  canceled,  are
deferred and recognized as expense as the related revenue is recognized over the
life of respective contracts.

Concentration of Credit Risk

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist  principally  of cash and accounts  receivable.  The Company
places its cash with high credit quality financial institutions.  Concentrations
of credit risk with respect to accounts  receivable are not  significant  due to
the large number of customers,  and their dispersion across different industries
and geographic areas.

At November  30, 1998,  the Company had  agreements  with 33 transit  districts.
Customers  advertising  on transit  vehicles  owned by the six  largest  transit
districts of Portland,  Oregon; Dallas; Cleveland;  British Columbia;  Milwaukee
and Cincinnati represented approximately 53% of the Company's total net revenues
for the year ended November 30, 1998. No single advertising customer represented
10% or more of the  Company's  revenues for any of the periods  presented in the
accompanying financial statements.

Transit  agreements  range  from one to five  years and are  subject  to renewal
either at the discretion of the transit district or upon the mutual agreement of
the Company and the transit district.  Generally,  these agreements  require the
Company to pay the transit  district the greater of a percentage  of the related
advertising revenues, net of the advertising production charges, or a guaranteed
minimum amount (Notes 8 and 10).

Fair Value of Financial Instruments

The  Company's  financial  instruments  consist  of cash,  accounts  receivable,
accounts payable,  accrued expenses and debt  instruments.  At November 30, 1997
and 1998, the fair value of the Company's financial instruments are estimated to
be equal to their reported  carrying value. The carrying value of long-term debt
approximates  fair  value.  The  resulting   estimates  of  fair  value  require
subjective  judgments and are  approximates.  Changes in the  methodologies  and
assumptions could significantly affect the estimates.

Property and Equipment

Property  and  equipment  are stated at cost.  Depreciation  is  provided on the
straight-line   method  over  the   estimated   useful   lives.   Additions  and
improvements,  including interest incurred during construction, are capitalized.
Normal  repairs  and  maintenance  are  expensed  as  incurred.   The  cost  and
accumulated  depreciation  of assets sold or otherwise  retired are removed from
the accounts and the  resulting  gain or loss is  recognized.  Interest  expense
incurred is capitalized in connection  with the  construction  of properties and
equipment.

Goodwill and Other Long-Lived Assets

Goodwill  resulting from the P&C  acquisition  is being  amortized over 15 years
using  the  straight-line  method  and is net of  amortization  of  $126,000  at
November  30,  1998.  Goodwill  and other  long-lived  assets  are  periodically
evaluated  when facts and  circumstances  indicate that the value of such assets
may be impaired.  Evaluations are based on undiscounted  projected earnings.  If
the valuation  indicates that undiscounted  earnings are insufficient to recover
the recorded assets, then the projected earnings are discounted to determine the
revised carrying value and a write-down for the difference is recorded.

Other assets include loan costs, which are stated at cost and amortized over the
life of the loan.


                                      F-10
<PAGE>
Income Taxes

The  Company  uses the  liability  method  to record  deferred  tax  assets  and
liabilities that are based on the difference between the tax bases of assets and
liabilities and their carrying amounts for financial reporting  purposes.  These
temporary  differences  result from the use of different  accounting methods for
financial statement and tax reporting purposes.

Earnings Per Share

Beginning in the Company's  fiscal year ended November 30, 1998,  basic earnings
per share ("EPS") and diluted EPS are required to be computed  using the methods
prescribed  by  Statement of Financial  Accounting  Standards  ("SFAS") No. 128,
"Earnings per Share." Basic EPS is calculated  using the weighted average number
of common shares  outstanding for the period and diluted EPS is calculated using
the weighted  average  number of common  shares and dilutive  common  equivalent
shares outstanding. Such amounts have been retroactively adjusted to reflect the
10-for-1  stock split which  occurred in 1996,  the 11-for-10  stock split which
occurred  in November  1997 and the  11-for-10  stock  split  which  occurred in
November 1998 (Note 7).

Following is a reconciliation of basic EPS and diluted EPS:
<TABLE>
<CAPTION>
                                                     Year Ended November 30, 1997
                                                  ----------------------------------
                                                                           Per Share
                                                    Income       Shares     Amount
                                                  ----------   ---------   ---------
<S>                                               <C>          <C>         <C>
Basic EPS-
  Income available to common shareholders         $1,000,064   4,237,387      $0.24
Effect of dilutive securities-
  Stock options                                            -      52,965
                                                  ----------   ---------
Diluted EPS-
  Income available to common shareholders         $1,000,064   4,290,352      $0.23
                                                  ==========   =========


                                                     Year Ended November 30, 1998
                                                  ----------------------------------
                                                                           Per Share
                                                    Income       Shares     Amount
                                                  ----------   ---------   ---------
Basic EPS-
  Income available to common shareholders         $1,501,179   4,263,327      $0.35
Effect of dilutive securities-
    Stock options                                          -      59,242
                                                  ----------   ---------
Diluted EPS-
  Income available to common shareholders         $1,501,179   4,322,569      $0.35
                                                  ==========   =========
</TABLE>

New Accounting Pronouncements

Effective  in its fiscal year ending  November  30,  1999,  the Company  will be
required to adopt SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131
"Disclosures about Segments of an Enterprise and Related  Information." SFAS No.
130 establishes  standards for reporting and display of comprehensive income and
its components in a full set of general-purpose  financial statements.  SFAS No.
131 changes  current  practice under SFAS No. 14 by establishing a new framework
on which to base segment  reporting  (referred to as the "management"  approach)
and also requires interim reporting of segment information.  Management does not
expect that the impact of adoption of these  pronouncements  will be material to
the Company's financial position or results of operations.


                                      F-11
<PAGE>
In June 1998,  the  Financial  Accounting  Standards  Board  issued SFAS No. 133
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting and reporting standards for all derivative  instruments.
SFAS No. 133 is effective for fiscal years  beginning  after June 15, 1999.  The
Company currently has no derivative instruments and, therefore,  the adoption of
SFAS 133 will have no impact on the Company's  financial  position or results of
operations.

2.  PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

                                                             November 30,
                                                        ----------------------
                                                          1997        1998
                                                        --------    ----------
            Prepaid leases                              $322,811    $  379,435
            Transit advertising production costs         294,991       500,297
            Other                                        172,432       276,329
                                                        --------    ----------
                                                        $790,234    $1,156,061
                                                        ========    ==========

3.  PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:
<TABLE>
<CAPTION>
                                                              November 30,
                                                        ------------------------
                                                            1997          1998     Asset Lives
                                                        -----------   -----------  -----------
<S>                                                     <C>           <C>          <C>     
            Outdoor advertising structures              $10,577,588   $11,281,887     20 years
            Other equipment and leaseholds                2,139,119     3,434,153   5-20 years
                                                        -----------   -----------
                                                         12,716,707    14,716,040
            Less- Accumulated depreciation                3,451,852     4,222,866
                                                        -----------   -----------
                                                        $ 9,264,855   $10,493,174
                                                        ===========   ===========
</TABLE>

4.  ACCRUED EXPENSES:

Accrued expenses consist of the following:

                                                              November 30,
                                                         ----------------------
                                                            1997        1998
                                                         ----------  ----------
            Transit district fees                        $  753,571  $1,890,581
            Payroll and related items                       307,365     403,073
            Other                                           105,947     380,633
                                                         ----------  ----------
                                                         $1,166,883  $2,674,287
                                                         ==========  ==========


                                      F-12
<PAGE>
5.  FINANCING ARRANGEMENTS:

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                    November 30,
                                                              -----------------------
                                                                 1997        1998
                                                              ----------  -----------
<S>                                                           <C>         <C>
Term loan with U.S. Bank National Association ("U.S.
  Bank"), as described below                                  $6,340,000  $ 5,565,000
Note payable in annual payments of $12,000 plus interest 
  at 10%, with collateral of outdoor
  advertising structures, due October 1999                        24,000       12,000
Note payable in monthly payments of $5,900 including 
  interest at 10%, guaranteed by Brian B. Obie (the 
  Company's Chairman of the Board, President and Chief 
  Executive Officer), due April 2000                             149,786       96,025
Note payable to U.S. Bank, as described below                          -      664,762
Notes payable in monthly payments of $2,219 including 
  interest ranging from 9% to 9.98%, with collateral of
  several vehicles, maturing through November 2002                40,756       27,884
Bridge loan with U.S. Bank, as described below                      -       7,000,000
Note payable to former shareholder of P&C in certain
   installment payments plus interest at 6%, due January 1, 
   2003 (Note 1)                                                    -       1,500,000
                                                                 
                                                               ----------  -----------
                                                                6,554,542   14,865,671
Less- Current portion                                             859,323    1,511,276
                                                               ----------  -----------
                                                               $5,695,219  $13,354,395
                                                               ==========  ===========
</TABLE>

The aggregate  principal  payments due on the above debt  subsequent to November
30, 1998 are:

      Fiscal Year Ending
         November 30,

             1999                      $ 1,511,276
             2000                        2,736,136
             2001                        2,705,178
             2002                        2,455,524
             2003                        2,449,718
          Thereafter                     3,007,839
                                       -----------
                                       $14,865,671
                                       ===========

In October 1996, the Company received a $12,000,000  bridge loan from U.S. Bank,
which was used to refinance  substantially  all of the  Company's  then existing
debt.  Upon the  completion of the IPO, the  outstanding  balance on this bridge
loan was reduced to $7,000,000.  Effective  February 12, 1997,  the  outstanding
balance  was   converted  to  a  seven-year   term  loan,   payable  in  monthly
installments, due April 30, 2004. On September 1, 1998, the term of the loan was
amended to be due on December 15, 2003,  payable in monthly  installments,  with
interest  to be  based,  at  the  Company's  option,  partially  at  the  London
Inter-Bank  Offering rate ("LIBOR") plus 2% (7.25% at November 30, 1998) and the
remainder at U.S.  Bank's prime rate plus .5% (8.25% at November 30, 1998).  The
loan is collateralized by substantially all of the Company's assets.


                                      F-13
<PAGE>
On August 1, 1998, the Company  received a $698,000 loan from U.S.  Bank,  which
was used to pay a note due to an  affiliated  partnership  (Note 8). The loan is
payable in monthly  installments  of $8,310 through July 15, 2005, with interest
to be based,  at the Company's  option,  partially at LIBOR plus 2% (7.71875% at
November 30, 1998) and the  remainder at U.S.  Bank's prime rate plus .5% (8.25%
at November 30, 1998). The loan is  collateralized  by substantially  all of the
Company's assets.

On September 1, 1998,  the Company  received a $7,000,000  bridge loan from U.S.
Bank,  which was used to finance the  Company's  acquisition  of P&C (Note 1) as
well as pay down certain indebtedness of P&C in connection with the acquisition.
The principal  balance is due on August 31, 1999, or upon closing of a secondary
offering,  whichever is earlier. Interest is based on LIBOR plus 2% (7.59375% at
November 30,  1998).  The loan is  collateralized  by  substantially  all of the
Company's assets.

In the event that a secondary offering does not occur by August 31, 1999, or the
secondary offering does not provide sufficient net proceeds for repayment of the
$7,000,000 bridge loan, the Company,  at its option, can convert the bridge loan
into a seven-year term loan, with the principal  amount limited to the lesser of
$7,000,000  or the unpaid  balance of the bridge loan  principal  and  interest,
immediately following application of all net proceeds of any secondary offering.
The first monthly installment would be due on the 15th day of the first calendar
month  following the closing of the term loan, with interest to be based, at the
Company's  option,  on LIBOR  plus 2% or at U.S.  Bank's  prime  rate plus 0.5%.
Therefore,  at November 30, 1998,  this loan is  classified  as long-term on the
balance sheet. The aggregate  principal  payments due on this debt subsequent to
November 30, 1998 are included in the five-year debt payout schedule above.

The Company also has a $4,000,000  operating  line of credit with U.S. Bank. The
interest  rate is at U.S.  Bank's prime rate (8.0% at November 30, 1998) and the
line is collateralized by receivables, equipment, inventory and contract rights.
The  outstanding  balance on this line of credit at November  30, 1997 and 1998,
was $742,864 and $1,414,877, respectively.

The Company was in compliance with all loan covenants at November 30, 1998.

6.  INCOME TAXES:

The provision for income taxes was a deferred provision of $614,311 for the year
ended November 30, 1997. For the year ended November 30, 1998, the provision for
income taxes included a current  provision of $478,306 and a deferred  provision
of $499,359.


                                      F-14
<PAGE>
The tax effects of temporary  differences  that give rise to deferred tax assets
and liabilities are as follows:

                                                      November 30,
                                              ----------------------------
                                                 1997               1998
                                              ----------         ---------
Current deferred tax assets:
  Deferred revenue                            $  457,595         $ 621,895
  Prepaid commissions                            291,029           224,560
  Allowance for doubtful accounts                 56,652           112,746
  Net operating loss carryforwards               442,565                 -
  Accrued expenses and other                       6,001            25,468
                                              ----------         ---------
          Total current deferred tax assets    1,253,842           984,669

Current deferred tax liabilities:
  Prepaid fees and other                        (148,602)         (225,837)
                                              ----------         ---------
          Net current deferred tax assets     $1,105,240         $ 758,832
                                              ==========         =========

Noncurrent deferred tax liabilities:
  Property and equipment                      $  630,551         $ 783,502
                                              ==========         =========

Based  on  management's  assessment,  it is more  likely  than  not that the net
deferred tax assets will be realized through future taxable income.

Income tax expense for the years ended  November  30, 1997 and 1998 differs from
the  amounts  computed by applying  the U.S.  federal  income tax rate of 34% to
pretax income, as follows:



                                                        Year Ended November 30,
                                                        -----------------------
                                                          1997           1998
                                                        --------       --------
Computed "expected" tax expense                         $548,888       $842,807
Increase in income taxes resulting from-
  State and local taxes, net of federal income
    tax benefit                                           65,423        114,523
  Other differences, net                                       -         20,335
                                                        --------       --------
          Actual income tax expense                     $614,311       $977,665
                                                        ========       ========


                                      F-15
<PAGE>
7. SHAREHOLDERS' EQUITY:

The Company's Restated Articles of Incorporation authorize the issuance of up to
20,000,000  shares of common  stock and  10,000,000  shares of  preferred  stock
issuable in series ("Preferred Stock").

In connection  with the Company's IPO, the Company's  Articles of  Incorporation
were  amended  and  restated on October 1, 1996 to  authorize  a 10-for-1  stock
split.  In October  1997,  the  Company  declared an  11-for-10  stock split for
shareholders  of record on November  21,  1997.  In November  1998,  the Company
declared an  11-for-10  stock split for  shareholders  of record on November 21,
1998.

Preferred Stock

The Board of Directors is authorized, without further shareholder authorization,
to  issue  Preferred  Stock  in one or  more  series  and to fix the  terms  and
provisions of each series, including dividend rights and preferences, conversion
rights,  voting rights,  redemption rights and rights on liquidation,  including
preferences over common stock.

Common Stock

Holders  of common  stock  are  entitled  to one vote per  share on all  matters
requiring  shareholder  vote.  Holders of common  stock are  entitled to receive
dividends  when and as  declared  by the  Board of  Directors  out of any  funds
lawfully available therefor, and, in the event of liquidation or distribution of
assets,  are entitled to participate  ratably in the distribution of such assets
remaining after payment of liabilities, in each case subject to any preferential
rights granted to any series of Preferred Stock that may then be outstanding.

Stock Options

On September 1, 1998,  the Company  granted  nonstatutory  stock  options to the
former  shareholder  of  P&C,  as  part  of the  acquisition  of P&C  (Note  1),
exercisable for 137,500 shares of the Company's common stock.  Additionally,  as
part of the acquisition,  the Company granted  nonstatutory stock options to the
legal  counsel  of the P&C  shareholder  exercisable  for  11,000  shares of the
Company's  common  stock.  Of the 148,500  stock  options  granted,  27,500 were
exercisable  on the date of grant at an exercise  price of $7.92 per share,  and
included  in the  purchase  price  for the  acquisition  of P&C  (Note  1).  The
remaining  110,000  options  granted  to  the  former  shareholder  of  P&C  are
exercisable  in  27,500  increments  on  the  annual  anniversary  dates  of the
Company's employment  agreement signed with the former P&C shareholder,  subject
to certain provisions regarding the former P&C shareholder's employment with the
Company.  These  options  will be  recorded  as  additional  goodwill  once  the
contingent provisions are met.

In  addition,  on  October  2,  1996,  the  Company's  Board  of  Directors  and
shareholders adopted the 1996 Stock Incentive Plan (the "Plan"),  which provides
for the issuance of 363,000 shares of common stock  pursuant to Incentive  Stock
Options ("ISOs"),  Nonqualified Stock Options ("NSOs"),  stock bonuses and stock
sales to employees, directors and consultants of the Company. ISOs may be issued
only to  employees of the Company and will have a maximum term of ten years from
the date of grant.  The exercise price for ISOs may not be less than 100% of the
fair  market  value  of the  common  stock  at the  time of the  grant,  and the
aggregate  fair market value (as  determined at the time of the grant) of shares
issuable  upon the exercise of ISOs for the first time in any one calendar  year
may not exceed $100,000. In the case of ISOs granted to holders of more than 10%
of the voting power of the Company, the exercise price may not be less than 110%
of the fair market value of the common  stock at the time of the grant,  and the
term of the option may not exceed five

                                      F-16
<PAGE>
years.  NSOs may be granted at not less than 85% of the fair market value of the
common stock at the date of grant.  Options  become  exercisable  in whole or in
part from time to time as  determined  by the Board of  Directors'  Compensation
Committee,  which administers the Plan. Activity under the Plan is summarized as
follows:

                                                                      Weighted
                                     Shares        Shares Subject     Average
                                 Available for     to  Options        Exercise
                                     Grant                             Price
                                 -------------     --------------    ---------
BALANCES, November 30, 1996         222,035          140,965           $5.50
  Options granted                   (20,570)          20,570            6.21
  Options canceled                    2,420           (2,420)           5.50
                                   --------          -------
BALANCES, November 30, 1997         203,885          159,115            5.59
  Options granted                   (72,150)          72,150           11.24
  Options canceled                   27,825          (27,825)           7.51
  Options exercised                       -          (11,979)           5.50
                                   --------          -------
BALANCES, November 30, 1998         159,560          191,461            7.45
                                   ========          =======

Statement of Financial Accounting Standards No. 123

During 1995,  the Financial  Accounting  Standards  Board issued SFAS 123, which
defines a fair value based method of accounting  for employee  stock options and
similar equity  instruments  and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans.  However, it also
allows an entity to continue to measure  compensation cost for those plans using
the method of accounting  prescribed by APB 25. Entities electing to continue to
use the  accounting  treatment in APB 25 must make pro forma  disclosures of net
income and, if presented,  earnings per share, as if the fair value based method
of accounting defined in SFAS 123 had been adopted.

The Company has elected to account for its stock-based  compensation plans under
APB 25; however,  the Company has computed,  for pro forma disclosure  purposes,
the value of all options  granted  during the years ended  November 30, 1997 and
1998,  using the  Black-Scholes  option  pricing model as prescribed by SFAS 123
using the following weighted average assumptions for grants:

                                    Year Ended
                                    November 30,
                               ---------------------
                                 1997          1998
                               -------       -------
Risk-free interest rate          6.25%         6.00%
Expected dividend yield             0%            0%
Expected lives                 8 years       6 years
Expected volatility             55.84%        53.11%


                                      F-17
<PAGE>
Using the Black-Scholes  methodology,  the total value of options granted during
the  years  ended  November  30,  1997  and  1998,  was  $78,160  and  $482,453,
respectively,  which  would be  amortized  on a pro forma basis over the vesting
period of the options  (typically  five years).  The weighted  average per share
fair value of options granted during the years ended November 30, 1997 and 1998,
was  $4.60  and  $7.36,  respectively.  If the  Company  had  accounted  for its
stock-based  compensation  plans in accordance  with SFAS 123, the Company's net
income and net  income per share  would  approximate  the pro forma  disclosures
below:

                                          Year Ended November 30,
                              ---------------------------------------------
                                       1997                    1998
                              ---------------------   ----------------------
                                  As                      As      
                               Reported   Pro Forma    Reported   Pro Forma
                              ----------  ---------   ----------  ----------
Net income                    $1,000,064  $931,396    $1,501,179  $1,396,956
Diluted net income per share     $0.23      $0.22        $0.35       $0.33

The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future  amounts.  SFAS 123 does not apply to awards prior to January 1, 1995,
and additional awards are anticipated in future years.

The following table summarizes  information  about stock options  outstanding at
November 30, 1998:
<TABLE>
<CAPTION>
                       Options Outstanding                          Options Exercisable
   -----------------------------------------------------------    ------------------------
                                      Weighted
                       Number          Average        Weighted        Number         Weighted
     Range of      Outstanding at     Remaining       Average     Exercisable at      Average
     Exercise      November 30,      Contractual      Exercise     November 30,      Exercise
      Prices           1998          Life - Years      Price           1998            Price
   ------------    --------------    ------------    ---------    --------------    ----------
<S>                   <C>                <C>          <C>              <C>            <C>  
   $       5.50       113,740            12.9         $ 5.50           45,496         $5.50
      6.10-6.25        16,214            13.2           6.25            3,630          6.23
           7.92       126,500             9.8           7.92           27,500          7.92
      9.06-9.55        44,675            11.4           9.40             -             -
    10.00-10.23         5,500            14.4          10.14             -             -
    12.73-13.86        33,332            14.4          12.85             -             -
   ------------       -------            ----         ------           ------         -----
   $ 5.50-13.86       339,961            11.7         $ 7.74           76,626         $6.40
   ============       =======            ====         ======           ======         =====
</TABLE>
At December 31, 1997,  24,079  options were  exercisable  at a weighted  average
exercise price of $5.50 per share.

8.  COMMITMENTS AND CERTAIN RELATED PARTY TRANSACTIONS:

Transit Agreements

Certain transit  agreements require the Company to remit to the transit district
the greater of a percentage of the related advertising  revenues or a guaranteed
minimum amount. At November 30, 1998,  future guaranteed  minimum payments under
the transit agreements are as follows:

      Fiscal Year Ending
         November 30,

             1999                     $14,780,733
             2000                      14,473,484
             2001                      14,636,890
             2002                      10,209,046
             2003                       7,019,531
          Thereafter                    8,630,785


                                      F-18
<PAGE>
Operating Leases

The  Company  leased   outdoor   advertising   structures   from  an  affiliated
partnership.  The lease agreement  required  monthly  payments of a minimum base
rent  plus  additional  rent  equal to 5% of the  gross  revenues  derived  from
advertising displayed on the structures.  Minimum base rent payments were $8,500
per month  through  December  1996,  and  increased  to $9,000 per month for the
following  calendar  year.  The lease  expired  December 31,  1997.  Total lease
expense  pursuant  to this lease was  $108,397  and  $17,981 for the years ended
November 30, 1997 and 1998, respectively.

In December  1997,  the Company  exercised  its option to purchase  the property
discussed  above at a purchase price of $698,000.  In accordance  with generally
accepted accounting principles, the Company recorded only the book value carried
on the  books  of the  affiliated  partnership  at the  date  of  purchase.  The
difference between the net book value of these assets and the purchase price has
been recorded as an addition to the Company's accumulated deficit.

The Company also rents office and production space from  affiliates.  Such rents
totaled  $123,180 and  $171,096 for the years ended  November 30, 1997 and 1998,
respectively.

The Company leases parcels of property beneath outdoor  advertising  structures.
These leases are  generally  for a term of up to ten years,  with two  five-year
renewal options at the Company's discretion.  The Company also leases facilities
for sales,  service  and  installation  for its  operating  offices.  Total rent
expense pursuant to these leases was $755,486 and $1,073,074 for the years ended
November 30, 1997 and 1998, respectively.

At November 30, 1998,  future  minimum lease  payments for all operating  leases
described above are as follows:

      Fiscal Year Ending
         November 30,

             1999                    $1,391,974
             2000                     1,264,114
             2001                     1,140,144
             2002                       859,667
             2003                       659,753
          Thereafter                  1,961,171

9.  EMPLOYEE BENEFIT PLAN:

Substantially all of the Company's  employees who have met vesting  requirements
participate   in  a  defined   contribution   benefit  plan  that  provides  for
discretionary  annual  contributions  by the  Company.  During  the years  ended
November  30,  1997  and  1998,  the  Company   accrued   $32,154  and  $86,304,
respectively,  as  contributions to the plan. In 1997, the Company paid the 1996
accrued  contribution through a contribution of 6,050 shares of its common stock
to the Plan and the balance in cash. In 1998,  the Company paid the 1997 accrued
contribution  through a contribution  of 7,715 shares of its common stock to the
Plan and the balance in cash.


                                      F-19
<PAGE>
10.  SUBSEQUENT EVENT:

The  Company  has a  contract  to  provide  advertising  sales  services  to the
Tri-County Metropolitan Transit District ("Tri-Met") in Portland, Oregon, which,
by its terms, was scheduled to expire in June 2001. The Company originally began
serving Tri-Met in January 1994,  pursuant to a five-year  agreement,  which was
later extended for an additional two years.  The Federal Transit  Administration
("FTA"),  which provides substantial monies to transit districts,  has taken the
position that transit advertising contracts may not exceed five years in length.
At the  request  of the  FTA,  Tri-Met  and the  Company  have  agreed  that the
Company's agreement with Tri-Met will terminate on June 30, 1999 and in December
1998 entered into an agreement to compensate  the Company for early  termination
of  the  existing  contract.   Tri-Met  is  soliciting   proposals  for  transit
advertising  sales  services for a five-year  term  beginning  July 1, 1999.  In
December  1998,  the Company  submitted  its response to  Tri-Met's  request for
proposal for a new multi-year contract beginning July 1, 1999. In February 1999,
the Company was advised by Tri-Met  that it was in second  place in the proposal
process. Tri-Met is expected to make a final decision in March 1999.




















                                      F-20