<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                        

             [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

                    OF THE SECURITIES EXCHANGE ACT OF 1934

                                        

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 333-57201

                           ADVANSTAR HOLDINGS, INC.

             (Exact name of Registrant as specified in its charter)


                  DELAWARE                                 94-3243499
(State or other jurisdiction of incorporation or         (I.R.S. Employer
                 organization)                        Identification No.)

          7500 OLD OAK BOULEVARD                              44130
               CLEVELAND, OH                               (Zip code)
  (Address of principal executive offices)

                                 (440) 243-8100
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
             (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.

                       Yes                     No  X
                           ---                    ---
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.
                                   FORM 10-Q

                               TABLE OF CONTENTS



PART I    FINANCIAL INFORMATION

          Item 1.  Financial Statements:                                  Page
                                                                          ---- 

                   Condensed Consolidated Statements of Operations 
                   (unaudited) for the Three Months Ended 
                   September 30, 1998 and 1997...........................    1
 
                   Condensed Consolidated Statements of Operations 
                   (unaudited) for the Nine Months Ended 
                   September 30, 1998 and 1997...........................    2
 
                   Condensed Consolidated Balance Sheets at 
                   September 30, 1998 (unaudited) and December 31, 1997..    3
 
                   Condensed Consolidated Statements of Cash Flows 
                   (unaudited) for the Three Months Ended 
                   September 30, 1998 and 1997...........................    4
 
                   Condensed Consolidated Statements of Cash Flows 
                   (unaudited) for the Nine Months Ended  
                   September 30, 1998 and 1997...........................    5
 
                   Notes to Condensed Consolidated Financial Statements..    6

Item 2.            Management's Discussion and Analysis of Financial
                   Condition and Results of Operations...................   17
 
PART II  OTHER INFORMATION

Item 6(a)          Exhibits..............................................   28

Item 6(b)          Reports on Form 8-K...................................   28
 
                   Signature.............................................   29

                   Exhibit Index.........................................   30

                   Exhibits..............................................   31
<PAGE>
 
                         PART I: FINANCIAL INFORMATION

ITEM 1:  FINANCIAL STATEMENTS


                            ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS--UNAUDITED)


<TABLE>
<CAPTION>
                                                                    For the Three Months Ended
                                                                           September 30,
                                                                  ------------------------------- 
                                                                      1998                1997
                                                                  -----------         ----------- 
<S>                                                              <C>                  <C> 
Net revenue..................................................     $    76,033         $    37,174
Operating expenses:                                            
 Cost of sales...............................................          16,340               8,054
 Selling, editorial and circulation..........................          30,052              19,527
 General and administrative..................................           9,422               6,451
 Depreciation and amortization...............................          18,761               6,277
                                                                  -----------         ----------- 
Operating income (loss)......................................           1,458              (3,135)
Interest expense, net........................................          (8,525)             (3,874)
Other, net...................................................             (82)                177
                                                                  -----------         ----------- 
Income (loss) before income taxes                                      (7,149)             (6,832)
Benefit (provision) for income taxes.........................             329                  (4)
                                                                  -----------         ----------- 
Net income (loss)............................................     $    (6,820)        $    (6,836)
                                                                  ===========         ===========
Net income (loss) per share, basic and diluted...............     $     (0.41)        $     (0.63)
                                                                  ===========         ===========
Weighted average common stock outstanding, 
  basic and diluted..........................................      16,733,333          10,900,000
</TABLE>

                                     - 1 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS--UNAUDITED)

<TABLE>
<CAPTION>
                                                                     For the Nine Months Ended
                                                                           September 30,
                                                                  ------------------------------- 
                                                                      1998                1997
                                                                  -----------         ----------- 
<S>                                                              <C>                  <C> 
Net revenue..................................................     $   197,245         $   137,228
Operating expenses:                                   
   Cost of sales.............................................          41,715              28,262
   Selling, editorial and circulation........................          85,431              65,008
   General and administrative................................          26,586              20,219
   Depreciation and amortization.............................          34,611              18,738
                                                                  -----------         ----------- 
Operating income.............................................           8,902               5,001
Interest expense, net........................................         (19,016)            (11,309)
Other, net...................................................          (1,976)                215
                                                                  -----------         ----------- 
Income (loss) before income taxes............................         (12,090)             (6,093)
Provision for income taxes...................................             (65)               (940)
                                                                  -----------         ----------- 
Net income (loss)............................................     $   (12,155)        $    (7,033)
                                                                  ===========         ===========
Net income (loss) per share, basic and diluted...............     $     (0.86)        $     (0.65)
                                                                  ===========         ===========
Weighted average common stock outstanding,            
   basic and diluted.........................................      14,169,231          10,841,392
</TABLE>

                                     - 2 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           September 30, 1998      December 31, 1997
                                                           ------------------      -----------------
                                                                  (Unaudited)          
<S>                                                               <C>                   <C>
                            ASSETS                                                    
CURRENT ASSETS:                                                                        
   Cash and cash equivlents.....................................  $     9,149            $    7,024
   Receivables, net.............................................       23,913                18,819
   Prepaids.....................................................       10,792                 9,607
   Other........................................................        2,214                 2,256
                                                                  -----------            ----------
          Total current assets..................................       46,068                37,706
                                                                  -----------            ----------
PROPERTY, PLANT AND EQUIPMENT, net..............................       13,481                12,146
GOODWILL AND INTANGIBLES, net...................................      588,799               248,645
                                                                  -----------            ----------
         Total assets...........................................  $   648,348            $  298,497
                                                                  ===========            ==========
                                                                                      
          LIABILITIES AND SHAREHOLDER'S EQUITY                                        

CURRENT LIABILITIES:                                                                   
   Current maturities of long-term debt.........................  $     5,897            $   15,350
   Accounts payable.............................................       14,324                10,938
   Deferred revenue.............................................       28,403                21,105
   Accrued liabilities..........................................       21,746                10,673
                                                                  -----------            ----------
          Total current liabilities.............................       70,370                58,066
                                                                  -----------            ----------
LONG-TERM DEBT, net of current maturities.......................      414,347               148,873
OTHER LONG-TERM LIABILITIES.....................................        1,334                 1,824
MINORITY INTEREST...............................................       14,452                   --
COMMITMENT AND CONTINGENCIES (Note 6)...........................
SHAREHOLDER'S EQUITY:                                                                 
   Common stock, $.01 par value, 20,000,000 shares authorized;                        
      16,733,333 shares outstanding at September 30, 1998 and                          
      10,900,000 December 31, 1997..............................          167                   109
   Paid-in capital..............................................      179,813               108,891
   Accumulated earnings (deficit)...............................      (31,464)              (19,309)
   Translation adjustment.......................................         (671)                   43
                                                                  -----------            ----------
          Total shareholder's equity............................      147,845                89,734
                                                                  -----------            ----------
          Total liabilities and shareholder's equity............  $   648,348            $  298,497
                                                                  ===========            ==========
</TABLE> 

                                     - 3 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (IN THOUSANDS--UNAUDITED)


<TABLE>
<CAPTION>
                                                                                        For the Three Months       
                                                                                         Ended September 30,
                                                                                     --------------------------  
                                                                                        1998             1997
                                                                                     ---------        ---------
<S>                                                                                 <C>              <C>
OPERATING ACTIVITIES:
  Net income (loss).............................................................     $  (6,820)       $  (6,836)
  Adjustments to reconcile net income (loss) to net cash 
    provided by operating activities-
       Depreciation and amortization............................................        18,761            6,277
       Other non-cash items.....................................................           220               32
       Changes in operating items...............................................        (4,460)           6,765
                                                                                     ---------        --------- 
           Net cash provided by operating activities............................         7,701            6,238
                                                                                      ---------        ---------

INVESTING ACTIVITIES:
  Additions to property, plant and equipment, net...............................          (883)             305
  Additions to intangible assets and acquisition working capital................       (75,238)          (3,113)
                                                                                     ---------        --------- 
          Net cash used in investing activities.................................       (76,121)          (2,808)
                                                                                     ---------        ---------  
FINANCING ACTIVITIES:
  Proceeds from sale of common stock and capital contributions..................           980                -
  Borrowings (payments) of long-term debt, net..................................        54,615           (2,125)
                                                                                     ---------        --------- 
          Net cash provided by (used in) financing activities...................        55,595           (2,125)
                                                                                     ---------        --------- 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................       (12,825)           1,305
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................        21,974            7,298
                                                                                     ---------        --------- 
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................     $   9,149        $   8,603
                                                                                     =========        =========
SUPPLEMENTAL INFORMATION:
 Cash paid for-
   Interest.....................................................................     $   5,090        $   3,715
 
   Taxes........................................................................           545               59
</TABLE>

                                     - 4 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (IN THOUSANDS--UNAUDITED)

<TABLE>
<CAPTION>
                                                                                         For the Nine Months       
                                                                                         Ended September 30,
                                                                                     --------------------------  
                                                                                        1998             1997
                                                                                     ---------        ---------
<S>                                                                                 <C>              <C>
OPERATING ACTIVITIES:
  Net income (loss)............................................................      $ (12,155)       $  (7,033)
  Adjustments to reconcile net income (loss) to net cash provided
     by operating activities-
       Depreciation and amortization...........................................         34,611           18,738
       Other non cash items....................................................         (1,481)             488
       Changes in operating items..............................................         (3,637)            (425)
                                                                                     ---------        --------- 
          Net cash provided by operating activities............................         17,338           11,768
 
INVESTING ACTIVITIES:
  Additions to property, plant and equipment, net..............................         (2,540)            (807)
  Additions to intangible assets and acquisition working capital...............       (339,658)         (34,238)
                                                                                     ---------        --------- 
          Net cash used in investing activities................................       (342,198)         (35,045)
                                                                                     ---------        --------- 
FINANCING ACTIVITIES:
  Proceeds from sale of common stock and capital contributions.................         70,980           12,000
  Borrowings of long-term debt, net............................................        256,005           17,349
                                                                                     ---------        --------- 
          Net cash provided by financing activities............................        326,985           29,349
                                                                                     ---------        ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS......................................          2,125            6,072
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................          7,024            2,531
                                                                                     ---------        ---------
CASH AND CASH EQUIVALENTS, end of period.......................................      $   9,149        $   8,603
                                                                                     =========        ========= 

SUPPLEMENTAL INFORMATION:
 Cash paid for-
   Interest....................................................................      $  13,144        $  11,768
 
   Taxes.......................................................................          1,495            1,593
</TABLE>

                                     - 5 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1. BASIS OF PRESENTATION:

The accompanying condensed consolidated financial statements of Advanstar
Holdings, Inc. (Holdings), together with its wholly owned subsidiary Advanstar
Communications Inc. (Communications) and Communications' subsidiaries
(collectively with Communications, the Company, and collectively with Holdings
and Communications, Advanstar) have been prepared by Advanstar, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Holdings currently has only minimal operations which are solely for the benefit
of Communications and the financial transactions and results of operations of
Holdings relating to such operations are "passed through" to Communications
without markup or discount, via intercompany charges.  Holdings is in the
process of "downstreaming" these minimal operations that it conducts for the
benefit of Communications to Communications.  The information furnished in the
condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of such financial statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
Advanstar believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed consolidated
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in Advanstar's Registration
Statement on Form S-4 (File No. 333-57201), relating to Communications' exchange
offer for its outstanding 9  1/4% Senior Subordinated Notes (the Notes).

Revenues and operating results for the three and nine months ended September 30,
1998 and 1997 are not necessarily indicative of the results to be expected for
the full year.

2. ACQUISITIONS AND FINANCING TRANSACTIONS:

MAGIC ACQUISITION

On April 30, 1998, Advanstar acquired Men's Apparel Guild in California, Inc.
(MAGIC), which operates apparel expositions (the MAGIC Acquisition). The
purchase price was approximately $234.3 million in cash and certain assumed
liabilities. Concurrent with the MAGIC Acquisition, Advanstar renegotiated its
credit agreement (the "Original Credit Facility") to provide additional
borrowing capacity (as so amended, the "First Amended Credit Facility") and
issued $150.0 million of Notes (see Note 3). On April 30, 1998, Advanstar also
received an additional equity contribution from its parent of approximately
$71.0 million.

TRAVEL AGENT ACQUISITION

On August 17, 1998, Advanstar acquired certain travel-related publication and
trade show assets of Universal Media Inc. (the Travel Agent Acquisition),
including Travel Agent (collectively, Travel Agent). The purchase price was
approximately $68.0 million in cash plus approximately $1.0 million in assumed
liabilities. Concurrent with the Travel Agent Acquisition, Advanstar undertook
an additional amendment to its credit agreement to further increase its
borrowing capacity thereunder by $40.0 million (as so amended, the Second
Amended Credit Facility, and together with the Original Credit Facility and the
First Amended Credit Facility, the Amended Credit Facility), and financed the
balance of the cash purchase price with its available cash and revolving credit
facility.

                                     - 6 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)



OTHER 1998 ACQUISITIONS

From January 1, 1998 through September 30, 1998, Advanstar completed ten other
acquisitions of exposition and publishing properties, with a cumulative purchase
price totaling approximately $77.7 million.  Certain entities acquired in 1998
have minority ownership interests.

PRO FORMA FINANCIAL INFORMATION

The following are unaudited pro forma results of operations for the nine months
ended September 30, 1998 as if the aforementioned acquisitions and the financing
transactions described above had been completed at the beginning of the year (in
thousands):

      Revenues.............................................  $ 237,911
                                                             =========
      Operating income.....................................  $  19,463
                                                             =========
      Net income (loss)....................................  $  (9,072)
                                                             =========
      Net income (loss) per share, basis and diluted.......  $   (0.64)
                                                             =========

The unaudited pro forma financial information does not purport to represent what
Advanstar's financial position or results of operations would actually have been
if these transactions had occurred at such dates or to project Advanstar's
future results of operations.

3. DEBT AND AMENDED CREDIT FACILITY:

In order to facilitate the MAGIC Acquisition and to provide greater flexibility
in pursuing its growth strategy, on April 30, 1998, Communications, the sole
subsidiary of Holdings (see Note 7) issued the Notes and Advanstar amended the
Original Credit Facility with a syndicate of banks by increasing its borrowing
capacity thereunder from $215.0 million to $270.0 million under the First
Amended Credit Facility.

The First Amended Credit Facility was again amended in August 1998 by increasing
Advanstar's borrowing capacity thereunder from $270.0 million to $310.0 million
under the Second Amended Credit Facility, which was used for the Travel Agent
Acquisition.

                                     - 7 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)



Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                           September 30,          December 31, 
                                                                               1998                   1997
                                                                           -------------          ------------
                                                                            (Unaudited)
<S>                                                                       <C>                    <C>
Tranche A term loan, interest at LIBOR plus 2.25%, 7.91% and 8.19% 
 at September 30, 1998 and December 31, 1997, respectively, due 
 October 31, 2003......................................................     $     99,265          $     51,500
Tranche A2 term loan, interest at LIBOR plus 2.75%, 8.69% at 
 December 31, 1997 due December 31, 2002...............................                -                38,850
Tranche B term loan, interest at LIBOR plus 2.5%, 8.16% and 8.44%  
 at September 30, 1998 and December 31, 1997, respectively, due 
 April 30, 2005........................................................          149,850                71,873
Revolving credit loan, interest at LIBOR plus 2.25%, 7.91% and 8.19% 
 at September 30, 1998 and December 31, 1997, respectively, due 
 October 31, 2003......................................................           21,500                 2,000
Senior subordinated notes at 9.25%, due May 31, 2008, net of discount..          149,629                     -
                                                                           -------------          ------------ 
                                                                                 420,244               164,223
Less- current maturities...............................................           (5,897)              (15,350)
                                                                           -------------          ------------
                                                                           $     414,347          $    148,873
                                                                           =============          ============
</TABLE>

DESCRIPTION OF AMENDED CREDIT FACILITY

The Amended Credit Facility consists of three components:  a 5 1/2-year term
loan in an aggregate principal amount equal to $100 million, a 7-year term loan
in an aggregate principal amount equal to $150 million, and a 5 1/2-year
revolving credit facility in the maximum available amount of $60 million.

The obligations of Communications under the Amended Credit Facility are
guaranteed by Holdings and the domestic wholly-owned subsidiaries of
Communications and are collateralized by substantially all tangible and
intangible assets of Advanstar and pledges of Communications' and substantially
all of its subsidiaries' capital stock (including MAGIC).

The term loans are amortized in quarterly installments totaling approximately
$1.8 million in 1998, $8.2 million in 1999, $15.9 million in 2000, $20.0 million
in 2001, $23.0 million 2002, $37.1 million in 2003, $72.3 million in 2004 and
$71.7 in 2005. Principal amounts outstanding under the revolving credit facility
are due and payable in full at maturity, approximately 5 1/2 years after April
30, 1998. Interest on outstanding borrowings accrues, at floating variable
rates, as defined, approximating a blended average rate of 8.1% on September 30,
1998. In addition, Advanstar is required to pay a commitment fee under the
revolving credit facility in respect of the unutilized commitments thereunder at
a rate that varies based upon operating performance targets and step-downs set
forth in the agreement, subject to a maximum commitment fee rate of 0.50% per
annum.

Advanstar is required to apply certain amounts to prepay the term loans,
including (i) proceeds from certain issuances of equity or indebtedness by
Advanstar; (ii) the net cash proceeds of certain sales or other dispositions by
Advanstar or any of its subsidiaries of any assets; and (iii) 50% of excess cash
flow (as defined) for each fiscal year starting on January 1, 2000. Advanstar
will also have the right to optionally prepay the loans under the Amended
Credit Facility, without premium, in whole or in part. Amounts

                                     - 8 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


applied as prepayments of the revolving credit facility may be reborrowed;
amounts prepaid in respect of the term loans may not.

Under the Amended Credit Facility, restrictive financial covenants
include a minimum fixed charge coverage ratio and a maximum leverage ratio. 
Advanstar was in compliance with all covenants as of September 30, 1998.

DESCRIPTION OF NOTES

The Notes are unsecured, senior subordinated obligations of Communications,
limited to $150.0 million aggregate principal amount, and will mature on May 1,
2008. Each Note bears interest at 9 1/4%, payable semiannually. The Notes are
redeemable at Advanstar's option after May 1, 2003 through April 30, 2006 at
specified premiums, and at par thereafter. A portion of the Notes may be
redeemed at a premium prior to May 1, 2001 with proceeds of certain equity
offerings made by Advanstar, and the Notes may also be redeemed at a premium
prior to May 1, 2003 upon a qualifying change of control of Advanstar.

Restrictive financial covenants under the Notes include a minimum fixed charge
coverage ratio and limitations on certain asset dispositions and dividend,
distribution, and other restricted payments. Advanstar was in compliance with
all covenants as of September 30, 1998.

4.  SHAREHOLDER'S EQUITY:

On June 10, 1998 Advanstar Holdings, Inc. merged into its parent holding
company, AHI Holdings Corp. AHI Holdings Corp. had no operations independent of
Advanstar Holdings, Inc. In connection with the merger, AHI Holdings Corp.
changed its name to Advanstar Holdings, Inc. All references to the number of
common shares and per share amounts have been adjusted to reflect the
capitalization of the merged entity.

5. COMPREHENSIVE INCOME:

Effective January 1, 1998, Advanstar adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income."  This statement establishes
standards for reporting and display of comprehensive income and its components.
The table below presents comprehensive income, defined as changes in the equity
of Advanstar excluding changes resulting from investments by and distributions
to shareholders (in thousands):

<TABLE>
<CAPTION>
                                                                Three Months Ended            Nine Months Ended 
                                                                   September 30,                 September 30,
                                                               --------------------          -------------------
                                                                  1998       1997               1998      1997
                                                               --------    --------          --------   --------
<S>                                                           <C>          <C>              <C>         <C>
Net income (loss)..........................................    $ (6,820)   $ (6,836)         $(12,155)  $ (7,033)
Change in translation adjustment...........................        (301)        (32)             (714)        46
                                                               --------    --------          --------   --------
Comprehensive income (loss)................................    $ (7,121)   $ (6,868)         $(12,869)  $ (6,987)
                                                               ========    ========          ========   ======== 
</TABLE>

6. COMMITMENTS AND CONTINGENCIES:

LITIGATION


Advanstar is a defendant in legal proceedings arising in the ordinary course of
business. Although the outcome of these proceedings cannot presently be
determined, in the opinion of management, disposition of these proceedings will
not have a material effect on the results of operations or financial position of
Advanstar.

                                     - 9 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


7. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

BASIS OF PRESENTATION

The Notes will be fully and unconditionally guaranteed on a senior subordinated
basis, jointly and severally, by Communications' wholly-owned domestic
subsidiaries and by Holdings. The subsidiary guarantors are Art Expositions
International, Inc. (Art Expo); Expocon Management Associates, Inc. (Expocon);
On Demand Marketing, Inc. (On Demand); Men's Apparel Guild in California, Inc.
(MAGIC); MAGIC Kids, Inc. (MAGIC Kids); Technology Events Company, LLC (TEC) and
Applied Business teleCommunications (ABC and, collectively with Art Expo,
Expocon, On Demand, MAGIC, MAGIC Kids, and TEC, the Subsidiary Guarantors). The
accompanying condensed consolidating financial information of Communications and
its subsidiaries are presented below and should be read in connection with the
condensed consolidated financial statements of Holdings. Separate financial
statements of Communications are not presented because Communications is a
wholly owned subsidiary of Holdings. The limited activities of Holdings are
performed solely for the benefit of Communications. Accordingly, the financial
transactions and results of Holdings are passed through to Communications,
without markup or discount, via intercompany charges. Separate consolidated
financial statements of Communications are not presented herein as they are not
materially different from those presented for Holdings. Separate financial
statements of the Subsidiary Guarantors are not presented because the Subsidiary
Guarantors are jointly, severally and unconditionally liable under the
guarantees, and Advanstar believes the condensed consolidating financial
statements presented are more meaningful in understanding the financial position
of the guarantors.

There are no significant restrictions on the ability of the Subsidiary
Guarantors to make distributions to Communications.

                                     - 10 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.

                     CONDENSED CONSOLIDATING BALANCE SHEET

                            AS OF SEPTEMBER 30, 1998

                                  (UNAUDITED)

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                             GUARANTOR  SUBSIDIARIES
                                             -------------------------------------------------------------------------------------
                                                       COMMUN-    ART              MAGIC                           ON    
                                             HOLDINGS  ICATIONS   EXPO    MAGIC    KIDS       ABC     EXPOCON    DEMAND      TBC
                                             --------  --------   ----  ---------  ------   -------   -------    ------    -------
<S>                                         <C>        <C>        <C>   <C>        <C>      <C>       <C>        <C>       <C>   
                ASSETS                                                                                                        
CURRENT ASSETS:                                                                                                                  
 Cash and cash equivalents................. $      -   $    399   $ -   $   (131)  $   30   $    57   $  (301)  $     -   $     -
 Accounts receivable, net..................        -     20,236     -        178       54       413     2,126    (1,294)     (792)
 Prepaid expenses..........................        -      5,033     -      1,348        -       488       505        83       483 
 Intercompany receivable (payable).........      579    (17,520)    -     20,886    2,947      (324)   (1,875)    2,346    (2,713)
 Other.....................................        -      1,767     -          -        -         -         -         -         -
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
        Total current assets...............      579      9,915     -     22,281    3,031       634       455     1,135    (3,022)
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
PROPERTY, PLANT AND EQUIPMENT, net.........        -     11,986     -        414       10        56       314         -         -
INVESTMENTS IN SUBSIDIARIES................  146,694    309,423     -          -        -         -         -         -         -
GOODWILL AND INTANGIBLE ASSETS, net........        -    286,894     -    214,197        4    17,592    11,840     8,156    10,802
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
                                            $147,273   $618,218   $ -   $236,892   $3,045   $18,282   $12,609   $ 9,291   $ 7,780
                                            =========  ========   ====  =========  ======   =======   =======   =======   ========
   LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
 Current maturities of long-term debt...... $      -   $  5,897   $ -   $      -   $    -   $     -   $     -   $     -   $     -
 Accounts payable..........................      124      8,640     -      3,015      393       (50)    1,211        16        35
 Deferred revenue..........................        -     10,681     -      1,053      (12)    3,018     2,113       900     1,190
 Accrued liabilities.......................      455     15,022     -      2,891      166       669       176         7        53
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
        Total current liabilities..........      579     40,240     -      6,959      547     3,637     3,500       923     1,278
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
LONG-TERM DEBT, net of current maturities..        -    414,347     -          -        -         -         -         -         -
OTHER LONG-TERM LIABILITIES................        -      1,334     -          -        -         -         -         -         -
MINORITY INTEREST..........................        -     14,452     -          -        -         -         -         -         -
SHAREHOLDER'S EQUITY:
 Common stock..............................      167         10     -          1        -         2         1         1         -
 Paid-in capital...........................  179,813    179,970     -    220,627    1,430    15,739     9,593     7,454     9,912
 Accumulated earnings (deficit)............  (32,615)   (31,464)    -      9,305    1,068    (1,096)     (485)      913    (3,410)
 Translation adjustment....................     (671)      (671)    -          -        -         -         -         -         -
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
        Total shareholder's equity.........  146,694    147,845     -    229,933    2,498    14,645     9,109     8,368     6,502
                                            ---------  --------   ----  ---------  ------   -------   -------   -------   --------
                                            $147,273   $618,218   $ -   $236,892   $3,045   $18,282   $12,609   $ 9,291   $ 7,780
                                            =========  ========   ====  =========  ======   =======   =======   =======   ========

<CAPTION> 
                                               TOTAL           NON-                           HOLDINGS
                                             GUARANTOR       GUARANTOR                      CONSOLIDATED
                                               SUBS            SUBS       ELIMINATIONS          TOTAL
                                             ---------       ---------    ------------      ------------
<S>                                         <C>              <C>          <C>               <C> 
                ASSETS                                        
CURRENT ASSETS:                                                                                                                  
 Cash and cash equivalents.................  $   (345)        $ 9,095      $       -          $  9,149
 Accounts receivable, net..................       685           2,992              -            23,913
 Prepaid expenses..........................     2,907           2,852              -            10,792
 Intercompany receivable (payable).........    21,267          (3,747)          (579)                -
 Other.....................................         -             447              -             2,214
                                             ---------       ---------     ----------         --------- 
        Total current assets...............    24,514          11,639           (579)           46,068
                                             ---------       ---------     ----------         --------- 
PROPERTY, PLANT AND EQUIPMENT, net.........       794             701              -            13,481
INVESTMENTS IN SUBSIDIARIES................         -               -       (456,117)                -
GOODWILL AND INTANGIBLE ASSETS, net........   262,591          39,314              -           588,799
                                             ---------       ---------     ----------         --------- 
                                             $287,899         $51,654      $(456,696)         $648,348
                                             =========       =========     ==========         ========= 
   LIABILITIES AND SHAREHOLDER'S EQUITY                                                                                            
CURRENT LIABILITIES:                                                                                                            
 Current maturities of long-term debt......  $      -         $     -      $       -          $  5,897
 Accounts payable..........................     4,620           1,064           (124)           14,324
 Deferred revenue..........................     8,262           9,460              -            28,403
 Accrued liabilities.......................     3,962           2,762           (455)           21,746
                                             ---------       ---------     ----------         --------- 
        Total current liabilities..........    16,844          13,286           (579)           70,370
                                             ---------       ---------     ----------         --------- 
LONG-TERM DEBT, net of current maturities..         -               -              -           414,347
OTHER LONG-TERM LIABILITIES................         -               -              -             1,334
MINORITY INTEREST..........................         -               -              -            14,452
SHAREHOLDER'S EQUITY:                                                                                                           
 Common stock..............................         5             332           (347)              167
 Paid-in capital...........................   264,755          37,812       (482,537)          179,813
 Accumulated earnings (deficit)............     6,295             224         26,096           (31,464)
 Translation adjustment....................         -               -            671              (671)
                                             ---------       ---------     ----------         --------- 
        Total shareholder's equity.........   271,055          38,368       (456,117)          147,845
                                             ---------       ---------     ----------         --------- 
                                             $287,899         $51,654      $(456,696)         $648,348
                                             =========       =========     ==========         ========= 

</TABLE>

                                     - 11 -
<PAGE>
 
                           ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998

                                  (UNAUDITED)

                                (IN THOUSANDS)
<TABLE> 
<CAPTION>
                                                                                           GUARANTOR SUBSIDIARIES
                                                                         ----------------------------------------------------------
                                                             COMMUN-     ART             MAGIC                        ON 
                                                  HOLDINGS   ICATIONS    EXPO   MAGIC     KIDS     ABC    EXPOCON   DEMAND    TEC 
                                                  --------   --------    ----   -----    -----     ---    -------   ------    ---
<S>                                               <C>        <C>        <C>    <C>       <C>      <C>      <C>      <C>      <C> 
Net revenue....................................   $     -    $ 42,969   $  -   $22,191   $1,976   $  48    $ 664    $  (1)   $ (37)
Operating expenses:
 Cost of sales and selling, editorial and 
   circulation.................................         -      29,964      -     8,126      854     378      773      (86)     463
 General and administrative....................    (1,527)      8,280      -       735       11     106      271        -        - 
 Depreciation and amortization.................         -      14,480      -     2,701        -     272      300      158      209 
                                                  --------   --------   -----  -------   ------   ------   ------   ------   ------
Operating income (loss)........................     1,527      (9,755)     -    10,629    1,111    (708)    (680)     (73)    (709)
Other income (expense):
 Interest expense, net.........................         -      (8,466)     -        34        -       -        -        -        -
 Other income (expense), net...................    (1,527)      2,720      -         -        -       2     (217)    (178)    (183)
                                                  --------   --------   -----  -------   ------   ------   ------   ------   ------
Income (loss) before income taxes..............         -     (15,501)     -    10,663    1,111    (706)    (897)    (251)    (892)
Benefit (provision) for income taxes...........         -       1,227      -         -        -      (5)       -       (9)       - 
Equity in income (loss) of subsidiaries........    (6,820)      7,454      -         -        -       -        -        -        - 
                                                  --------   --------   -----  -------   ------   ------   ------   ------   ------
Net income (loss)..............................   $(6,820)   $ (6,820)  $  -   $10,663   $1,111   $(711)   $(897)   $(260)   $(892) 
                                                  ========   ========   =====  =======   ======   ======   ======   ======   ======



<CAPTION> 
                                                   TOTAL           NON-                            HOLDINGS
                                                 GUARANTOR       GUARANTOR          ELIMIN-      CONSOLIDATED
                                                   SUBS            SUBS             ATIONS          TOTAL
                                                 ---------       ---------          -------      ------------
<S>                                               <C>            <C>                <C>            <C>
Net revenue....................................   $24,841         $ 8,223           $   -           $76,033
Operating expenses:
 Cost of sales and selling, editorial and 
   circulation.................................    10,508
 General and administrative....................     1,123           1,546               -             9,422
 Depreciation and amortization.................     3,640             641               -            18,761
                                                 ---------       ----------        --------        ----------
Operating income (loss)........................     9,570             116               -             1,458
Other income (expense):
 Interest expense, net.........................        34             (93)              -            (8,525)
 Other income (expense), net...................      (576)           (699)              -               (82)
                                                 ---------       ----------        --------        ----------
Income (loss) before income taxes..............     9,028            (676)              -            (7,149)
Benefit (provision) for income taxes...........       (14)           (884)              -               329
Equity in income (loss) of subsidiaries........         -               -            (634)                -
                                                 ---------       ----------        --------        ----------
Net income (loss)..............................   $ 9,014         $(1,560)          $(634)          $(6,820)
                                                 =========       ==========        ========        ==========

</TABLE> 

                                     - 12 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

                                  (UNAUDITED)

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                         GUARANTOR SUBSIDIARIES
                                                                       ----------------------------------------------------------
                                                           COMMUN-     ART             MAGIC                          ON 
                                               HOLDINGS    ICATIONS    EXPO   MAGIC     KIDS     ABC      EXPOCON   DEMAND    TEC 
                                               --------    --------    ----   -----    -----     ---      -------   ------    ---
<S>                                           <C>         <C>         <C>   <C>       <C>      <C>        <C>      <C>      <C> 
Net revenue.................................  $      -    $130,855    $ -   $22,191   $1,976   $   375    $6,171   $3,723   $ 2,576
Operating expenses:
 Cost of sales and selling, editorial and 
  circulation...............................         -      86,633      -     8,290      893       888     4,378    1,871     3,453
 General and administrative.................         -      20,090      -     1,043       14       218       682        -         -
 Depreciation and amortization..............         -      27,425      -     3,587        -       362       870      475       627
                                              ---------   ---------   ---   -------   ------   --------   -------  ------   -------
Operating income (loss).....................         -      (3,293)     -     9,271    1,069    (1,093)      241    1,377    (1,504)

Other income (expense):.....................     
Interest expense, net.......................         -     (18,774)     -        34        -         -         -        -         - 

Other income (expense), net.................         -       2,298      -         -        -         2      (671)    (533)     (550)
                                              ---------   ---------   ---   -------   ------   --------   -------  ------   -------
Income (loss) before income taxes...........         -     (19,769)     -     9,305    1,069    (1,091)     (430)     844    (2,054)

Benefit (provision) for income taxes........         -       1,022      -         -        -        (5)        -      (27)        - 

Equity in income (loss) of subsidiaries.....   (12,155)      6,592      -         -        -         -         -        -         - 
                                              ---------   ---------   ---   -------   ------   --------   -------  ------   -------
Net income (loss)...........................  $(12,155)   $(12,155)   $ -   $ 9,305   $1,069   $(1,096)   $ (430)  $  817   $(2,054)
                                              =========   =========   ===   =======   ======   ========   =======  ======   =======





<CAPTION> 


                                                TOTAL           NON-                          HOLDINGS
                                              GUARANTOR       GUARANTOR        ELIMIN-      CONSOLIDATED
                                                SUBS            SUBS           ATIONS          TOTAL
                                              ---------       ---------        -------      ------------
<S>                                           <C>             <C>              <C>            <C>
Net revenue.................................  $37,012         $29,378          $    -         $197,245
Operating expenses:
 Cost of sales and selling, editorial and 
  circulation...............................   19,773          20,740               -          127,146
 General and administrative.................    1,957           4,539               -           26,586
 Depreciation and amortization..............    5,921           1,265               -           34,611
                                              -------         --------         ------         --------- 
Operating income (loss).....................    9,361           2,834               -            8,902
Other income (expense):.....................     
Interest expense, net.......................       34            (276)              -          (19,016)
Other income (expense), net.................   (1,752)         (2,522)              -           (1,976)
                                              -------         --------         ------         --------- 
Income (loss) before income taxes...........    7,643              36               -          (12,090)
Benefit (provision) for income taxes........      (32)         (1,055)              -              (65)
Equity in income (loss) of subsidiaries.....  $ 7,611         $(1,019)
                                              -------         --------         ------         --------- 
Net income (loss)...........................  $ 7,611         $(1,019)         $5,563         $(12,155)
                                              =======         ========         ======         =========

</TABLE> 

                                     - 13 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                 For the Three Months Ended September 30, 1998
                                  (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                           GUARANTOR SUBSIDIARIES
                                                                         ----------------------------------------------------------
                                                             COMMUN-     ART               MAGIC                        ON 
                                                  HOLDINGS   ICATIONS    EXPO   MAGIC      KIDS    ABC    EXPOCON   DEMAND    TEC 
                                                  --------   --------    ----   -----      -----   ---    -------   ------    ---
<S>                                              <C>        <C>         <C>   <C>         <C>      <C>      <C>      <C>      <C> 
OPERATING ACTIVITIES:
 Net income (loss)  ...........................  $(6,820)   $ (6,820)   $ -   $ 10,663    $ 1,111  $(711)   $(897)   $(260)   $(892)

 Adjustments to reconcile net income (loss) 
   to net cash provided by operating 
   activities: ................................
 Depreciation and amortization ................        -      14,480      -      2,701          -    272      300      158      209 

 Other noncash items  .........................        -         220      -          -          -      -        -        -        - 

 Changes in operating items ...................    6,820       1,688      -    (16,733)    (1,110)   590      728      102      683 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
Net cash provided by (used in) operating 
  activities ..................................        -       9,568      -     (3,369)         1    151      131        -        - 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
INVESTING ACTIVITIES:
Additions to property, plant and 
  equipment, net ..............................        -        (533)     -       (154)        (5)   (11)    (186)       -        - 

Additions to intangible assets and 
  acquisition working capital .................        -     (75,992)     -        967        (11)  (177)     (63)       -        - 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
Net cash provided by (used in) investing 
  activities...................................        -     (76,525)     -        813        (16)  (188)    (249)       -        - 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
FINANCING ACTIVITIES:
Proceeds from sale of common stock and 
  capital contributions and other .............        -         980      -          -          -      -        -        -        - 

Borrowings (payments) of long-term debt .......        -      54,615      -          -          -      -        -        -        - 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
     Net cash provided by financing 
       activities .............................        -      55,595      -          -          -      -        -        -        - 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
NET INCREASE (DECREASE) IN CASH AND CASH 
  EQUIVALENTS..................................        -     (11,362)     -     (2,556)       (15)   (37)    (118)       -        - 

CASH AND CASH EQUIVALENTS, 
  beginning of period .........................        -      11,761      -      2,425         45     94     (183)       -        - 
                                                 --------   --------   ----   ---------   -------  -----    ------   -----    -----
CASH AND CASH EQUIVALENTS, end of period ......  $     -    $    399   $  -   $   (131)   $    30  $  57    $(301)   $   -    $   - 
                                                 ========   ========   ====   =========   =======  =====    ======   =====    =====

<CAPTION> 

                                                    TOTAL           NON-                          HOLDINGS
                                                  GUARANTOR       GUARANTOR        ELIMIN-      CONSOLIDATED
                                                    SUBS            SUBS           ATIONS          TOTAL
                                                  ---------       ---------        -------      ------------
<S>                                               <C>             <C>              <C>            <C>
OPERATING ACTIVITIES:
 Net income (loss)  ...........................   $  9,014        $(1,560)         $(634)         $ (6,820)
 Adjustments to reconcile net income (loss) 
   to net cash provided by operating 
   activities:
 Depreciation and amortization ................      3,640            641              -            18,761
 Other noncash items  .........................          -              -              -               220
 Changes in operating items ...................    (15,740)         2,138            634            (4,460)
                                                   --------       -------          ------         --------
Net cash provided by (used in) operating 
  activities ..................................     (3,086)         1,219              -             7,701
                                                   --------       -------          ------         --------
INVESTING ACTIVITIES:
Additions to property, plant and 
  equipment, net ..............................       (356)             6              -              (883)
Additions to intangible assets and 
  acquisition working capital .................        716             38              -           (75,238)
                                                   --------       -------          ------         --------
Net cash provided by (used in) investing 
  activities...................................        360             44              -           (76,121)
                                                   --------       -------          ------         --------
FINANCING ACTIVITIES:
Proceeds from sale of common stock and 
  capital contributions and other .............          -              -              -               980
Borrowings (payments) of long-term debt .......          -              -              -            54,615
                                                   --------       -------          ------         --------
     Net cash provided by financing 
       activities .............................          -              -              -            55,595
                                                   --------       -------          ------         --------
NET INCREASE (DECREASE) IN CASH AND CASH 
  EQUIVALENTS..................................     (2,726)         1,263              -           (12,825)
CASH AND CASH EQUIVALENTS, 
  beginning of period .........................      2,381          7,832                           21,974
                                                   --------       -------          ------         --------
CASH AND CASH EQUIVALENTS, end of period ......    $  (345)       $ 9,095          $   -          $  9,149
                                                   ========       =======          ======         ========

</TABLE> 

                                     - 14 -
<PAGE>
 
                            ADVANSTAR HOLDINGS, INC.
                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

                                  (UNAUDITED)

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                      GUARANTOR SUBSIDIARIES
                                                                    ----------------------------------------------------------
                                                        COMMUN-    ART               MAGIC                          ON 
                                             HOLDINGS   ICATIONS   EXPO   MAGIC      KIDS     ABC         EXPOCON   DEMAND    TEC 
                                             --------   --------   ----   -----      -----    ---         -------   ------    ---
<S>                                          <C>        <C>        <C>   <C>         <C>      <C>        <C>       <C>      <C> 
OPERATING ACTIVITIES:
 Net income (loss).......................... $(12,155)  $ (12,155) $ -   $   9,305   $ 1,069  $ (1,096)  $  (430)  $   817  $(2,054)

 Adjustments to reconcile net income
   (loss) to net cash provided by operating
   activities:
     Depreciation and amortization..........        -      27,425    -       3,587         -       362       870       475      627 

     Other noncash items                                                                    -    (1,501)        -         -       - 

     Changes in operating items.............   12,155    (263,049)   -     194,534    (1,696)   17,495     3,597    (1,292)   1,427 
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
Net cash provided by (used in) operating 
  activities................................        -    (249,280)   -     207,426      (627)   16,761     4,057         -        - 
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
INVESTING ACTIVITIES:
Additions to property, plant and 
  equipment, net............................        -      (2,026)   -        (154)       (5)      (11)     (203)        -        - 

Additions to intangible assets and 
  acquisition working capital...............        -     (78,686)   -    (207,403)      662   (16,693)   (3,838)        -        - 
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
Net cash provided by (used in) 
  investing activities......................        -     (78,683)   -    (207,557)      657   (16,704)   (4,041)        -        - 
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
FINANCING ACTIVITIES:
Proceeds from sale of common stock and 
  capital contributions.....................        -      70,980    -           -         -         -         -         -        - 

Borrowings of long-term debt................        -     256,005    -           -         -         -         -         -        - 
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
Net cash provided by financing activities...                         -     326,985         -         -         -         -        -
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
NET INCREASE (DECREASE) IN CASH AND 
  CASH EQUIVALENTS..........................        -      (3,004)   -        (131)       30        57        16         -        - 

CASH AND CASH EQUIVALENTS,
  beginning of period.......................        -       3,403    -           -         -         -      (317)        -        - 
                                             --------   --------   ---   ----------  -------  --------   --------  -------  -------
CASH AND CASH EQUIVALENTS, end of period.... $      -   $     399  $ -   $    (131)  $    30  $     57   $  (301)  $     -  $     - 
                                             ========   =========  ===   ==========  =======  ========   ========  =======  =======



<CAPTION> 

                                                    TOTAL           NON-                          HOLDINGS
                                                  GUARANTOR       GUARANTOR        ELIMIN-      CONSOLIDATED
                                                    SUBS            SUBS           ATIONS          TOTAL
                                                  ---------       ---------        -------      ------------
<S>                                               <C>             <C>              <C>            <C>
OPERATING ACTIVITIES:
 Net income (loss)..........................      $   7,611        $ (1,019)       $ 5,563         $ (12,155)
 Adjustments to reconcile net income
   (loss) to net cash provided by operating
   activities:
     Depreciation and amortization..........          5,921           1,265              -            34,611
     Other noncash items                                 20               -              -            (1,481)
     Changes in operating items.............        214,065          38,755         (5,563)           (3,637)
                                                    --------       --------        -------           -------
Net cash provided by (used in) operating 
  activities................................        227,617          39,001              -            17,338
                                                    --------       --------        -------           -------
INVESTING ACTIVITIES:
Additions to property, plant and 
  equipment, net............................           (373)           (141)             -            (2,540)
Additions to intangible assets and 
  acquisition working capital...............       (227,272)        (33,703)             -          (339,658)
                                                    --------       --------        -------           -------
Net cash provided by (used in) 
  investing activities......................       (227,645)        (33,844)             -          (342,198)
                                                    --------       --------        -------           -------
FINANCING ACTIVITIES:
Proceeds from sale of common stock and 
  capital contributions.....................              -               -              -            70,980
Borrowings of long-term debt................              -               -              -           256,005
                                                    --------       --------        -------           -------
Net cash provided by financing activities...              -               -              -           326,985
                                                    --------       --------        -------           -------
NET INCREASE (DECREASE) IN CASH AND 
  CASH EQUIVALENTS..........................            (28)          5,157              -             2,125
CASH AND CASH EQUIVALENTS, 
  beginning of period.......................           (317)          3,938              -             7,024
                                                    --------       --------        -------           -------
CASH AND CASH EQUIVALENTS, end of period....        $  (345)       $  9,095        $     -           $ 9,149
                                                    ========       ========        =======           =======

</TABLE> 

                                     - 15 -
<PAGE>
 
8.   New Accounting Pronouncements:

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ``Accounting for Derivative Instruments
and Hedging Activities'' (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative financial instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. Advanstar will be
required to adopt SFAS No. 133 no later than January 1, 2000.

In the fourth quarter of 1998, Advanstar will adopt Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information."  This statement requires Advanstar to report financial and
descriptive information about reportable operating segments.  Generally,
financial information will be required to be reported on the basis that is used
internally to evaluate segment performance and allocate resources to segments.
This new standard will not affect how Advanstar determines results of operations
or shareholders' equity.

                                     - 16 -
<PAGE>
 
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                 OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying condensed
consolidated financial statements for the periods specified and associated
notes.  Further reference should be made to "Risk Factors" below and to
Advanstar's Registration Statement on Form S-4 (File No. 333-57201) under the
Securities Act of 1933, as amended, and the consolidated financial statements
for the year ended December 31, 1997 included therein.

OVERVIEW

Advanstar Holdings, Inc., ("Holdings"), together with its wholly-owned
subsidiary Advanstar Communications Inc. ("Communications") and Communications'
subsidiaries (collectively with Communications, the "Company", and collectively
with Holdings and Communications, "Advanstar") provides integrated business-to-
business marketing communications services, principally through controlled
circulation trade, business and professional magazines and trade shows,
expositions and conferences.

Advanstar's principal sources of revenue are derived from advertising and
subscriptions in its publications, booth rentals, attendee revenue, seminar and
conference registrations from its expositions and trade shows, and sales of its
marketing services products.  Advanstar operates internally through four
industry or market-focused clusters. Each of these four clusters, Retail,
Hospitality & Fashion; Healthcare & Pharmaceutical; Information Technology &
Communications; and Manufacturing & Processing, contains all of Advanstar's
products and services directed toward its respective industry or market.
Additionally, Advanstar has a Market Development cluster to focus on developing
properties in markets where Advanstar looks to expand its selection of products
and services.

On April 30, 1998, Advanstar acquired the Men's Apparel Guild in California,
Inc. ("MAGIC"), producer of the world's largest trade show for the men's apparel
industry (based on net square feet of exhibition space), for cash and assumed
liabilities of $234.3 million (the "MAGIC Acquisition").  On August 17, 1998,
Advanstar acquired certain travel-related publication and trade show assets of
Universal Media, Inc. (collectively, "Travel Agent"), including Travel Agent,
the leading magazine, based on number of advertising pages, according to the
June 15, 1998 edition of Crain's Advertising Age, in the United States travel
agency market (the "Travel Agent Acquisition").  Advanstar paid $68.0 million in
cash plus the assumption of approximately $1.0 million of liabilities to acquire
Travel Agent. In addition to the MAGIC Acquisition and the Travel Agent
Acquisition, Advanstar made an additional ten acquisitions or joint ventures
in 1998 for aggregate purchase prices of approximately $77.7 million (the "Other
Acquisitions"). The MAGIC Acquisition, the Travel Agent Acquisition and the
Other Acquisitions are collectively referred to herein as the ``Acquisitions.''

Advanstar recognizes revenue from publishing activities throughout the year
based on the issue dates of publications. With respect to expositions and trade
shows, revenue and related direct event expenses are recognized in the month a
show or conference is held. Consequently, during the year, Advanstar will
reflect on its balance sheet the deferred revenue collected and prepaid expenses
incurred for a given event's next scheduled show. A portion of booth revenues
are collected up to a year in advance for Advanstar's expositions. These balance
sheet deferrals are recognized and released to the income statement in the month
the event is held.

RESULTS OF OPERATIONS

Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997

NET REVENUE.  Net revenue for the three months ended September 30, 1998
increased $38.8 million, or 104.3%, to $76.0 million from $37.2 million for the
three months ended September 30, 1997.  Exposition 

                                     - 17 -
<PAGE>
 
revenue increased in the third quarter $32.2 million, or 418.2% to $39.9 million
from $7.7 million in the third quarter of 1997, due primarily to exposition
events acquired in 1998, including MAGIC and the launch of the WorldPharm event,
offset by the discontinuation of exposition events in the Information Technology
& Communications and Manufacturing & Processing clusters. Publishing revenue for
the third quarter of 1998 increased $6.1 million, or 23.3%, to $32.3 million
from $26.2 million for the third quarter of 1997. The publishing revenue
increase was due primarily to improved performance in the Retail, Hospitality &
Fashion cluster and the Information Technology & Communications cluster, and to
publishing properties acquired in 1998, partially offset by decreased revenue
from certain properties in the Healthcare & Pharmaceutical cluster and from the
sale of a property in the Manufacturing & Processing cluster in April 1998.
Marketing Services revenue for the three months ended September 30, 1998
increased $0.5 million, or 15.2%, to $3.8 million from $3.3 million in the third
quarter of 1997.

Of the revenue increase in the third quarter of 1998, growth in the base
business (excluding properties acquired in 1998) was $1.8 million, or 4.9%,
increasing to $38.7 million from $36.9 million in the third quarter of 1997 due
primarily to improved performance in the Healthcare & Pharmaceutical cluster
attributable primarily to the launch of WorldPharm exposition and growth in the
Information Technology & Communications cluster and certain properties in the
Retail, Hospitality & Fashion cluster.  Of the overall growth in the base
business, $0.3 million was attributable to timing differences in certain
exposition events between the third quarter of 1998 compared with the third
quarter of 1997.   Exposition events are often held over different dates from
year to year, which occasionally results in reported exposition results being
reported in different fiscal quarters.  Revenue for the third quarter from all
properties acquired in 1998 was $37.3 million.

PRODUCTION, SELLING AND OTHER DIRECT EXPENSES.  Production, selling and other
direct expenses for the third quarter increased $18.8 million, or 68.1%, to
$46.4 million from $27.6 million in 1997, of which $17.4 million was
attributable to properties acquired in 1998.  Production, selling and other
direct expenses for the base business for the third quarter 1998 increased $1.4
million, or 5.1%, to $29.0 million from $27.6 million in 1997.  Production costs
for printing, paper and postage for the base business for the third quarter of
1998 increased $.1 million, or 1.6%, to $6.4 million from $6.3 million for the
third quarter 1997, due to a modest growth in the number of advertising pages.
Paper prices began to decline slightly in September 1998.  Base business selling
and promotional expenses for the third quarter of 1998 increased $0.6 million,
or 5.5%, to $11.5 million from $10.9 million in the third quarter of 1997, due
primarily to increased sales resources in publishing and marketing services.
Base business exposition facility costs for the third quarter of 1998 increased
$.3 million, or 21.4%, to $1.7 million from $1.4 million in the third quarter of
1997, due primarily to the timing of certain events from one quarter to another.

GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses for
the third quarter of 1998 increased $2.9 million, or 44.6%, to $9.4 million from
$6.5 million in the third quarter of 1997, of which $1.0 million was
attributable to acquisitions in 1998. General and administrative expenses for
the base business increased $1.9 million, or 29.2%, to $8.4 million from $6.5
million for the third quarter of 1998, largely due to incremental expenses of
$0.4 million relating to the establishment of Advanstar's Latin American
operations, $0.7 million relating to the expansion of infrastructure to support
the new market-focused organization and anticipated future growth, and $0.2
million for internet, Year 2000 and other information technology investments.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the three
months ended September 30, 1998 increased $12.5 million, or 198.4%, to $18.8
million from $6.3 million in the third quarter of 1997.  This increase is due
primarily to increased goodwill from the Company's recent acquisition activity
and the write-down of certain impaired intangible assets in the Healthcare &
Pharmaceutical, and Manufacturing & Processing clusters.

OPERATING INCOME.  For the three months ended September 30, 1998, operating
income increased $4.6 million, or 148.4%, to $1.5 million from a loss of $3.1
million in the third quarter of 1997, due to the growth in revenue and resulting
improved operating performance, partially offset by a $12.5 million increase in

                                     - 18 -
<PAGE>
 
amortization as a result of Advanstar's recent acquisition activity, and the
write-down of certain intangible assets.  In accordance with FASB Statement No.
121, "Accounting For the Impairment of Long-Lived Assets and For Long-Lived
Assets to Be Disposed Of," Advanstar adjusted the valuation of its intangible
assets to reflect the discontinuation and impairment of certain properties in
the Healthcare & Pharmaceutical and Manufacturing & Processing clusters.

INTEREST EXPENSE.  Net interest expense for the third quarter of 1998 increased
$4.6 million, or 117.9%, to $8.5 million from $3.9 million in the third quarter
of 1997, due to the incurrence of additional indebtedness necessary to fund
acquisitions completed in the latter part of 1997 and the first nine months of
1998.   In August 1998, in connection with the Travel Agent Acquisition,
Advanstar increased its Senior Term Loans by $40.0 million as part of the Second
Amended Credit Facility.

NET LOSS.  Net loss for the three months ended September 30, 1998 increased $1.3
million to a loss of $8.1 million from a loss of $6.8 million in 1997.  The
increase was due primarily to the growth in operating income offset by the
increases in amortization and interest expense and an increase of $1.0 million
in income tax expense relating to Advanstar's U.K. and Latin American
operations.

EBITDA.  EBITDA for the quarter ended September 30, 1998 increased $17.1
million, or 551.6% to $20.2 million from $3.1 million in the third quarter of
1997.  The increase was due primarily to the increase in revenue and resulting
increase in operating performance.  "EBITDA" is operating income plus
amortization and depreciation.  EBITDA does not represent and should not be
considered an alternative to net income or cash flow from operations as
determined by generally accepted accounting principles ("GAAP"), and Advanstar's
calculation thereof may not be comparable to that reported by other companies.
Advanstar believes that EBITDA provides useful information regarding Advanstar's
ability to service and/or incur indebtedness and is used by many other
companies. Advanstar's lenders have indicated that the amount of indebtedness
Advanstar will be permitted to incur will be based, in part, on Advanstar's
EBITDA.  It is also Advanstar's experience that the merit of potential
acquisitions and divestitures in Advanstar's industry are evaluated by the
parties involved, in part, based on EBITDA.  EBITDA does not take into account
Advanstar's working capital requirements or other commitments and, accordingly,
is not necessarily indicative of the amounts that may be available for
discretionary uses.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997

Net revenue.  Net revenue for the first nine months of 1998 increased $60.0
million, or 43.7%, to $197.2 million from $137.2 million for the first nine
months of 1997.  Exposition revenue increased $46.7 million, or 98.1%, to $94.3
million from $47.6 million in the first nine months of 1997, due significantly
to exposition events acquired in late 1997 and in the first nine months of 1998,
including Telexpo, Scantech and MAGIC. Additionally, results increased primarily
due to improved overall performance in the Retail, Hospitality & Fashion,
Information Technology & Communications and Manufacturing & Processing clusters,
offset by decreased revenue from certain properties in the Retail, Hospitality &
Fashion, Manufacturing & Processing and Market Development clusters and the
discontinuation of three events in the Information Technology & Communications
and Retail, Hospitality & Fashion clusters. Publishing revenue for the first
nine months of 1998 increased $12.1 million, or 15.1%, to $92.0 million from
$79.9 million for the first nine months of 1997. The publishing revenue increase
was due significantly to aggregate improved performance in the Information
Technology & Communications, Retail, Hospitality & Fashion and Healthcare &
Pharmaceutical clusters and publications acquired in 1998, including Travel
Agent, partially offset by decreased revenue from certain properties in the
Manufacturing & Processing cluster (including $0.6 million attributable to the
sale of a magazine in April 1998) and certain properties in the Healthcare &
Pharmaceutical cluster. Marketing Services revenue for the first nine months of
1998 increased $1.2 million, or 12.4%, to $10.9 million from $9.7 million in the
first nine months of 1997.

Of the overall revenue increase in the first nine months of 1998, growth in the
base business (excluding properties acquired and disposed of in 1998) was $14.0
million, or 10.3%, increasing to $150.3 million from $136.3 million in the first
nine months of 1997 due to overall improved performance in the Information

                                     - 19 -
<PAGE>
 
Technology & Communications and Retail, Hospitality & Fashion clusters,
partially offset by decreased revenue from the Market Development cluster and
certain properties in the Manufacturing & Processing, Healthcare &
Pharmaceutical, and Information Technology & Communications clusters.  Of the
overall growth in the base business, $3.2 million was attributable to timing
differences in certain exposition events between the first nine months of 1998
and the same period in 1997.   Exposition events are often held over different
dates from year to year, which will occasionally result in exposition results
being reported in different fiscal quarters.  Revenue from all properties
acquired in the first nine months of 1998 was $46.6 million.

PRODUCTION, SELLING AND OTHER DIRECT EXPENSES.  Production, selling and other
direct expenses for the first nine months of 1998 increased $33.8 million, or
36.2%, to $127.1 million from $93.3 million in 1997, of which $23.7 million was
attributable to production, selling and other expenses of properties acquired in
the first half of 1998.  Production, selling and other direct expenses for the
base business for the first nine months of 1998 increased $10.1 million, or
10.8%, to $103.4 million from $93.3 million in 1997.  Production costs for
printing, paper and postage for the base business for the first nine months of
1998 increased $1.0 million, or 5.4%, to $19.4 million from $18.4 million in the
first nine months of 1997, due to a 2.7% growth in the number of advertising
pages and increases in postage rates and paper costs.  Paper price increases
began to slow in the second quarter of 1998 and, in September 1998 began to
decline slightly.  Base business selling and promotional expenses for the first
nine months of 1998 increased $5.7 million, or 15.6%, to $42.2 million from
$36.5 million in the first nine months of 1997, due primarily to increased
exposition promotion and conference costs in support of growth in existing
events, investments in the Healthcare & Pharmaceutical cluster, increased sales
resources across all clusters, and costs related to the growth in Marketing
Services revenue.  Exposition facility costs for the base business for the first
nine months of 1998 increased $2.3 million, or 26.7%, to $10.9 million from $8.6
million in the first nine months of 1997, due primarily to the growth in the
size of several events and expansion into new venues of certain shows.

GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses for
the first nine months of 1998 increased $6.4 million, or, 31.7%, to $26.6
million from $20.2 million in the first nine months of 1997, of which $1.7
million was attributable to acquisitions in 1998. General and administrative
expenses for the base business increased $4.7 million, or 23.3%, to $24.9
million from $20.2 million for the first nine months of 1998, largely due to
incremental expenses of $1.2 million relating to the establishment of
Advanstar's Latin American operations, $2.1 million relating to the expansion of
infrastructure to support the new market focused organization and anticipated
future growth, and $0.6 million for internet, Year 2000 and other information
technology investments.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the nine
months ended September 30, 1998 increased $15.9 million, or 85.0%, to $34.6
million from $18.7 million in the first nine months of 1997.  This increase is
due primarily to increased goodwill from the Company's recent acquisition
activity and the write-down of certain impaired intangible assets in the
Healthcare & Pharmaceutical and Manufacturing & Processing clusters.

OPERATING INCOME.  For the first nine months of 1998, operating income increased
$3.9 million, or 78.0%, to $8.9 million from $5.0 million in the first nine
months of 1997, due to the growth in revenue and resulting improved operating
performance, partially offset by a $16.1 million increase in amortization as a
result of Advanstar's recent acquisition activity and the write-down of certain
intangible assets.  In accordance with FASB Statement No. 121, Advanstar
adjusted the valuation of its intangible assets to reflect the discontinuance
and impairment of certain properties in the Healthcare & Pharmaceutical and
Manufacturing & Processing clusters.

INTEREST EXPENSE.  Net interest expense for the first nine months of 1998
increased $7.7 million, or 68.1%, to $19.0 million from $11.3 million in the
first nine months of 1997, due to the incurrence of additional indebtedness
necessary to fund acquisitions completed in latter part of 1997 and the first
nine months of 1998.  In April 1998, Communications issued its 9-1/4% Senior
Subordinated Notes due 2008 (the "Notes") in the amount of $150.0 million for
use in funding the MAGIC Acquisition.  Interest is payable semiannually with

                                     - 20 -
<PAGE>
 
the first payment due on November 1, 1998. Interest expense in the first nine
months of 1998 includes $5.8 million of accrued interest on the Notes. In August
1998, in connection with the Travel Agent Acquisition, Advanstar increased its
Senior Term Loans by $40.0 million as part of the Second Amended Credit
Facility.

NET LOSS.  Net loss for the first nine months of 1998 increased $6.3 million or
90%, to a loss of $13.3 million from a loss of $7.0 million in 1997.  The
increased was due primarily to the increases in amortization and interest
expense, an increase of $0.3 in income tax expense, and the write-off of $4.5
million of certain unamortized intangibles relating to the refinancing of
Advanstar's credit facilities as part of the MAGIC Acquisition, offset by a gain
on the disposition of certain publishing properties of $2.0 million.

EBITDA.  EBITDA for the first nine months of 1998 increased $19.8 million, or
83.5%, to $43.5 million from $23.7 million in the first nine months of 1997. The
increase was due primarily to the increase in revenue and resulting increase in
operating performance. EBITDA does not represent and should not be considered an
alternative to net income or cash flow from operations as determined by GAAP,
and Advanstar's calculation thereof may not be comparable to that reported by
other companies. Advanstar believes that EBITDA provides useful information
regarding Advanstar's ability to service and/or incur indebtedness and is used
by many other companies. Advanstar's lenders have indicated that the amount of
indebtedness Advanstar will be permitted to incur will be based, in part, on
Advanstar's EBITDA. It is also Advanstar's experience that the merit of
potential acquisitions and divestitures in Advanstar's industry are evaluated by
the parties involved, in part, based on EBITDA. EBITDA does not take into
account Advanstar's working capital requirements or other commitments and,
accordingly, is not necessarily indicative of the amounts that may be available
for discretionary uses.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities.  Net cash provided by operations in the
first nine months of 1998  increased $5.5 million, or 46.6%, to $17.3 million in
1998 from $11.8 million in the first nine months of 1997.  The increase was due
to the increase in net loss of $6.3 million, adjusted for the gain on sale of
assets of $2.0 million, and the increase in working capital items of $2.1
million, due largely to the growth from acquisitions, offset by a $15.9 million
increase in depreciation and amortization.

CASH FLOWS FROM INVESTING ACTIVITIES.  Net cash used in investing activities in
the first nine months of 1998 increased $307.2 million, or 877.7%, to $342.2
million from $35.0 million in the first nine months of 1997.  The increase is
primarily due to uses for the Acquisitions in 1998, net of acquired working
capital, offset by proceeds of $4.0 million from the sale of certain publishing
properties in April 1998, and an increase of $1.7 million in capital
expenditures for additional exposition wall and lighting systems as well as
upgrades and expansion of certain of Advanstar's computer networks and servers.
Management anticipates that capital expenditures for all of 1998 will be
approximately $4.0 million, primarily for additional upgrades and expansions of
Advanstar's desktop environment and strategic information systems.

CASH FLOWS FROM FINANCING ACTIVITIES. Net cash provided from financing
activities for the first nine months of 1998 increased $297.7 million, to $327.0
million from $29.3 million in the first nine months of 1997, due primarily to
the refinancing of Advanstar's credit facility in April 1998 and August 1998
(consisting of $250.0 million of senior term loans replacing outstanding senior
term and revolver loans of $187.0 million), issuance of $150.0 million of Notes
and receipt of an additional equity infusion of $71.0 million from Advanstar's
parent to finance the Acquisitions in the first nine months of 1998.

Interest payments on the Notes and interest and principal payments under the
Amended Credit Facility will represent significant liquidity requirements for
Advanstar. The senior term debt under Advanstar's Amended Credit Facility
consists of two tranches, (i) $100.0 million of Tranche A Senior Term loans
amortizing over 5.5 years and maturing September 30, 2003, and (ii) $150.0
million of Tranche B Senior Term loans with modest amortization over the initial
5.5 years of its term maturing with balloon payments in 2004 and 2005. Payment
of the Revolving Credit Facility (the "Revolver") is due September 30, 2003.
Interest under the

                                     - 21 -
<PAGE>
 
Amended Credit Facility is at 30, 60, 90 or 180 day LIBOR plus applicable
margins ranging from 2.25% to 2.50%.  Future significant increases in the LIBOR
interest rate may adversely impact Advanstar's liquidity.  To mitigate such
risk, Advanstar has hedged its interest rate exposure by fixing interest rates
on approximately $225.0 million of its total long-term debt by the issuance of
the Notes and the purchase of interest rate cap agreements setting caps ranging
from 8.0% to 8.5%. The Indenture limits the ability of the Subsidiary Guarantors
(as defined therein) to restrict distributions or loans to Communications.

CAPITAL EXPENDITURES.  Capital expenditures for the first nine months of 1998
increased $1.7 million, or 212.5%, to $2.5 million from $0.8 million in the
first nine months of 1997.  The increase was due primarily to expenditures for
additional exposition wall and lighting systems as well as upgrades and
expansion of certain of Advanstar's computer networks and servers.  Management
believes these levels will increase to approximately $4.0 million for all 1998
and to approximately $5.0 million in 1999 as a consequence of its recent
acquisition program and resulting increase in the size of Advanstar's overall
business and information system requirements.  Expenditures include additions to
Advanstar's desktop environment, various software upgrades and enhancements, and
expansions of its communication networks and systems.  Capital expenditures have
been financed by Advanstar's cash flows from operations, and management believes
Advanstar's operating cash flows will be sufficient to fund anticipated levels
of capital expenditures.

Management expects that Advanstar's primary source of liquidity will be cash
flow from operations.  Advanstar also has a $60.0 million revolving line of
credit available for funding capital expenditures, working capital needs,
acquisitions, or for other general corporate purposes.  As of September 30,
1998, Advanstar had approximately $38.0 million of availability under its
revolving credit facility. Advanstar generally operates with negative working
capital, excluding cash and current maturities of long-term debt, due to the
impact of deferred revenue from expositions, which are billed and collected as
deposits up to six months in advance of the respective exposition.
Consequently, expositions carry little or no accounts receivable.

The ability of Advanstar to fund its operations, make planned capital
expenditures, acquisitions and scheduled payments on its indebtedness depends on
its future operating performance subject to future economic conditions and to
financial, business and other factors, many of which are beyond Advanstar's
control.  Management believes that cash flow from operations and available
borrowings under the Revolver will provide adequate funds for its working
capital needs, planned capital expenditures, debt service obligations (including
the Notes) and other needs.  Management believes such liquidity also will enable
Advanstar to make selective acquisitions to the extent of available free cash
flow and remaining availability under the Revolver.  There can be no assurance
that Advanstar's business will generate sufficient revenue growth, or that
future borrowings will be available to enable Advanstar to service its
indebtedness, including the Notes, or to fund its other liquidity needs.

Year 2000 Readiness Disclosure Statement

Advanstar has conducted a review of its computer systems and software
infrastructure to identify those areas that are not Year 2000 compliant and has
begun implementing its plan to correct any shortcomings.  Advanstar believes
that the plan will be completed in 1999 and that the total cost to implement its
plan should be no more than $3.0 million.  These costs will be expensed as
incurred.  Through September 30, 1998, $0.6 million has been incurred.
Management believes that with modifications or upgrades to existing software,
Year 2000 compliance will not pose significant operational issues.  Advanstar is
also conducting a review of its key vendors' and suppliers' Year 2000
compliance.  Based on its review and assessment, Advanstar does not believe that
any Year 2000 issues will have a material adverse effect on its business,
financial condition or results of operations.  If Advanstar is not able to
resolve any unforeseen Year 2000 issues, certain publication and exposition
operations could be hindered. The outcome of Advanstar's Year 2000 readiness 
review is subject to a number of risks and uncertainties, some of which are 
beyond its control.

                                     - 22 -
<PAGE>
 
                           PART II. OTHER INFORMATION

                            Advanstar Holdings, Inc.


                                  Risk Factors

This report, other reports, and communications to securityholders, as well as
oral statements made by the officers or agents of Advanstar may contain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.  These statements may related to, among other
things, Advanstar's future revenues, operating income, EBITDA and the plans and
objectives of management.  All forward-looking statements included herein are
made as of the date hereof, based on information available to Advanstar as of
the date thereof, and Advanstar assumes no obligation to update any forward-
looking statement.  These forward-looking statements involve risks and
uncertainties, and actual results could differ materially from those discussed
in the forward-looking statements. Factors that may cause such variation are
discussed below, as well as in Advanstar's Registration Statement on Form S-4
(File No. 333-57201) under the Securities Act of 1933, as amended, and
Advanstar's other reports filed with the Securities and Exchange Commission.

SUBSTANTIAL LEVERAGE

The Acquisitions and related debt financings have significantly increased
Advanstar's debt service obligations. Although Advanstar's cash flow from
operations has been sufficient to meet its debt service obligations in the past,
there can be no assurance that Advanstar's operating results will continue to be
sufficient for Advanstar to meet its obligations.

The degree to which Advanstar is leveraged could have important consequences,
including the following:

 .    impairment of Advanstar's future ability to obtain additional financing for
     acquisitions, capital expenditures, working capital or general corporate
     purposes;

 .    the reduction of funds available to Advanstar for its operations or other
     purposes due to the dedication of substantial portion of Advanstar's cash
     flow from operations to the payment of principal and interest on the Notes
     and the borrowings under the Amended Credit Facility;

 .    increased exposure to interest rate risk due to the fact that certain of
     Advanstar's borrowings are and will continue to be at variable interest
     rates;

 .    the indebtedness outstanding under the Amended Credit Facility is secured
     by the capital stock of Communications; and

 .    Advanstar may be substantially more leveraged than certain of its
     competitors, which may place it at a relative disadvantage and make it more
     vulnerable to changing market conditions and regulations.

ABILITY TO SERVICE DEBT

Advanstar's ability to make scheduled payments or to refinance its obligations
with respect to its indebtedness will depend on its financial and operating
performance, which, in turn, is subject to prevailing economic conditions and to
certain financial, business and other factors beyond its control. If Advanstar's
cash flow and capital resources are insufficient to fund its debt service
obligations, Advanstar may be forced to sell assets, obtain additional equity
capital or restructure its debt. There can be no assurance that Advanstar's cash
flow and capital resources will be sufficient for payment of its indebtedness in
the future. In the absence of such operating results and resources, Advanstar
could face substantial liquidity problems and might be required to 

                                     - 23 -
<PAGE>
 
dispose of material assets or operations to meet its debt service and other
obligations, and there can be no assurance as to the timing of such sales or the
adequacy of the proceeds which Advanstar could realize therefrom. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

RESTRICTIONS IMPOSED BY AMENDED CREDIT FACILITY

The Amended Credit Facility contains a number of covenants that, among other
things, restrict the ability of Advanstar to incur additional indebtedness, pay
dividends, prepay subordinated indebtedness such as the Notes, dispose of
certain assets, enter into sale and leaseback transactions, create liens, make
capital expenditures and make certain investments or acquisitions and otherwise
restrict corporate activities. In addition, under the Amended Credit Facility,
Advanstar is required to satisfy specified financial covenants, including cash
flow to total debt, interest coverage and consolidated tangible net worth tests.
The ability of Advanstar to comply with such provisions may be affected by
events beyond Advanstar's control. The breach of any of these covenants could
result in a default under the Amended Credit Facility. In the event of any such
default, depending on the actions taken by the lenders under the Amended Credit
Facility, Advanstar could be prohibited from making any payments on the Notes.
In addition, such lenders could elect to declare all amounts borrowed under the
Amended Credit Facility, together with accrued interest, to be due and payable.
The Amended Credit Facility is secured by, among other things, the capital stock
of Advanstar and its subsidiaries, and if Advanstar were unable to repay such
borrowings, the Banks could proceed against their collateral. If the lenders or
the holders of any other secured indebtedness were to foreclose on the
collateral securing Advanstar's obligations to them, it is possible that there
would be insufficient assets remaining after satisfaction in full of all such
indebtedness to satisfy in full the claims of the holders of the Notes. See
''Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.''

SUBORDINATION; UNSECURED STATUS OF THE NOTES AND THE GUARANTEES

The payment of principal of and interest on, and any premium or other amounts
owing in respect of, the Notes will be subordinated to the prior payment in full
of all existing and future senior indebtedness of Advanstar, including all
amounts owing under the Amended Credit Facility. Consequently, in the event of a
bankruptcy, liquidation, dissolution, reorganization or similar proceedings with
respect to Advanstar, assets of Advanstar will be available to pay obligations
on the Notes only after senior indebtedness has been paid in full, and there can
be no assurance that there will be sufficient assets to pay amounts due on all
or any of the Notes.

The Notes will be unsecured and will be subordinated in right of payment to
all existing and future senior indebtedness of Advanstar. The Notes will rank
pari passu with any future senior subordinated indebtedness of Advanstar and
will rank senior to all subordinated obligations of Advanstar. The Note
Guarantees will be unsecured, senior subordinated obligations of Holdings and
Art Expositions International, Expocon Management Associates, Inc., On Demand
Marketing Inc., MAGIC, Magic Kids, Inc., Technology Events Company, LLC and
Applied Business TeleCommunications (the "Subsidiary Guarantors" and together
with Holdings the "Guarantors"), subordinated in right of payment to all
existing and future senior indebtedness including the guarantees of indebtedness
under the Amended Credit Facility.

The Indenture dated April 30, 1998 among Advanstar and the Bank of New York
(the "Indenture") permits Advanstar to incur certain secured indebtedness,
including indebtedness under the Amended Credit Facility, which will be secured
by a lien on substantially all of the assets of Advanstar. The Notes and the
Guarantees are unsecured and therefore do not have the benefit of such
collateral. Accordingly, if an event of default occurs under the Amended Credit
Facility, the lenders thereunder may foreclose upon such collateral to the
exclusion of the holders of the Notes, notwithstanding the existence of an event
of default with respect to the Notes. In such event, such assets would first be
used to repay in full amounts outstanding under the Amended Credit Facility,
resulting in all or a portion of Advanstar's assets being unavailable to satisfy
the claims of the holders of Notes and other unsecured Indebtedness.

                                     - 24 -
<PAGE>
 
FRAUDULENT TRANSFER CONSIDERATIONS

The incurrence of indebtedness (such as the Notes) is subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
Advanstar. Under these statutes, if a court were to find that obligations (such
as the Notes) were incurred with the intent of hindering, delaying or defrauding
present or future creditors, that Advanstar received less than a reasonably
equivalent value or fair consideration for those obligations and, at the time of
the incurrence of the obligations the obligor either (i) was insolvent or
rendered insolvent by reason thereof, (ii) was engaged or was about to engage in
a business or transaction for which its remaining unencumbered assets
constituted unreasonably small capital or (iii) intended to or believed that it
would incur debts beyond its ability to pay such debts as they matured or became
due, such court could void or subordinate the obligations in question.

The measure of insolvency for purposes of a fraudulent conveyance claim will
vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent a particular time if the sum of
its debts at that time is greater than the then fair saleable value of its
assets or if the fair saleable value of its assets at that time is less than the
amount that would be required to pay its probable liability on its existing
debts as they become absolute and mature. Communications believes that it is (i)
not insolvent, (ii) in possession of sufficient capital to run its business
effectively and (iii) incurring debts within its ability to pay as the same
mature or become due.

In addition, the guarantees by the Subsidiary Guarantors may be subject to
review under relevant federal and state fraudulent conveyance and similar
statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf of
creditors of any of the Subsidiary Guarantors. In such a case, the analysis set
forth above would generally apply, except that the guarantees by the Subsidiary
guarantors could also be subject to the claim that, since the guarantees were
incurred for the benefit of Advanstar (and only indirectly for the benefit of
the Subsidiary Guarantors), the obligations of the Subsidiary Guarantors
thereunder were incurred for less than reasonably equivalent value or fair
consideration. A court could void any of the Subsidiary Guarantors' obligations
under such guarantees, subordinate the guarantees by the Subsidiary Guarantors
to other indebtedness of a Subsidiary Guarantor or take other action detrimental
to the holders of the Notes .

POSSIBLE UNENFORCEABILITY OF SUBSIDIARY GUARANTEES

Advanstar derives certain of its operating income from its subsidiaries. The
holders of the Notes will have no direct claim against such subsidiaries other
than a claim created by one or more of the guarantees, which may themselves be
subject to legal challenge in a bankruptcy or reorganization case or a lawsuit
by or on behalf of creditors of a Subsidiary Guarantor. If such a challenge were
upheld, such guarantees would be invalid and unenforceable. To the extent that
any of such guarantees are not enforceable, the rights of the holders of the
Notes to participate in any distribution of assets of any Subsidiary Guarantor
upon liquidation, bankruptcy, reorganization or otherwise will, as is the case
with other unsecured creditors of Advanstar, be subject to prior claims of
creditors of that Subsidiary Guarantor. Advanstar must rely in part upon
distributions from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal of and interest on the Notes.
The Indenture contains covenants that restrict the ability of Advanstar's
subsidiaries to enter into any agreement limiting distributions and transfers,
including dividends. However, the ability of Advanstar's subsidiaries to make
distributions may be restricted by among other things, applicable state
corporate laws and other laws and regulations or by terms of agreements to which
they are or may become a party. In addition, there can be no assurance that such
distributions will be adequate to fund the interest and principal payments on
the Amended Credit Facility and the Notes when due.

CHANGE OF CONTROL

Upon a Change of Control, holders of the Notes will have the right to require
Advanstar to repurchase all or any part of such holders' Notes at a price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. The events that constitute a Change of Control
under the 

                                     - 25 -
<PAGE>
 
Notes will also constitute a default under the Amended Credit Facility, which
will prohibit the purchase of the Notes by Advanstar in the event of certain
Change of Control events unless and until such time as Advanstar's indebtedness
under the Amended Credit Facility is repaid in full. There can be no assurance
that Advanstar would have sufficient financial resources available to satisfy
all of its obligations under the Amended Credit Facility and the Notes in the
event of a Change of Control. Advanstar's failure to purchase the Notes would
result in a default under the Indenture and under the Amended Credit Facility,
which could have a material adverse effect on Advanstar's business, financial
condition and results of operations.

DEPENDENCE ON DEMAND FOR ADVERTISING

Advanstar derives a substantial portion of its total revenue from advertising
sales. A general economic downturn or a recession in the United States could
cause Advanstar's advertisers to reduce their advertising budgets. Any material
decline in the demand for advertising could have an adverse effect on
Advanstar's business, financial condition and results of operations.

DEPENDENCE ON VENUES AND DATES FOR EXPOSITIONS AND CONFERENCES

The success of an exposition or a conference depends in part upon its date and
location. The market for desirable dates and locations is highly competitive.
Advanstar generally maintains multiyear reservations for its exposition and
conference venues and dates. However, consistent with industry practice,
Advanstar does not pay for these reservations and the reservations are not
binding on the facility owners until a contract is signed. Contracts typically
guarantee the right to certain venues or dates for only one year, and there can
be no assurance that Advanstar's reservations will lead to signed, binding
contracts with facility owners. In the event that Advanstar loses its rights to
exposition/conference dates or locations, the profitability and future prospects
of the expositions or conferences effected, and Advanstar's overall business,
financial condition and results of operations could be materially and adversely
effected. No assurance can be given that Advanstar can maintain the date or
location of any of its expositions or conferences. In addition, the fact that
exhibitions and conferences are held on prescheduled dates at specific locations
could make them vulnerable to events outside of Advanstar's control, such as
natural catastrophes, labor strikes or transportation shutdowns.  Advanstar 
carries insurance to protect against a loss due to these uncontrollable events.

IMPORTANCE OF MAGIC

Historically, none of Advanstar's trade shows has individually represented a
significant portion of Advanstar's exposition revenue.  For the nine month
period ended September 30, 1998, MAGIC represented 12.3% of the Company's
revenue and 32.2% of the Company's EBITDA.  The MAGIC trade shows, however,
would have represented an aggregate of 29.7% of Advanstar's pro forma exposition
revenue for the year ended December 31, 1997 and 20.6% and 12.1% of Advanstar's
pro forma EBITDA and pro forma net revenue, respectively, for the same period.
Advanstar expects that the MAGIC trade shows will continue to represent a
significant portion of Advanstar's overall revenue in the future. Although
Advanstar believes that it has a diversified portfolio of expositions, a
significant decline in the performance of one or both of the February or August
MAGIC trade shows could have a material adverse effect on Advanstar's business,
financial condition and results of operations.

EFFECT OF INCREASE IN PAPER AND POSTAGE COSTS

The price of paper is a significant expense of Advanstar relating to its print
products and direct mail solicitations. Although Advanstar has implemented
measures designed to substantially offset historical price increases, such
increases, despite such offsetting measures, could have a material adverse
effect on Advanstar's business, financial condition and results of operations.
Postage for product distribution and direct mail solicitation is also a
significant expense of Advanstar. Advanstar generally uses the United States
Postal Service. Postage costs increase periodically and will increase in the
future. No assurance can be given that Advanstar can pass such cost increases
through to its customers.

                                     - 26 -
<PAGE>
 
EXPANSION RISKS AND IMPACT ON FUTURE OPERATING RESULTS

Advanstar's objective is to grow through, among other things, strategic
acquisitions. Advanstar's acquisition strategy entails risks inherent in
assessing the value, strengths, weaknesses, contingent and other liabilities and
potential profitability of acquisition candidates and in integrating the
operations of acquired businesses. There can be no assurance that acquisition
opportunities will be available, that Advanstar will have access to the capital
required to finance potential acquisitions or that any business acquired will be
integrated successfully or prove profitable. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."  Additionally, the
integration of acquisitions, in particular the MAGIC Acquisition, requires and
will require substantial attention from management. The diversion of the
attention of management, and any difficulties encountered in the transition
process, could have a material adverse impact on Advanstar's revenue and
operating results. In addition, the process of integrating the various
businesses could cause the interruption of, or a loss of momentum in, the
activities of some or all of these businesses, which could have a material
adverse effect on Advanstar's business, financial condition or results of
operations. There can be no assurance that Advanstar will realize any of the
anticipated benefits from the MAGIC Acquisition or any of the other acquisitions
it consummates.

DEPENDENCE ON KEY PERSONNEL

Advanstar has benefited substantially from the leadership and experience of its
senior management team, and is dependent on their continued services in order to
successfully implement its business strategy. Although Holdings has entered into
employment agreements with Robert Krakoff, Chairman of the Board and Chief
Operating Officer of Communications, and James Alic, Vice Chairman of
Communications, there can be no assurance that these and other key personnel
will continue to be employed by Advanstar or that Advanstar will be able to
attract and retain qualified personnel in the future. Although Advanstar
believes that it could replace key employees in an orderly fashion should the
need arise, the loss of such key personnel could have a material adverse affect
on Advanstar's business, financial condition or results of operations. Advanstar
does not currently maintain key-man life insurance policies on its executive
officers.

COMPETITION

Competition for Advanstar's products and services is highly fragmented, both by
product and geography, and exists at many levels. On a global level, there are
several much larger international firms--such as Reed-Elsevier plc and United
News and Media--which operate in many geographic markets and have broad product
offerings in publishing, expositions and conferences and marketing services.
Many of these competitors are better capitalized and have substantially greater
financial and other resources than Advanstar. In a few cases, these firms
operate in the same market as Advanstar. In general, these large firms are
organized and market their products and services by product and geographic
location, not on an integrated basis. Within each particular industry sector,
Advanstar generally has a large number of direct and indirect competitors. In
some cases, these competitors operate in several geographic areas. In other
cases, they operate in only one geographic market. In most cases, these
competitors are small- to medium-sized corporations. However, in several markets
such as information technology and healthcare, there are large competitors
focused on a single industry. In expositions and conferences in particular,
there are many not-for-profit association competitors and, in several countries,
the exposition hall owner and operator may also be a competitor. In any given
publishing marketplace in a particular country, there are typically two to five
direct competitors for both readers and advertisers. Additionally, there are
usually many indirect competitors who define market segments differently and
thus may be alternatives for either the reader or the advertiser. Exposition and
conference competition in each market and country occurs on many levels. There
is seldom any truly direct competitor for a particular event, given the
uniqueness of venue and date. However, given the availability of alternative
venues and the ability to define events for particular market segments and/or
with different strategic positioning, the range of competition for exposition
dollars, sponsorships and show attendees and conferees is extensive. Because
there are few barriers to entry, Advanstar anticipates that, as the trade
publications and 

                                     - 27 -
<PAGE>
 
expositions industries evolve, additional competitors with greater resources
than Advanstar may enter the markets, or particular segments of the markets,
thereby intensifying competition.

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

Advanstar's growth strategy includes international expansion. There are certain
risks inherent in doing business in international markets, such as the
uncertainty of product acceptance by different cultures, the risks of divergent
business expectations or cultural incompatibility in establishing joint ventures
with foreign partners, difficulties in staffing and managing multinational
operations, currency fluctuations, changing economic conditions, state-imposed
restrictions on the repatriation of funds and potentially adverse tax
consequences. There can be no assurance that one or more of such factors will
not have a material adverse effect on Advanstar's future international
operations and, consequently, on Advanstar's business, financial condition and
results of operations.

CONTROL BY HFCP III

Hellman & Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P.
and H&F International Partners III, L.P. (collectively "HFCP III") own, directly
or indirectly, substantially all of the outstanding capital stock of Holdings
and can effectively control the affairs and policies of Advanstar. There can be
no assurance that the interests of HFCP III will not conflict with the interests
of the holders of the Notes. See "Principal Stockholders."

                          PART II: OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS FILED ON FORM 8-K

6(a) Exhibits

     10.1 Credit Agreement, dated as of May 31, 1996, as amended and restated as
          of August 26, 1998, among Advanstar Communications Inc., Advanstar
          Holdings Inc., the Subsidiary Guarantors (as defined therein) and the
          Chase Manhattan Bank.

     27   Financial Data Schedule for the three months and nine months ended
          September 30, 1998

6(b) Reports on Form 8-K

     No reports on Form 8-K have been filed during the quarter for which this
     report is filed.

                                     - 28 -
<PAGE>
 
                                   SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                              ADVANSTAR HOLDINGS, INC.

Date:  11/16/98               By /s/ David W. Montgomery
      -----------                --------------------------------------
                                 David W. Montgomery
                                 Vice President--Finance and
                                 Chief Financial Officer
                                 (principal accounting and financial officer)




 

                                     - 29 -
<PAGE>
 
                            Advanstar Holdings Inc.
                                 EXHIBIT INDEX

Exhibit No.

   10.1        Credit Agreement, dated as of May 31, 1996, as amended and
               restated as of August 26, 1998, among Advanstar Communications
               Inc., Advanstar Holdings, Inc., the Subsidiary Guarantors (as
               defined therein) and the Chase Manhattan Bank.

   27          Financial Data Schedule for the three and nine months ended
               September 30, 1998.