### SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM10-K

(Mark One)

| | ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2004 OR
| | ----------------------------------------------------------------------------------------------------------------------------------

| | TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD
FROM __________ TO _______________
| | -----------------------------------------------------------------------------------------------------------------------------------------------------

0-17430
Commission File Number

OBSIDIAN ENTERPRISES, INC.(Exact name of registrant as specified in its charter)

|Delaware
(State or other jurisdiction of incorporation
or organization) | 35-2154335
(IRS Employer Identification No.)
|----------------------------------------------------------------------- | --------------------------------------------

|111 Monument Circle, Suite 4800
Indianapolis, IN
(Address of principal executive offices) | 46204
(Zip Code)
|----------------------------------------------------------------------------------------- | ----------------

(317) 237-4122
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($0.0001 par value)
(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of the Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
    NO

As of April 30, 2004, the aggregate market value of the Company's common stock
held by non-affiliates of the registrant, based on the average bid and ask price
on such date, was approximately $2,399,836.

As of January 30, 2005, the registrant had 3,109,333 shares of common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

INFORMATION REQUIRED IN PART II AND PART III HAS NOT BEEN INCORPORATED BY REFERENCE.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 2
|------------------------------------ | -------------- | ------

PART I

ITEM 1.    BUSINESS.

DESCRIPTION OF BUSINESS

OVERVIEW
Obsidian Enterprises, Inc. (Obsidian Enterprises) is a holding
company headquartered in Indianapolis, Indiana. We have historically invested in
and acquired small and mid-sized companies in industries such as manufacturing
and transportation.

Our goals are to
maximize the profits of our current subsidiaries and to acquire additional
manufacturing companies of similar size. We currently conduct business through
six subsidiaries:

Butyl-Rubber Reclaiming

| | » | U.S. Rubber Reclaiming, Inc. ("U.S. Rubber"), acquired in fiscal 2001, owns
and operates butyl-rubber reclaiming facilities;
| | - | ----------------------------------------------------------------------------------------------------------------------------

Coach Leasing

| | » | Pyramid Coach, Inc. ("Pyramid"), acquired in fiscal 2001, provides luxury coach
leases for corporations and the entertainment industry;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | » | Obsidian Leasing Company, Inc. ("Obsidian Leasing"), formed in fiscal 2002, owns
some of the coaches operated by Pyramid;
| | - | -------------------------------------------------------------------------------------------------------------------------

Trailer and Related Transportation Equipment Manufacturing

| | » | United Expressline, Inc., ("United"), acquired in fiscal 2001, manufactures
steel-framed cargo, racing and specialty trailers;
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | » | Danzer Industries, Inc. ("Danzer"), the only subsidiary of the Company until
fiscal 2001, manufactures metal parts and truck bodies for the service and
utilities markets; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Classic Manufacturing, Inc. (Classic), acquired in May 2004, manufactures
steel-framed cargo, fifth wheel, gooseneck, motorcycle, race, snowmobile and stacker/lift
trailers and open trailers used in the landscape industry.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to
fiscal 2001, our only subsidiary was Danzer. In fiscal 2001, we changed our
management and expanded our business. Timothy S. Durham became our Chief
Executive Officer and Chairman of the Board and we purchased four new businesses
from Mr. Durham, Obsidian Capital Partners, L.P (Partners) and the
other owners of such businesses pursuant to an Acquisition Agreement and Plan of
Reorganization, dated June 21, 2001. Pursuant to the Acquisition Agreement and
Plan of Reorganization, shares of our Series C Preferred Stock were issued to
the sellers in exchange for our acquisition of the businesses. We currently own
and operate three of the businesses acquired in this transaction, U.S. Rubber,
Pyramid, and United. The fourth business acquired, Champion Trailer, Inc.
(Champion), which manufactured racecar transporters, specialty
exhibits trailers and mobile hospitality units, was sold in 2003.

In October
2001, we changed our state of incorporation from New York to Delaware and our
name was changed from Danzer Corporation to Obsidian Enterprises,
Inc.

In March
2004, Obsidian Capital Partners converted all of its shares of our Series C
Preferred Stock and our Series D Preferred Stock into a total of 2,218,725
shares of our common stock. Following this conversion, no shares of our Series C
or Series D Preferred Stock are currently outstanding. Also in fiscal 2004, the
shareholders approved a 50-to-1 reverse stock split. As a result of the reverse
stock split and the amendment to the Certificate of Incorporation we reduced the
number of shares of common stock outstanding and the number of authorized shares
were also reduced.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 3
|------------------------------------ | -------------- | ------

SEGMENTS

We operate in three industry segments:

| | » | butyl rubber reclaiming;
| | - | ------------------------

| | » | trailer and related transportation equipment manufacturing;
and
| | - | ---------------------------------------------------------------

| | » | coach leasing.
| | - | --------------

All sales are
in North and South America, primarily in the United States, Canada and Brazil.
For quantitative and geographic segment information, see Note 13 in the Notes to
Consolidated Financial Statements.

Butyl Rubber Reclaiming

Our butyl rubber
processing facilities are located in two adjacent plants in Vicksburg,
Mississippi. We collect various used and scrap butyl rubber products, primarily
inner tubes from tires, and then reprocess these into reclaimed butyl rubber
sheets. We sell reclaimed butyl rubber products through an internal sales
force.

Customers mix
our reclaimed butyl rubber with virgin butyl rubber and use the product
predominately as the inner liner of tubeless tires and also as inner tubes for
tires and for tapes and mastics for pipelines. The combination of reclaimed
butyl rubber with virgin butyl rubber facilitates some manufacturing processes,
but the primary reason manufacturers use reclaimed butyl rubber is the cost
savings offered compared to virgin butyl rubber.

Three other
enterprises engaged in reclaiming butyl rubber worldwide are:

| | » | The Gujarat Company in India;
| | - | -----------------------------

| | » | Han Cook in Korea; and
| | - | ----------------------

| | » | Vrederstein N.V. in the Netherlands.
| | - | ------------------------------------

These
enterprises are not major competitors of ours for sales in the North and South
America, because price is the primary competitive factor and cost of
transportation increases the prices these other enterprises can offer. These
enterprises do compete with us for the purchase of used and scrap butyl rubber
products, our primary raw material.

Two enterprises
manufacture virgin butyl rubber for sale in the United States:

| | » | Exxon Corporation; and
| | - | ----------------------

| | » | Bayer AG.
| | - | ---------

These
enterprises are much larger than we are, are well capitalized and have larger
sales staffs. The prices these enterprises charge for virgin butyl rubber place
an upper limit on the prices that we can charge for reclaimed butyl
rubber.

We obtain our
supply of scrap inner tubes primarily from approximately 1,000 scrap merchants
located principally in the United States. We also import a small supply of scrap
inner tubes from sources in Brazil, Venezuela, and India. Our ability to produce
reclaimed butyl rubber is potentially restrained by the limited supply of scrap
butyl rubber products. Since the introduction of tubeless tires for automobiles
in the 1970s, the number of scrap inner tubes from sources in the United States
has declined substantially. In the United States, inner tubes are now primarily
limited to the agricultural and large truck tire market. We also obtain some
additional supplies with reclaiming scrap butyl rubber pads from the
manufacturers of other butyl rubber products. This pad scrap is created as a
result of the manufacturing process for molded butyl rubber products and is
available at approximately 60% of the cost of scrap inner tubes. The pad scrap
is a partial substitute for inner tubes as raw material for our reclaimed butyl
rubber product.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 4
|------------------------------------ | -------------- | ------

We recently introduced
new processing equipment including a wet grind and cryogenic systems to increase our
ability to utilize additional rubber products in our butyl rubber reclaim process and to
add new natural rubber products to this segment.

We are the primary
supplier of reclaimed butyl rubber to most of the tire industry in the United States and
we also have tire manufacturer customers in Canada and Brazil. Although we have had
long-term relationships with our primary customers, we do not have long-term contracts
with them. Three of our reclaimed butyl rubber customers accounted for a substantial
portion of our butyl rubber sales in fiscal 2004:

| | ¤ | Michelin:  40 %
| | - | ---------------

| | ¤ | Kelley Springfield:  22%
| | - | ------------------------

| | ¤ | Tyco Adhesives:  12%
| | - | --------------------

The loss of
any of the largest customers would materially and adversely affect our revenues.
Our reclaimed butyl rubber products are generally ordered by customers monthly
and shipped promptly after the order. Customers generally pay accounts on 30- to
60-day terms.

Trailer and Related Transportation Equipment
Manufacturing

Manufacturing

We
manufacture specialty racing, cargo and ATV trailers at facilities we own in
Bristol, Indiana, and in White Pigeon and Sturgis, Michigan. In fiscal 2002, we
also began manufacturing cargo trailers at our facility in Hagerstown, Maryland
(which principally manufactures service truck bodies, as discussed below) to
utilize the available manufacturing capacity at the facility and to meet demand
for cargo trailers. We also maintain a facility in Elkhart, Indiana to provide
warranty maintenance.

We also
manufacture service truck bodies to order for original equipment truck
manufacturers and under the Morrison trademark at our facility in
Hagerstown, Maryland.

Customers, Sales and Marketing

We sell our
United Trailers, Danzer Trailers, and Classic
Trailers product lines through a network of approximately 420 dealers in
the United States and Canada, principally in the Midwestern and Eastern United
States. The trailers are built to order to dealer specifications. Although we
have formal agreements with a few of these dealers, most of the dealership
arrangements are informal and nonexclusive. The terms of sale for the trailer
products when title transfers (FOB the plant) with payment generally due upon
the dealer taking delivery of the trailer, although certain dealers have 30- or
60-day payment terms. Our trailer business is somewhat seasonal, with fewer
orders during the months from November through January. Seasonality of our
business relates primarily to increased purchases during the warmer months of
the year. Although the prices for our trailer brands can be as high as $79,000,
the average price is approximately $3,900.

Our service truck
bodies are sold primarily to customers located in the Eastern and Southeastern
United States. We sell our service truck bodies to original equipment truck
manufacturers, or private labels, shipping finished bodies to the
customer for installation on truck body chassis. We also sell service truck
bodies under our proprietary Morrison trademark to a network of
approximately 300 dealers who, in turn, sell to municipalities, utility
companies, cable companies, phone companies and contractors. Sales of our
service truck bodies tends to follow a seasonal pattern of increased purchases
during the spring and fall and lower purchases during the months of late fall
and winter due to the purchasing habits of the telecom industry. Although the
prices for our service truck bodies can be as high as $10,000, the average price
is approximately $3,000.

Sales of both
trailers and truck service bodies are conducted through an internal sales force
maintained by our subsidiaries.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 5
|------------------------------------ | -------------- | ------

Competitors

A significant
number of companies manufacture specialty racing, cargo and ATV carriers in the
United States. Although many of these companies are relatively small and do not
possess our technical capability, a number of our competitors are much larger
and possess equal or greater technical and financial resources. Four of our
larger competitors are:

| | » | Haulmark Industries;
| | - | --------------------

| | » | Pace American;
| | - | --------------

| | » | U.S. Cargo; and
| | - | ---------------

| | » | Wells Cargo.
| | - | ------------

We compete for
specialty racing, cargo and ATV trailer sales through price, quality and
availability, but price generally is the most important factor.

A significant
number of companies manufacture service truck bodies in the United States. While
many of these companies are relatively small and do not possess our technical
capacity, a number of our competitors are much larger and possess equal or
greater technical and financial resources. Four of these competitors
are:

| | » | Knapheide Manufacturing Co.;
| | - | ----------------------------

| | » | Omaha Standard, Inc.;
| | - | ---------------------

| | » | Reading Body Works, Inc.; and
| | - | -----------------------------

| | » | Stahl, a Scott Fetzer Co., which is a wholly-owned subsidiary of Berkshire
Hathaway, Inc.
| | - | -----------------------------------------------------------------------------------------

We compete
for service truck body sales through price and service, with price being the
most important factor. We also offer service truck bodies made to the
individually specified requirements of our customers.

Raw Materials

We purchase
our raw materials for the trailer and related transportation equipment segment
from numerous suppliers. During fiscal 2003 and 2004, the supply of plywood and
steel became limited. These limitations resulted from the Hurricanes in Florida
which affected the plywood market and the aggressive purchasing of steel by
China. Although we had an adequate supply for our production needs, the prices
for these materials escalated substantially. At this time, we cannot estimate if
or when the cost of plywood or steel will return to historic levels, and we are
pursuing alternate material sources.

Warranties

We generally
warrant our trailer and related transportation equipment to be free from defects
in material and workmanship, and we also provide warranties relating to
performance under normal use, including service for 12 months after retail sale.
Our obligation under these warranties generally is limited to the repair or
replacement of the defective product. Historically, our warranty costs have not
been material to our consolidated financial statements.

Backlog

The backlog
of our trailer and related transportation segment as of October 31, 2004 was
approximately $6,823, as compared to backlog as of October 31, 2003 of $4,650
(stated in thousands). We expect to fill this backlog during fiscal
2005.

Coach Leasing

We lease
high-end luxury entertainment coaches from our facility in Nashville, Tennessee.
We lease coaches for both short-term (weekly or monthly) and long-term
periods.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 6
|------------------------------------ | -------------- | ------

At October
31, 2004, we managed 39 coaches. We also sometimes sublease coaches from other
coach owners on a short-term basis in order to lease them to our
customers.

DW Leasing,
LLC (DW Leasing), a company Mr. Durham controls, transferred 22
coaches to our subsidiary Obsidian Leasing in fiscal 2002. DW Leasing continues
to own seven coaches that we manage. We also manage eleven coaches owned by DC
Investments Leasing, LLC (DC Investments Leasing), an entity
controlled by Mr. Durham.

Our
consolidated financial statements include the assets, liabilities and equity of
DW Leasing and the results of its operations, and since its December 1, 2002
inception, the assets, liabilities and equity of DC Investments Leasing and the
results of its operations. Both of these entities are in the business of coach
leasing and their coaches are leased exclusively through Pyramid. For additional
information, see the discussion of FASB Interpretation No. 46 included in Note 1
to the Notes to Consolidated Financial Statements contained in Item
8.

We lease
coaches through an internal sales force to country, rock-n-roll, pop and
traveling Broadway show entertainment industries across the United States. We
also lease coaches to various corporations. During the year ended October 31,
2004, we leased coaches to a number of touring groups, including Kid Rock, Brad
Paisley, Alan Jackson, Sheryl Crow, Christina Aguilera and the New York City
Opera. Our corporate customers include Playboy and Rock the Vote
2004".

Several other
companies lease luxury coaches in the United States. A significant number of
companies are small in comparison to the number of coaches in our fleet.
Although many of these companies are relatively small and do not possess our
amenity qualities, a number of our competitors are much larger and possess equal
or greater amenity qualities and financial resources. Some of our larger
competitors include:

| | » | Entertainer Coaches of America;
| | - | -------------------------------

| | » | Florida Coach;
| | - | --------------

| | » | Senators Coach; and
| | - | -------------------

| | » | Hemphill Brothers.
| | - | ------------------

We believe
that amenities are an important factor in leasing coaches to our target market
and we equip our coaches with a full complement of amenities. We compete with
other luxury coach providers based on a combination of quality, amenities,
availability and price. During fiscal 2004 we experienced turnover in
management, and the entertainment touring experienced a slowdown which reduced
our business by an estimated 25% that had a negative impact on our operations.
At this time, we cannot estimate when touring levels for the entertainment
industry will return to previous levels.

GOVERNMENT REGULATION

Federal,
state, and local agencies regulate areas of our business, including
environmental and fire hazard control. They also regulate our work place to
ensure safe working conditions for our employees. The trailers and truck bodies
we manufacture must meet standards set by state and federal transportation
authorities and the coaches we lease must comply with those standards and
regulations. These regulatory bodies could take actions that would have a
material adverse affect on our ability to do business.

EMPLOYEES

As of October
31, 2004, we had 420 employees. We have a labor contract through January 2008
with the United Brotherhood of Carpenters and Joiners of America for the
approximately 50 production workers at our truck body manufacturing facility in
Hagerstown, Maryland. None of the employees at our other facilities is
represented by a labor union. We believe that our employee relations are
satisfactory.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 7
|------------------------------------ | -------------- | ------

PATENTS AND PROPRIETARY TECHNOLOGY

We do not
rely on any patents, registered trademarks, or special licenses to give us a
competitive advantage. The Morrison, Danzer,
Pyramid, United Trailer, and Classic Trailer
brand names have brand recognition in the relevant market.

RESEARCH AND DEVELOPMENT

We have not
incurred any material research and development expenses during any of our last
three fiscal years and we do not contemplate incurring any material research and
development expenses in fiscal 2005.

FINANCIAL INFORMATION FOR BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA

We operate
our business through three segments. For further detail of revenue, profit or
loss and total assets see Note 13 to the Notes to Consolidated Financial
Statements contained in Item 8.

FORWARD-LOOKING INFORMATION AND
RISKS

In addition
to historical information, this Annual Report on Form 10-K contains
forward-looking statements. You can identify forward-looking statements by the
use of words and phrases such as expects, plans,
will, estimates, forecasts,
projects, believes, anticipates,
looking forward and other words and phrases of similar meaning. You
also can identify forward-looking statements by the fact that they do not relate
strictly to historical or current facts. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ materially.
Factors that might cause or contribute to such differences include, but are not
limited to, those discussed in the section entitled Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operation. Readers should carefully review the risks described in this and
other documents that we file from time to time with the Securities and Exchange
Commission, including the quarterly reports on Form 10-Q to be filed by the
Company in fiscal 2005. Readers are cautioned not to place undue reliance on the
forward-looking statements, which speak only to the date of this Annual Report
on Form 10-K. The Company undertakes no obligation to publicly release any
revisions to the forward-looking statements or reflect events or circumstances
after the date of this document.

Forwardlooking statements cannot be guaranteed and actual results may vary
materially due to the uncertainties and risks, known and unknown, associated
with such statements. The Company wishes to caution readers that the following
important factors among others, in some cases have affected, and in the future
could affect, the Companys actual results and could cause actual
consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of the Company:

| | 1. | Our financial statements have been presented on the basis that the Company will
continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. In the period
since June 2001, the Company and its subsidiaries have incurred losses and
reductions in equity on a consolidated basis. The Company and certain of its
subsidiaries are also in violation of certain financial covenants in their
respective credit agreements as of October 31, 2004 and we have been unable to
obtain waivers for certain of these violations (as discussed in Financial
Covenants below). Additionally, as discussed below, our losses have
historically been funded by related party loans from Fair Holdings, Inc. ("Fair
Holdings"), an entity controlled by our Chairman, which is also in violations of
certain covenants under its credit agreement. Our continuing losses and covenant
violations, combined with uncertainties relating to our ability and the ability
of Fair Holdings to refinance our debt or obtain waivers from our lenders
regarding these covenant violations, have led the Companys independent
auditor, McGladrey & Pullen LLP, to include a statement in its audit report
relating to the Companys audited consolidated financial statements for the
year ended October 31, 2004 expressing substantial doubt about the
Companys ability to continue as a going concern. Our continued realization
of our assets and satisfaction of our liabilities in the normal course of
business is dependent upon our ability to generate sufficient cash flow to meet
our financial obligations, to comply with the terms of our debt financing
agreements, to obtain refinancing of certain obligations and to continue to
receive financial support under our line of credit with Fair Holdings.
Managements plans in regard to these matters are described in
Liquidity and Capital Resources and in Note 2 to the Companys
consolidated financial statements included elsewhere in this report.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | In the period since June 2001, we have incurred losses and reductions in equity
on a consolidated basis. The Company and certain of its subsidiaries are also in
violation of certain financial covenants in their respective credit agreements
as of October 31, 2004 and we have been unable to obtain waivers for certain of
these violations (as discussed in "Financial Covenants" in Management's
Discussion and Analysis below). All amounts outstanding as of October 31, 2004
under these credit agreements have been classified as current on our balance
sheet. We are currently negotiating to obtain waivers or refinance the credit
agreements where covenant violations exist and we do not expect these violations
to impair our ability to fund current and future obligations of the Company.
Historically, losses and certain third-party debt repayments have been financed
with DC Investments, LLC ("DC Investments") and its subsidiary Fair Holdings,
entities controlled by the Company's Chairman, on terms that may not have been
available from other sources. As of October 31, 2004, Fair Holdings is in
violation of certain covenants in the credit agreement with its lender. These
violations have not been waived, nor has the lender agreed not to take action
against Fair Holdings as a result of the violations. Action by the lender to
require repayment of all amounts due from Fair Holdings may impair Fair
Holdings' ability to loan further amounts to the Company under its credit
agreement with Fair Holdings. As of October 31, 2004, total debt outstanding to
DC Investments and Fair Holdings was $20,299.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 8
|------------------------------------ | -------------- | ------

| | 3. | Our inability to obtain additional financing may prevent additional expansion in
our current business or acquiring new businesses. Additional financing may not
be available to us on advantageous terms or at all, if, for example the interest
rates are unattractive or we do not have sufficient collateral available to
secure the desired increase in debt. Currently all of our assets are being used
to secure outstanding debt, so unless we acquire unsecured assets or obtain a
partial release from our secured creditors of their security interests, we will
not have available additional collateral to pledge to new debtors.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | We may issue equity to finance any future acquisitions or refinance existing
               debt. This would dilute the proportionate ownership of our current shareholders
               and may reduce per share value. Acquisitions may also lead to increased levels
               of borrowing. This would result in increased interest expense. Acquisitions are
               also likely to increase our depreciation and amortization expense. These factors
               may incur losses or reduced profits in the future.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The prices of the raw materials we utilize are subject to fluctuation, as
               occurred in fiscal 2004. We may not be able to pass along any or all of these
               increases to our customers. As a result, increases in the price of raw materials
               may decrease the profit margin from sales of our products.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | Our overall strategy includes increasing revenue and reducing/controlling
               operating expenses. We have concentrated our efforts in ongoing, company-wide
               efficiency activities intended to increase productivity and reduce costs
               including personnel reductions, reduction or elimination of non-personnel
               expenses and realigning and streamlining operations. We cannot assure that our
               efforts will result in increased profitability for any meaningful period of
               time.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7. | We face significant competition in connection with the products and services we
               provide. The level of competition has increased recently and is expected to
               continue at increasing levels in the future. There are many other companies
               engaged in the manufacture of cargo trailers, luxury coach leasing and butyl
               rubber reclaiming, and many of these companies have greater financial and other
               business resources than those possessed by us. Furthermore, other companies may
               enter our area of business in the future. If competition increases, our
               sales and profits are likely to decline.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8. | We may have difficulty receiving our requirements for butyl rubber tubes, our
               principle raw material in this segment. In recent years, the number of sources
               of supply has been reduced. We continue to search for additional sources and to
               make purchases from foreign suppliers. However, if the number of suppliers is
               further reduced, or if we are otherwise unable to obtain butyl raw material
               requirements on a timely basis and on favorable terms, our operations may be
               harmed.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 9. | There is a limited market for our Common Stock. There can be no assurance that a
               broader market for the Common Stock will develop. Selling shares of the Common
               Stock may be difficult because smaller quantities of shares are bought and sold
               and security analysts and news media coverage about the Company is
               limited. These factors could result in lower prices and larger spreads in the
               bid and asked prices for the shares of Common Stock.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10. | Recently, there have been significant regulatory changes, including the
               Sarbanes-Oxley Act of 2002, and there may be new accounting pronouncements or
               regulatory rulings that will have an impact on our future consolidated financial
               position and results of operations. The Sarbanes-Oxley Act of 2002 and other
               rule changes and proposed legislative initiatives following several highly
               publicized corporate accounting and corporate governance failures are likely to
               increase general and administrative costs.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 9
|------------------------------------ | -------------- | ------

ITEM 2.    PROPERTIES.

The following describes the Company's properties:

|Identification | Location | Ownership/Description | Segment
|-------------- | -------- | --------------------- | -------

|Headquarters | 111 Monument Circle,
Suite 4800,
Indianapolis, IN 46204 | 3,700 square feet leased
commercial office space | N/A
|------------ | ------------------------------------------------------- | ------------------------------------------------ | ---

|Butyl Rubber Processing Plants | Vicksburg, Mississippi | Two adjacent plants aggregating 87,000 square feet, each owned by the Company
and encumbered by a mortgage to PNC Bank | Butyl Rubber Processing
|------------------------------ | ---------------------- | ---------------------------------------------------------------------------------------------------------------------- | -----------------------

|Truck Body Plant | Hagerstown, Maryland | 75,000 square foot plant owned by the Company and encumbered by a mortgage to
Fair Holdings | Trailer and related transportation equipment manufacturing
|---------------- | -------------------- | ------------------------------------------------------------------------------------------- | ----------------------------------------------------------

|Trailer Manufacturing Plant | Bristol, Indiana | Several buildings aggregating 49,000 square feet owned by the Company and
encumbered by a mortgage to First Indiana Bank NA | Trailer and related transportation equipment manufacturing
|--------------------------- | ---------------- | --------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------

|Trailer Manufacturing Plant | Elkhart, Indiana | 35,000 square foot plant leased by the Company * | Trailer and related transportation equipment manufacturing
|--------------------------- | ---------------- | ------------------------------------------------ | ----------------------------------------------------------

|Trailer Manufacturing Plant | White Pigeon, Michigan | 47,000 square foot plant owned by the Company and encumbered by a mortgage to
First Indiana Bank NA | Trailer and related transportation equipment manufacturing
|--------------------------- | ---------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------------------------------

|Coach Leasing Office | Nashville, Tennessee | 12,000 square feet of office space and other facilities leased by the Company | Coach Leasing
|-------------------- | -------------------- | ----------------------------------------------------------------------------- | -------------

|Trailer Manufacturing Plant | Sturgis, Michigan | 54,000 square foot plant leased by the Company** | Trailer and related transportation equipment manufacturing
|--------------------------- | ----------------- | ------------------------------------------------ | ----------------------------------------------------------

* Lease is short term and upon expiration in fiscal 2005 the operations of
this facility will transfer to other existing facilities.

** Long term lease expiring May 2012.

We believe
that our property, plant and equipment are well maintained and adequate for our
requirements. We also believe that all of our assets are adequately covered by
insurance.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 10
|------------------------------------ | -------------- | -------

ITEM 3.    LEGAL
PROCEEDINGS.

Subsequent to
October 31, 2004, Pyramid and its parent, Obsidian Enterprises, and other
affiliated companies and members filed suit against the former owners of Pyramid
for violation of the terms of its non-compete agreement. The lawsuit was filed
against various individuals and operating entities that are directly competing
with the Company and the Company is seeking punitive and compensatory
damages.

ITEM 4    SUBMISSION OF
MATTERS TO A VOTE OF SECURITY
HOLDERS.

No matters were
submitted to a vote of our stockholders during the fourth quarter of fiscal 2004.

PART II

ITEM 5.    MARKET
FOR THE REGISTRANT'S COMMON
EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES
OF EQUITY
SECURITIES.

The Companys
common stock is currently traded on the OTC Bulletin Board under the symbol
OBDE.OB. The following table sets forth the high and low bid quotations for
the common stock for the fiscal quarters indicated.

|            | Fiscal 2004 | Fiscal 2003
|----------- | ----------- | -----------
|
|1st Quarter | $17.50      | $11.50     
|2nd Quarter | $20.00      | $5.00      
|3rd Quarter | $10.00      | $2.50      
|4th Quarter | $6.25       | $2.95      

The above
quotations reflect inter-dealer prices, and may not include retail mark-up, mark
down or commissions and may not necessarily represent actual transactions. At
October 31, 2004, there were approximately 720 holders of record of the
Companys common stock. Some of the shares of common stock are held in
street name for an unknown number of beneficial owners. To date the Company has
not paid a cash dividend on its common stock. The payment and amount of any
future cash dividends would be restricted by the Companys lenders and will
necessarily depend upon conditions such as the Companys earnings,
financial condition, working capital requirements and other factors. The Company
does not anticipate paying any dividends in the near future. As of October 31,
2004 the Company has no outstanding options or warrants under any equity
compensation plan.

ITEM 6.    SELECTED
FINANCIAL DATA.

The following
table sets forth certain selected consolidated financial information concerning
the Company. This information is not covered by the independent auditors
report. For further information, see the accompanying Consolidated Financial
Statements of Obsidian Enterprises, Inc. and subsidiaries for the years ended
October 31, 2004, 2003, and 2002 and the information set forth in Item 7,
Managements Discussion and Analysis of Financial Condition and
Results of Operations, and in Item 8, Financial Statements and
Supplementary Data below.

The
information for the year ended December 31, 2000 is for that of U.S. Rubber
only, the accounting acquirer in the reverse merger further described in Item
8.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 11
|------------------------------------ | -------------- | -------

OPERATING DATA:

(Amounts in thousands, except per share data)

|                                                    | Year Ended October 31, | Ten Months
Ended
October 31, | Year Ended
December 31,
|--------------------------------------------------- | ---------------------- | ---------------------------- | -----------------------
|
|Net sales                                           |                        |                              | $                      
|Income (loss) from operations                       |                        |                              |                        
|Discontinued operations, net of tax                 |                        |                              |                        
|Cumulative effect of change in accounting principle |                        |                              |                        
|Net income (loss)                                   |                        |                              |                        
|Basic and diluted loss per share:                   |                        |                             
|From continuing operations                          |                        |                              |                        
|Discontinued operations                             |                        |                              |                        
|Cumulative effect of change in                      |                        |                             
|accounting principle                                |                        |                              |                        
|Net loss per share                                  |                        |                              |                        

BALANCE SHEET DATA:

|                                          | October 31, | December 31,
|----------------------------------------- | ----------- | ------------
|
|Working capital (deficit)                 |             |             
|Total assets                              |             |             
|Long-term debt, including current portion |             |             
|and redeemable stock                      |             |             
|Stockholders' equity (deficit)            |             |             

No dividends
have been declared or paid in any period presented.

The Company
adopted Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, on November 1, 2001. SFAS No. 142 changed
the accounting for goodwill from a model that required amortization supplemented
by impairment tests to an accounting model based solely upon impairment tests.
The consolidated operating data presented includes goodwill amortization only
for the ten months ended October 31, 2001. Had the nonamortization provisions of
SFAS No. 142 been effective prior to fiscal 2001, the net loss for the ten
months ended October 31, 2001 would have been reduced by $76 to $4,319. There
would be no change in earnings per share. All other periods presented would be
unchanged.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 12
|------------------------------------ | -------------- | -------

ITEM 7.    MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

All dollar
amounts in this Item 7 are in thousands (except for share and per share
information).

Organization of Financial Information

This
Managements Discussion and Analysis provides material historical and
prospective disclosures intended to enable investors and other users to assess
our financial condition and results of operations. Statements that are not
historical are forward-looking and involve risks and uncertainties discussed
under the caption Forward-Looking Statements in Item 1 of this
Annual Report on Form 10-K.

The
consolidated financial statements and notes are presented in Item 8 of this
Annual Report on Form 10-K. Included in the consolidated financial statements
are the consolidated statements of operations, consolidated balance sheets,
consolidated statements of cash flows, and consolidated statements of
stockholders deficit and comprehensive loss. The notes, which are an
integral part of the consolidated financial statements, provide additional
information required to fully understand the nature of amounts included in the
consolidated financial statements.

Significant Transactions and Financial Trends

Throughout
these financial sections, you will read about significant transactions or events
that materially contribute to, or reduce, earnings and materially affect
financial trends. Significant transactions discussed in this Managements
Discussion and Analysis include:

| | » | Strategic acquisitions;
| | - | -----------------------

| | » | Raw material price increases and our cost reduction initiatives;
| | - | ----------------------------------------------------------------

| | » | Covenant defaults under the credit agreements in place at certain of our subsidiaries;
| | - | --------------------------------------------------------------------------------------

| | » | An asset impairment charge and discontinued operations recorded in fiscal 2002; and
| | - | -----------------------------------------------------------------------------------

| | » | The cumulative effect of a change in accounting principle as a result of adopting Statement
of Financial Accounting Standard (SFAS) No. 142 in fiscal 2002.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------

These
significant transactions or events resulted from unique facts and circumstances that are
not expected to recur with similar materiality or impact on continuing
operations. While these items are important in understanding and evaluating
financial results and trends, other transactions or events such as those
discussed later in this Managements Discussion and Analysis may also have
a material impact. An understanding of these transactions or events is necessary in order
to estimate the likelihood that current trends will continue or these events
will recur.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 13
|------------------------------------ | -------------- | -------

INTRODUCTION

Obsidian Enterprises is a holding company headquartered in Indianapolis,
Indiana. We conduct business through our subsidiaries:

Butyl Rubber Reclaiming

| | » | U.S. Rubber., acquired in fiscal 2001, owns and operates butyl rubber reclaiming
facilities;
| | - | --------------------------------------------------------------------------------------------

Coach Leasing

| | » | Pyramid, acquired in fiscal 2001, provides luxury coach leases for corporations
and the entertainment industry;
| | - | ---------------------------------------------------------------------------------------------------------------

| | » | Obsidian Leasing , formed in fiscal 2002, owns some of the coaches operated by
Pyramid;
| | - | ---------------------------------------------------------------------------------------

Trailer and Related Transportation Equipment Manufacturing

| | » | United, acquired in fiscal 2001, manufactures steel-framed cargo, racing and
specialty trailers;
| | - | ------------------------------------------------------------------------------------------------

| | » | Danzer, the only subsidiary of the Company until fiscal 2001, manufactures metal
parts and truck bodies for the service and utilities markets; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Classic, acquired in May 2004, manufactures steel-framed cargo, fifth wheel,
gooseneck, motorcycle, race, snowmobile and stacker/lift trailers and open
trailers used in the landscape industry.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

While each of the
subsidiaries markets its products or services independently, our emphasis is to
provide high quality products and services by taking advantage of cross-selling
opportunities, manufacturing and other operational efficiencies through each of
the subsidiaries.

RESULTS OF OPERATIONS

GOING CONCERN

The
Companys financial statements have been presented on the basis that it is
a going concern which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. In the period since June 2001,
Obsidian Enterprises and its subsidiaries have incurred losses and reductions in
equity on a consolidated basis. The Company and certain of its subsidiaries are
also in violation of certain financial covenants in their respective credit
agreements as of October 31, 2004 and we have been unable to obtain waivers for
certain of these violations (as discussed in Financial Covenants
below). All amounts outstanding as of October 31, 2004 under these credit
agreements have been classified as current on our balance sheet. We are
currently negotiating to obtain waivers or refinance the credit agreements where
covenant violations exist and we do not expect these violations to impair our
ability to fund current and future obligations of the Company. Historically,
losses and certain third-party debt repayments have been financed with DC
Investments, LLC (DC Investments) and its subsidiary Fair Holdings,
Inc. (Fair Holdings), entities controlled by the Companys
Chairman, on terms that may not have been available from other sources. As of
October 31, 2004, Fair Holdings is in violation of certain covenants in the
credit agreement with its lender. These violations have not been waived, nor has
the lender agreed not to take action against Fair Holdings as a result of the
violations. Action by the lender to require repayment of all amounts due from
Fair Holdings may impair Fair Holdings' ability to loan further amounts to the
Company under its credit agreement with Fair Holdings. As of October 31, 2004,
total debt outstanding to DC Investments and Fair Holdings was
$20,299.

These continuing losses and covenant violations, combined with uncertainties
relating to the ability of the Company and Fair Holdings to refinance their debt
or obtain waivers from their lenders regarding these covenant violations, have
led the Companys independent auditor, McGladrey & Pullen LLP to include a
statement in its audit report relating to the Companys audited consolidated
financial statements for the year ended October 31, 2004 expressing substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are described in Liquidity and Capital
Resources and in Note 2 to the Companys consolidated financial statements
included elsewhere in this report.

OVERVIEW

During fiscal
2004, our results of operations were negatively impacted by various
events discussed below.  During fiscal 2005, we intend to focus our efforts
on generating positive cash flow and increasing our working capital through
improved operations and pursuing significant strategic
initiatives.

| | » | In the trailer and related transportation equipment manufacturing segment we
successfully completed the acquisition of Classic in Sturgis, Michigan in fiscal
2009. The addition of Classic enabled us to add synergistic products to our
trailer line. The addition of Classic added revenues to this segment of 20% on
an annualized basis and helped improve our gross margins in this segment by
approximately 3% on an annualized basis. The segment was negatively affected by
the significant increases in raw material prices during fiscal 2004 which
reduced our gross margins. We were able to pass some of the increases through to
our customers through price increases of approximately 12%. Our price increases
lagged behind the raw material price increases throughout 2004, which reduced
our overall gross margins.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 14
|------------------------------------ | -------------- | -------

| |  | We expect market conditions to remain very competitive and raw material prices
to remain somewhat volatile in this segment. As raw material prices begin to
level off we expect our price increases to return our margins to a profitable
level. We are also implementing programs with a goal of reducing the costs of
raw material. Our cost of materials percentage historically has been above the
industry average. Our cost reduction initiatives for fiscal 2005 include
combining the purchasing power of all our subsidiaries to negotiate better
pricing through higher volume purchases. We also expect to be able to take
advantage of purchase discounts with additional available working capital
through a new line of credit. Additional strategies in the trailer and related
transportation segment include: building sales growth through market expansion,
cross selling and additional geographical production with Classic. We continue
to evaluate strategic acquisitions to determine whether they can improve the
performance of this segment.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Our butyl rubber reclaiming segment sales remained flat during fiscal 2004. We
continue to search for new market sources of butyl raw material. We are
continuing to expand our recycling program with the chapters of The National FFA
Organization. We implemented a new Fine Grind process that increases our ability
to use other types of rubber in our Butyl reclaim process. Additional costs were
incurred to maintain the equipment in this very capital intensive operation. We
also incurred significant increases in energy costs. During fiscal 2004 we
implemented a five percent price increase as our cost to obtain raw materials
has increased and the maintenance of the equipment as increased.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | For fiscal 2005 we expect the market demand for our product to be high due to
our current order backlog. The availability of raw material for butyl rubber
reclaiming to meet the market demands continues to be a concern. We expect our
continued participation with The National FFA Organization will improve our
ability to recover and process additional butyl materials. In addition we will
continue to modify our Fine Grind operation to increase our rubber resource
utilization of existing material. Also during the fourth quarter of fiscal 2004
we started the design and implementation of a cryogenic process. This process
will enable the Company to expand its product lines of natural rubber in new
markets. Full implementation is expected to be completed by the second quarter
of fiscal 2005.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Our luxury coach leasing segment was negatively affected by a decrease in sales
from a lower utilization of our fleet. The lower utilization is due to increased
market competition in the industry and a significant decrease in the number of
entertainers touring. As noted in the legal matters under Item 3, the company
filed a law suit in December 2004 against the former owners of Pyramid for
violation of their non-compete agreement. Several tours that utilized our
coaches during fiscal 2003 did not return in fiscal 2004. Utilization of our
fleet for fiscal 2004 decreased approximately 30% which in turn had a
significant negative impact on the earnings of this segment.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | As discussed below under Liquidity and Capital Resources, in fiscal
2004, we had completed negotiations to increase the Companys line of
credit facility of $15,000 of which approximately $4,185 was available for
borrowing by the Company at October 31, 2004.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | We will continue to pursue strategic acquisition opportunities that include
targets both in our traditional, basic industries and manufacturing sectors as
well as targets that possess assets (including cash) that are outside our
traditional areas of focus, and available on terms that our management
believes to be attractive. This strategy resulted in a traditional acquisition
of Classic effective May 1, 2004. We also incurred significant increases in
professional fees of approximately $600 for the unsuccessful exchange offer for
Net Perceptions during 2004. While no material negotiations are currently active
with respect to any targets, we anticipate that over the course of fiscal
2005 we will pursue acquisition opportunities that we deem attractive in a
variety of industry sectors. Ultimately, these acquisitions may (but cannot be
guaranteed to) result in our having increased financial resources and
potentially a broader asset base and more diversified sources of revenue.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 15
|------------------------------------ | -------------- | -------

Fiscal 2004 Compared with Fiscal 2003

The following table
details our results of operations as a percentage of sales:

|                                             | Year Ended October 31,
|-------------------------------------------- | ----------------------
|
|Net sales                                    |                       
|Cost of sales                                |                       
|Selling, general and administrative expenses |                       
|Interest expense                             |                       

Net Sales

Net sales in fiscal
2004 were $64,360 compared to $59,295 in fiscal 2003, an increase of 8.5%. The
sales growth relates primarily to the purchase of Classic in May 2004. In
addition, cargo trailer sales have increased due to the increased capacity and
sales growth from our Hagerstown Maryland facilities along with an average price
increase of 4.5% to offset raw material price increases. Sales in the butyl rubber
reclamation segment decreased slightly and sales in the coach leasing segment decreased
approximately $1,800.

Looking ahead, we expect
improvement of sales growth in fiscal 2005 compared to sales growth in 2004,
driven primarily by:

| | » | The introduction of new products in trailer and related transportation equipment segment
with the addition of Classic and other potential acquisitions.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Additional production capacity through our Hagerstown, Maryland facility for market
expansion on the East coast for cargo trailers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| | » | The introduction of new products for our rubber reclamation segment with the successful
implementation of our cryogenic production equipment to add other rubber products for our
current customers and new markets.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | General price increases to pass through significant price increases for raw
materials.
| | - | --------------------------------------------------------------------------------------

| | » | Expected improvement in overall economic conditions.
| | - | ----------------------------------------------------

There can be
no guarantee, however, that such growth will occur. Please see Note 1 to the
Notes to Consolidated Financial Statements for a discussion of the
Companys ability to continue as a going concern.

Gross Profit

Gross profit
as a percentage of sales decreased 2.5 percentage points from 12.7 percent in
fiscal 2003 to 10.2 percent in fiscal 2004. The decrease was mainly the result
of increased raw material costs in our trailer and related transportation
equipment segment related to steel and wood which are the most significant
components of our cost of goods sold. In addition, our rubber reclaim segment
incurred additional costs during fiscal 2004 for repair and maintenance of their
equipment and the purchase of raw materials from foreign sources. We were able
to pass some of the raw material cost increases through to our customers
although our price increases lagged behind the raw material cost increases
throughout fiscal 2004, reducing our overall gross profit.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 16
|------------------------------------ | -------------- | -------

Looking
ahead, we expect to improve our gross profit margins in fiscal 2005 compared
to fiscal 2004, primarily by the integration of acquisitions and cost
reductions as follows:

| | » | The addition of Classic should improve the overall gross margin as the product
lines provided by Classic historically have had higher gross margins.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | » | We are implementing a process to pool all of our related purchasing together for
all our subsidiaries to increase our purchasing power through volume discounts.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Our refinancing and increase of our working capital line of credit with Fair Holding should enable us to take
advantage of lost vendor discounts and allow us to save one to one and a
half percent on our raw material purchases.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Continued development of our recycling program with The National FFA Organization for our
rubber reclaim segment along with further implementation of our Fine Grind and Cryogenic
systems should improve overall operating efficiencies and provide additional uses of our scrap
rubber products.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Selling, General and Administrative (SG&A) Expenses

The Companys
SG&A expenses increased $2,290 or 26.8% for the year ended October 31, 2004 compared
to 2003. The increase in expenses was due, in part, to professional fees and other expenses related to the
unsuccessful exchange offer for Net Perceptions, Inc. These expenses are non-recurring and
totaled approximately $600. Other increases include the additional SG&A expenses of
$500 for Classic, depreciation and amortization of $375, insurance of $500 and the
remaining increase of $315 for salaries, marketing expenses for website advertising and
other general expenses.

Looking ahead, SG&A
expenses are expected to increase. Recently, there have been significant regulatory
changes, including the Sarbanes-Oxley Act of 2002, and there may be new accounting
pronouncements or regulatory rulings that will increase our administrative expenses. We
also expect to grow our company through mergers and acquisitions, which will include
additional legal, and accounting expenses.

Interest Expense

Interest expense for
the year ended October 31, 2004 as a percentage of average debt borrowings of
$44,088 was 9.5%. Interest expense for the year ended October 31, 2003 as a
percentage of average debt borrowings of $39,819 was 8.9%. The increase is
primarily due to the increase of the prime rate as well as increased borrowings
on related party debt to fund the operating losses discussed below in
Liquidity and Capital Resources, and Partners Equity
Transactions.

Income Tax Provision

The income tax benefit
for the year ended October 31, 2004 decreased by $914 compared to the year ended October
31, 2003. The income tax benefit is created primarily through net operating loss carry
forwards recognized to the extent they are available to offset the Companys net
deferred tax liability.

Fiscal 2003 Compared
with Fiscal 2002
The following table details our results of operations as a percentage of
sales:

|                                             | Year Ended October 31, |    
|-------------------------------------------- | ---------------------- | ---
|
|Net sales                                    |                        | 100
|Cost of sales                                |                        | 87 
|Selling, general and administrative expenses |                        | 14 
|Loss on asset impairment                     |                        | ---
|Loss from discontinued operations            |                        | ---
|Interest expense                             |                        | 6  

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 17
|------------------------------------ | -------------- | -------

Net Sales

Net sales in fiscal
2003 were $59,295 million compared to $57,274 million in fiscal 2002, an increase of 3.5%.
Sales growth was primarily driven by our coach leasing segment with the addition of five
new buses. Our butyl rubber segment also had increases due to increased demand in the oil
exploration and tire industries. The trailer and related equipment manufacturing segment
had a slight increase due to the discounting that occurred in the industry during fiscal
2003 and overall reduction in the sale of truck bodies.

Gross Profit

Gross profit as a
percentage of sales decreased 3.8 percentage points from 16.5 percent in fiscal 2002 to
12.7 percent in fiscal 2003. The decrease was mainly the result of:

| | » | The sales discount program for cargo trailers that took place in fiscal 2003
which lowered our gross margin by $1,511 or 2.6%.
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | » | Increased raw material costs in our trailer segment of 1%, primarily related to
plywood which is a significant portion of our raw materials used in production.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Purchases of raw materials in our rubber reclaim segment from foreign sources
thus increasing the cost.

Selling, General and Administrative (SG&A) Expenses

Our SG&A expenses
decreased $53 or .6% for the year ended October 31, 2003 compared to 2002. The decrease is
related primarily to the overall decrease in professional fees for services in assisting
with creating better subsidiary reporting and post acquisition activities, the cost to
obtain prior year audits to meet regulatory filing requirements and the cost of using
outside consultants to provide accounting and related services to management.

Interest Expense

Interest expense for
the year ended October 31, 2003 as a percentage of average debt borrowings of $39,819 was
8.9%. Interest expense for the year ended October 31, 2002 as a percentage of average debt
borrowings of $35,923 was 9.6%. The decrease is primarily due to the reduction of the
prime rate as well as the refinancing debt and equity transactions discussed below in
Liquidity and Capital Resources and
Partners Equity Transactions.

Income Tax Provision

The income tax benefit
for the year ended October 31, 2003 increased by $904 compared to the year ended October
31, 2002 The income tax benefit is created primarily through net operating loss
carryforwards recognized to the extent they are available to offset the Companys net
deferred tax liability.

Discontinued Operations

On October 30, 2002,
our Board of Directors agreed to sell substantially all assets of Champion to an entity
controlled by Messrs. Durham and Whitesell in exchange for assumption of all liabilities
of Champion, other than its subordinated debt. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting for Impairment of Long-Lived
Assets, the operating results of Champion have been classified as discontinued operations.
The losses from discontinued operations for the year ended October 31, 2003 and 2002
represent the losses of Champion during these periods, net of tax benefit of $25 and $0,
respectively. The loss from discontinued operations for the years ended October 31, 2003
and 2002 were $49 and $1,040, respectively.

Substantially all
assets of Champion subject to its liabilities were sold on January 30, 2003. No gain or
loss was recognized in the consolidated statement of operations due to the involvement of
related parties. This transaction resulted in an increase in equity of $1,142.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 18
|------------------------------------ | -------------- | -------

BUSINESS SEGMENTS

The following
information provides perspective on our business segments sales and
operating results for the years ended October 31, 2004, 2003, and
2002. The comments that follow should be read in conjunction with our
consolidated financial statements and related notes contained in this Form
10-K. The following table shows net sales by product segment:

|                        | Year Ended October 31, |  |  
|----------------------- | ---------------------- |  | -
|
|                       
|Trailer manufacturing   |                        |  | $
|Butyl rubber reclaiming |                        |  |  
|Coach leasing           |                        |  |  
|                        |                        |  |  
|                       
|Total                   |                        |  | $
|                        |                        |  |  

We allocate
SG&A expenses to the respective subsidiaries primarily based on a percentage
of sales. Amounts allocated by segment are as follows:

|                        | Year Ended October 31, |  |  
|----------------------- | ---------------------- |  | -
|
|                       
|Trailer manufacturing   |                        |  | $
|Butyl rubber reclaiming |                        |  |  
|Coach leasing           |                        |  |  
|                        |                        |  |  
|                       
|Total                   |                        |  | $
|                        |                        |  |  

TRAILER AND RELATED
TRANSPORTATION EQUIPMENT
MANUFACTURING

The following table
shows sales, cost of sales, gross profit and loss before taxes and minority interest for
this segment for the periods indicated:

|                               | Year Ended October 31, |  |  
|------------------------------ | ---------------------- |  | -
|
|                              
|Net sales                      |                        |  | $
|Cost of sales                  |                        |  |  
|                               |                        |  |  
|                              
|Gross profit                   |                        |  | $
|                               |                        |  |  
|                              
|Gross profit %                 |                        |  |  
|                               |                        |  |  
|                              
|Loss before taxes and minority |                        | 
|interest                       |                        |  | $
|                               |                        |  |  

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 19
|------------------------------------ | -------------- | -------

Sales

Sales in this segment
increased $7,175 or 17.5% over the comparable period of fiscal 2003. A portion of the
increase relates to our purchase of Classic, which increased 2004 sales by
$4,061. In addition, cargo trailer sales have increased $3,233 due to strong customer
demand for both our United and Danzer products along with the acceptance of new products
offered by both subsidiaries. The increase was offset by a $119 decrease in sales of truck
bodies during the twelve months ended October 31, 2004. This
reduction was related to the continued decrease in orders from the telecommunications
industry for truck bodies. We do not anticipate any significant order increases from truck
body customers in the near future.

In fiscal 2003, sales
in this segment increased $234 or .6% as compared to fiscal 2002. The increase was
primarily related to the sales of cargo trailers increasing by approximately $1,600 as a
result of additional production facilities. Sales increased to existing customers and we
added new markets. We also began a sales discount/rebate program to stimulate sales. While
this program did increase the units sold, it resulted in a lower average price per unit.
The increase in cargo trailer sales was offset by the decrease in sales of truck bodies of
approximately $1,375 compared to fiscal 2002.

Looking ahead for the
trailer and related equipment manufacturing segment, improvement will depend on our
ability to improve gross margins for fiscal year 2005 as compared to fiscal 2004. Orders
for our cargo trailers remain strong. We also have additional capacity at our Hagerstown,
Maryland facility for our continued market expansion to the East coast for cargo trailers.
Our price increases will also increase revenue and should soften the impact of raw material price increases. The acquisition of Classic has provided new customers and new
product lines which we expect will increase our future segment revenues by approximately 20%.

Gross profit

The gross profit in this segment for
fiscal 2004 increased slightly to 8.4% of revenues as compared to 8.1% for fiscal 2003.
The cost of plywood and steel, major components of our cargo trailers increased
significantly starting in August 2003 and continued through October 31, 2004. Material
cost surcharges were initiated in April 2004 to our customers to offset the significant
price increases we incurred from our vendors. Our gross margins improved somewhat
throughout the year, but we were unable to pass all the increases through during fiscal
year 2004. For that reason, our margins were negatively affected for 2004. Our gross
margins were also negatively impacted by a fire at the Hagerstown, Maryland facility in
May 2004 which interrupted production. These negative effects on our gross margins were
offset somewhat by the purchase of Classic in May 2004. The gross margins for the Classic
trailer lines typically are higher than our historical gross margins.

In fiscal 2003, gross
profit decreased by 5.9% when compared to fiscal 2002 primarily due to our discounting of
cargo trailers that decreased our gross margin by 2.6%. The sales discounts/rebates
offered during fiscal 2003 ended with the introduction of new product lines. Gross profits
were also impacted by the rising costs of raw materials during the fourth quarter of
fiscal 2003. In addition the decreased volume at our truck body plant resulted in an
inability to absorb fixed overhead costs. To offset these costs, management began
production of cargo trailers in this facility during late fiscal 2002. Inefficiencies in
the start up of this operation and additional production facilities in Elkhart, Indiana,
had a negative impact in gross profit margins as compared to fiscal 2002.

Looking ahead,
improvement will depend on our ability to pass through our raw material cost
increases to our customers in order to improve gross margins. We also expect the
addition of Classic will improve our gross margin as Classics product line
historically had higher gross margins than our comparable products. We are also
implementing a process to pool all of our related purchasing together for all
our trailer manufacturing subsidiaries to increase our purchasing power and
obtain volume discounts. Our refinancing and increase of our working capital
lines of credit, if they can be achieved, will enable us to take advantage of
lost vendor discounts and save by one to one and a half percent on our raw
material purchases.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 20
|------------------------------------ | -------------- | -------

Loss before taxes and minority interest

In fiscal 2004, the
loss before taxes and minority interest increased by $630 when compared to fiscal 2003,
and $2,144 when compared to fiscal 2002. The decrease in profitability and negative trend
has been primarily due to the negative impact of economic conditions as further described
in our gross profit analysis. During fiscal 2004, raw material costs increased significantly
and our ability to pass this increase through to our customers was at a slower pace, therefore
negatively impacting our profitability. Looking ahead we expect that our price increases
will improve our working capital and provide positive
cash flow to this segment.

BUTYL RUBBER RECLAIMING

The following
table shows sales, cost of sales, gross profit and loss before taxes and
minority interest for this segment for the periods indicated:

|                               | Year Ended October 31, |  |  
|------------------------------ | ---------------------- |  | -
|
|Net Sales                      |                        |  | $
|Cost of Sales                  |                        |  |  
|                               |                        |  |  
|                              
|Gross Profit                   |                        |  | $
|                               |                        |  |  
|                              
|Gross Profit %                 |                        |  |  
|                               |                        |  |  
|                              
|Loss before taxes and minority |                        | 
|interest                       |                        |  | $
|                               |                        |  |  

Sales

Net sales in
this segment for fiscal 2004 as compared to fiscal 2003 have decreased by $293
or 2.7%. Sales in this segment remain flat due to the limited availability of
raw materials. Sales to our customers have remained the same and additional
increases will depend on finding new sources of butyl inner tubes and developing
other natural rubber products. We continue to work with the National FFA
Association to implement a reclamation program to increase our resources in the
agricultural industries. As noted above, management has been testing other
materials including butyl pad scrap as a replacement material with some success.
In addition, alternative sources of material, including overseas sources, are
being pursued to provide a consistent supply of material. We continue to utilize
our Fine Grind and other processes to increase our ability to process other
types of products for our butyl reclaim process as well as other natural rubber
products.

In fiscal
2003, net sales in this segment as compared to fiscal 2002 increased by 8.7% in
the amount of $880. Sales in this segment were higher in fiscal 2003 because of
increased demand from our tire manufacturing customers and an increase in
pricing. Net sales also increased due to increased demand for pipeline mastic
wraps.

Looking
ahead, sales are expected to increase moderately in fiscal 2005 compared to
fiscal 2004. Sales growth will depend on the successful implementation of our
recycling program with the chapters of The National FFA Organization and finding
other sources of material. In addition, the continued implementation of our Fine
Grind and Cryogenic grinding processes will increase the ability to utilize some
additional rubber products in our Butyl reclaim process and add new
products.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 21
|------------------------------------ | -------------- | -------

Gross profit

Gross profit
as a percentage of sales decreased by 7.2% for fiscal 2004 as compared to fiscal
2003. The primary reason for this decrease is a lack of a consistent supply of
raw materials and increasing energy costs. As a result of having to use less
than optimum raw material mix in the reclaiming process, additional processing
time is incurred to ensure delivery of quality product. Our processes require
significant amounts of natural gas and electricity, the cost of which increased significantly
during fiscal 2004. Additional costs were incurred to maintain the equipment in
this very capital intensive operation. During fiscal 2004 we initiated price
increases of 5% to partially offset increasing costs of production and
materials.

In fiscal
2003, gross profit as a percentage of sales increased 2.3% compared to fiscal
2002. The primary reason for this increase is efficiency gains with the
consolidation of our plant operations in fiscal 2003. Although we gained some
efficiency in consolidating plant operations, our reclaim process is most
efficient when raw material consists of primarily road worn inner tubes with a
mix of other butyl rubber.

Looking ahead, our
segment gross profit improvement will depend greatly on the success of finding consistent
sources of raw material and improved efficiencies in our operations through our new
cryogenic and fine grind processes.

Loss before
taxes and minority interest

In fiscal
2004, the loss before taxes and minority interest increased by $854 as compared
to fiscal 2003, and $874 as compared to fiscal 2002. The decrease in
profitability and negative trend as noted above has been primarily due to the
significant increases in energy costs, inefficiencies in production and higher
maintenance costs. Our capital intensive operation also requires significant
maintenance and improvements. As noted above we have put into place new processes
for our cryogenic and fine grind systems. Looking ahead, we anticipate the new
processes will improve our efficiencies and provide additional products to
improve and provide additional working capital and cash flow for this
segment.

COACH LEASING

The following table
shows sales, cost of sales, gross profit and loss before taxes and minority interest for
this segment for the periods indicated:

|                               | Year Ended October 31, |  |  
|------------------------------ | ---------------------- |  | -
|
|Net Sales                      |                        |  | $
|Cost of Sales                  |                        |  |  
|                               |                        |  |  
|                              
|Gross Profit                   |                        |  | $
|                               |                        |  |  
|                              
|Gross Profit %                 |                        |  |  
|                               |                        |  |  
|                              
|Loss before taxes and minority |                        | 
|interest                       |                        |  | $
|                               |                        |  |  

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 22
|------------------------------------ | -------------- | -------

Sales

Sales for fiscal 2004
decreased by $1,817 or 25% from fiscal 2003. The decrease in sales relates to a
lower utilization of our fleet compared to fiscal 2003.
Management believes the lower utilization is due to increased market competition
in the industry. As noted in legal matters in section, Item 3, the company filed
a lawsuit in December 2004 against the former owners of Pyramid for violation of
their non-compete agreement. We experienced turnover in management which
contributed to several tours that utilized our coaches during fiscal 2003 but
did not return in fiscal 2004. Utilization of our fleet for fiscal 2004
decreased 25% for the twelve months ended October 31, 2004 as compared to the
same period for fiscal 2003. In general during fiscal 2004, the entertainment
touring industry slowed and reduced our business by an estimated 25% which had a
negative impact on our operations. At this time, we cannot estimate when the
touring for the entertainment industry will return to previous levels. In fiscal
2003, sales increased 14.2% in the amount of $907 over fiscal 2002. The increase
in sales is attributable to marketing efforts and the addition of six coaches
during fiscal 2003. Our marketing efforts on specialized tour groups such as
golf course trips, Broadway musicals, corporate customers, and rock and pop
bands expanded our customer base as these customers are in addition to the
country and western performers who have traditionally been this segments
primary customer base.

Gross profit

Gross profit percentage
for this segment was 41.1% for fiscal 2004 compared to 44.2% for fiscal 2003.
The decrease is attributable primarily to the increase of costs for maintaining
a larger fleet while revenues per coach have decreased. In addition, some of our
increased costs as a percentage of revenue were offset by the mix of utilization
of the coaches owned in our fleet and the need to sublease additional buses from
third parties to meet demand. Subleasing third party buses are typically at
lower gross margins. As current demand has decreased our need for third party
coaches has decreased. In addition, in November 2004 we sold two of our older
coaches at no material gain or loss. We also plan to sell three other older
coaches in the first half of 2005. The sale of our older coaches is expected to
reduce our fleet maintenance expenses as the older coaches require a higher
level of maintenance.

In fiscal 2003, the
gross profit percentage for this segment was 44.2% compared to 47.3% for fiscal 2002. The
reduction is attributable primarily to the need to sublease additional buses from third
parties to meet current demand during peak periods and increased operating costs for
insurance.

Looking ahead, segment
sales and gross profits in fiscal 2005 will depend on the industry market conditions. We
are continually working to improve our utilization of our owned coaches to increase our
revenues and minimize additional costs from leasing third party buses.

Loss before taxes and
minority interest

In fiscal 2004, the
loss before taxes and minority interest increased $1,357 from fiscal 2003 and $1,062 since
fiscal 2002. The decrease in profitability and negative trend as noted above has been
primarily due to the significant decrease in the professional acts touring in fiscal 2004.
The touring industry in general decreased 30% which reduced the utilization of our
coaches. Also, during fiscal 2004, we maintained a larger fleet than prior years which
increased our depreciation and interest costs. Looking ahead we continue to explore other
non-traditional uses for our coaches to improve the utilization and therefore increase our
cash flow and working capital in this segment. We are also evaluating our coaches and as
noted above selling the older coaches in our fleet to reduce our costs.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 23
|------------------------------------ | -------------- | -------

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

The Companys
financial statements have been presented on the basis that it is a going concern
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. In the period since June 2001, Obsidian
Enterprises and its subsidiaries have incurred losses and reductions in equity
on a consolidated basis. The Company and certain of its subsidiaries are also in
violation of certain financial covenants in their respective credit agreements
as of October 31, 2004 and have been unable to obtain waivers for certain of
these violations. All amounts outstanding as of October 31, 2004 under these
credit agreements have been classified as current on our balance sheet. We are
currently negotiating to obtain waivers or refinance the credit agreements where
covenant violations exist, and we do not expect these violations to impair our
ability to fund current and future obligations of the Company. Losses and
certain third-party debt repayments have been financed with DC Investments and
its subsidiary Fair Holdings, entities controlled by the Companys
Chairman, on terms that may not have been available from other sources. As of
October 31, 2004, Fair Holdings is in violation of certain covenants in the
credit agreement with its lender. These violations have not been waived, nor has
the lender agreed not to take action against Fair Holdings as a result of the
violations. Action by the lender to require repayment of all amounts due from
Fair Holdings may impair Fair Holdings' ability to loan further amounts to the
Company under its credit agreement with Fair Holdings. As of October 31, 2004,
our total debt outstanding to Fair Holdings was $20,299.

These continuing losses and covenant violations, combined with uncertainties
relating to the ability of the Company and Fair Holdings to refinance their debt
or obtain waivers from their lenders regarding these covenant violations, have
led the Companys independent auditor, McGladrey & Pullen LLP to include a
statement in its audit report relating to the Companys audited consolidated
financial statements for the year ended October 31, 2004 expressing substantial
doubt about the Companys ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 2 to the Companys
consolidated financial statements included elsewhere in this report.

We are continuing to
address our liquidity and working capital issues through various means including
operational changes and financing matters which are discussed below. During
fiscal 2005, we expect to refinance current debt of $12,800 on a long-term
basis. We also expect to generate approximately $5,200 in cash from operations
which will be used to satisfy current obligations. Any potential cash
shortage which could range from $2,000 up to $5,000, is expected to be supported through
our existing lines of credit with Fair Holdings. In addition, Fair Holdings has
informally indicated that it would make available additional financial support,
if necessary, although we currently do not have any commitment for this
support.

WORKING CAPITAL

Our
businesses are working capital intensive and require funding for purchases of
production inventory, capital expenditures and expansion and upgrading of
facilities. Each of our subsidiaries has a separate revolving credit agreement
and term loan borrowings through which the subsidiary finances its operations
together with cash generated from operations. Our consolidated working capital
position (current assets over current liabilities) was negative at October 31,
2004 by $10,504. At the end of fiscal 2003, our working capital position was
positive by $6,045. The decrease in working capital is primarily attributable to
certain loans that were classified as current as of October 31, 2004 due to
covenant violations and other circumstances. We are currently working to
refinance loans for United in the amount of $4,100, Obsidian Leasing in the
amount of $3,400 and US Rubber in the amount of $5,300 as noted in further
detail below. The refinancing of these obligations will improve our working
capital to a positive position upon completion.

We continue
to address liquidity and working capital issues in a number of ways. In fiscal
2004, net cash used in continuing operations was $4,220 compared to $2,604 in
fiscal 2003. The use of cash and working capital was primarily related to
operating losses. For fiscal 2005, we expect our operations to begin to generate
positive cash and increase our overall working capital through improved
operations as follows:

| | » | We secured an additional financial commitment from Fair Holdings to provide,
additional borrowings under a $15,000 line of credit agreement, which expires on
January 1, 2007. Approximately $4,185 is currently available to us under the
agreement.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | United is in negotiations for a new line of credit and term loan. We expect to
complete the refinancing of this debt during the first half of fiscal 2005.
Under the terms of the commitment, the maximum borrowing availability will
increase to $5,000. Upon completion, this will improve United's working capital
by approximately $4,100, as the debt will be reclassified from current to long
term as it relates to the new agreement.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Obsidian Leasing has a current debt obligation due of $3,400. We are actively
working to refinance this debt with other banks. We expect to complete the
refinancing during the first half of fiscal 2005. In November 2004, we sold two
of our older coaches and reduced our debt by $209. We are also in negotiations
to sell three coaches more which will reduce the debt by an additional estimated
$354.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | US Rubber has a balloon payment on its debt which will be due October 24, 2005
which is our fourth quarter. We are in the initial stages of preparing to negotiate and
refinance this debt prior to October 2005.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 24
|------------------------------------ | -------------- | -------

| | » | Classic received an amendment to its credit facility to temporarily increase its
line of credit availability by $250 through April 2005.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | » | We are actively working to restructure or refinance our high interest rate debt
on more favorable terms. Approximately $19,800 of our debt bears interest from rates
ranging from 10% to 15%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | As fully described under Guarantees of Obsidian Capital Partners, we
have an agreement that gives us the right to mandate a capital contribution if
the lenders to U.S. Rubber or United were to declare a default. In either of
those events, the Company has the right to enforce a capital contribution
agreement up to $1,370 on U.S. Rubber and $1,000 on United to fund the
respective subsidiarys shortfall. These payments, if any, would be applied
directly to reduce the respective subsidiarys debt obligations to the
lender.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Cost reduction and other initiatives are being put in place for raw materials in
the trailer and related transportation manufacturing segment with the use of
alternative materials and additional discounts through volume purchasing by
pooling our purchasing power from all affiliated companies. Significant
increases in raw material costs are passed through to our customers through
price increase surcharges.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | We continue to look for ways to strengthen our liquidity, equity and working
capital through ongoing evaluations of merger and acquisition candidates and other
recapitalization methods. In 2004 we purchased Classic which provided positive cash from
operations, additional working capital and additional liquidity under its line of credit.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Overall improvements in economic conditions.
| | - | --------------------------------------------

Management believes the
steps taken to improve operations will positively impact our liquidity and
working capital for fiscal 2005. However, success is dependent on our ability to
restore gross profits and capitalize on new markets in the trailer and related
transportation manufacturing segment, obtain consistent material supply in the
butyl rubber reclaiming segment and restore our market share in the coach
leasing segment. Moreover, improvement in our liquidity and working capital
position is substantially dependent upon our ability to successfully refinance
approximately $13,500 of debt at three of our subsidiaries. Failure to complete
these refinancings on a timely basis could have a material adverse effect on our
liquidity and working capital position and could impair the ability of our
subsidiaries to continue operations.

FINANCIAL COVENANTS

Significant financial
covenants in our credit agreements include the maintenance of minimum financial ratios, such as levels of
earnings to funded debt and fixed charge coverage ratios. We did not meet requirements and
covenants in certain debt agreements.

At October 31, 2004,
United did not meet certain financial covenants relating to minimum levels of
EBITDA and fixed charge coverage ratios in its agreements with its bank and
Huntington Capital Investment Company. Huntington Capital Investment Company
waived its covenant violations as of October 31, 2004. The amount is classified
as current until completion of an amendment to cure future violations. The bank
debt has matured and the Company is currently working with the bank on a short
term extension until this debt is refinanced. The total debt of $7,693 is
classified as current.

Obsidian
Leasing was notified by letter dated November 3, 2004 that it was in technical
default of its fixed charge coverage ratio in its credit agreement with its bank
and the loans matured on December 1, 2004. The Company is currently discussing a
forbearance agreement with the bank and the total related debt of $3,430 is
classified as current. Management is currently exploring options with regard to
refinancing the outstanding debt.

US Rubber did not meet its covenant related to delivery of audited financial
statements within 90 days of the end of its 2004 fiscal year. No waiver was
received, the total balance of $5,307 is classified as current based on an
October due date.

As of October
31, 2004, Obsidian Enterprises did not meet its financial covenant related to a
minimum working capital requirement and the delivery of audited statements
within 90 days of the end of its 2004 fiscal year in its credit agreements with RENN
Capital. No waiver was received and the total balance of $500 is classified as
current.

Our high
level of debt creates liquidity issues for us and the stringent financial
covenants that are common for this type of debt increase the probability that
our subsidiaries may from time to time be in default under these loans. These
risks are mitigated, in part, for our United and U.S. Rubber subsidiaries by the
right described below under Guarantees of Obsidian Capital Partners.
Additionally, despite the above described financial covenant violations, all of
our lenders continue to make advances to the Company and our subsidiaries under
our lines of credit.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 25
|------------------------------------ | -------------- | -------

Long-Term Assets

Long-term
assets as of October 31, 2004 were $33,190 compared to $32,300 as of October 31,
2003. The net increase of $890 was primarily due to the purchase of Classic and the
long-term assets associated with the acquisition, increase in production
equipment and a new coach, net of amortization of intangible assets and the
disposal of assets.

Capital Structure

The following table
details our total capitalization components:

|                                                     | 2004 | 2003
|---------------------------------------------------- | ---- | ----
|
|                                                    
|Short-term debt                                      |      |     
|Long-term debt, including Redeemable Preferred Stock |      |     
|Stockholders' deficit                                |      |     

Total debt
increased in fiscal 2004 by $6,148 compared to fiscal 2003. The increase relates
primarily to the increase in working capital needs by funding operational
losses, acquisitions, financing of operational equipment and coaches and the
change in the valuation of Redeemable Stock. Shareholders equity decreased
primarily as a result of the current year loss.

CASH AVAILABILITY

On a
consolidated basis, at October 31, 2004, we had approximately $688 of cash and
cash equivalents. United, Classic, Danzer, U.S. Rubber, and Obsidian Enterprises
each have revolving credit lines available for working capital at each
individual entity. Borrowings under the credit facilities are available to the
lesser of the maximum amount or the borrowing base as defined in the credit
agreement. At October 31, 2004, additional current availability under these
credit lines and maximum availability if supported by their individual borrowing
bases are:

|Company                 | Current Availability | Maximum Availability
|----------------------- | -------------------- | --------------------
|
|United Expressline      |                      |                     
|Classic Manufacturing   |                      |                     
|U.S. Rubber             |                      |                     
|Danzer Industries(1)    |                      |                     
|Obsidian Enterprises(1) |                      |                     

(1)  Additional borrowings only through Fair Holdings, a related party
under existing lines of credit.

OBSIDIAN CAPITAL PARTNERS EQUITY TRANSACTIONS

Obsidian
Capital Partners (Partners), our major shareholder, was required
under the Agreement and Plan of Reorganization to fund, through the purchase of
additional preferred stock, certain ongoing administrative expenses of the
Company to complete the Plan of Reorganization, complete all required current
and prior year audits to meet the regulatory filing requirements, and ensure all
annual and quarterly SEC filings are completed to enable the registration of the
preferred stock issued to Partners. The amounts expended through October 31,
2002 approximated $1,275. Pursuant to the agreement with Partners, we converted
these amounts to equity in exchange for issuance to Partners of convertible
preferred stock in October 2002. Additional expenses of $270 in excess of
amounts Partners was obligated to pay were funded by Fair Holdings and
subsequently converted to Series D Preferred Stock. The total liability of
$1,545 converted to equity was incurred as follows: $364 capitalized in the
reverse merger transaction; $376 as expenses incurred in 2001; and $805 as
expenses incurred in 2002.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 26
|------------------------------------ | -------------- | -------

In fiscal 2002,
Partners converted $1,290 of notes payable and accrued interest from us to Partners to
402,906 shares of our Series C Preferred Stock.

In October 2003,
Partners acquired shares of the Companys Series D Preferred Stock for $250 under the
capital contribution agreement described under Guarantee of Partners below.

In March 2004, Partners
converted all of the outstanding Series C and D Preferred Stock to 1,807,492 shares of
common stock.

GUARANTEES OF OBSIDIAN CAPITAL PARTNERS

We have an agreement
with Partners that gives us the right to mandate under the debt obligations with
third parties a capital contribution from the Partners if the lenders to U.S.
Rubber or United were to declare a default. In either of those events, the
Company has the right to enforce a capital contribution agreement with Partners
requiring a contribution of up to $1,370 to be made to U.S. Rubber and $1,000 to
be made to United to fund the respective subsidiarys shortfall. These
payments, if any, would be applied directly to reduce the respective
subsidiarys debt obligations to the lender. During fiscal 2003, Partners
contributed $250 to the Company under the above agreement and was issued Series
D Preferred Stock in the Company which was converted to 49,998 shares of common
stock in March 2004. The proceeds were contributed to U.S. Rubber to keep the
Company in compliance with its fixed charge coverage ratio for its revolving
line of credit agreement.

Off-Balance Sheet Arrangements and Contractual Obligations

It is not our
usual business practice to enter into off-balance sheet arrangements, except for
off-balance sheet arrangements related to operating lease commitments described
below in the table of contractual obligations.

A summary of
our contractual cash obligations for the fiscal years ending 2005 through 2008
and 2009 and thereafter at October 31, 2004 is as follows:

|Contractual Obligation               | Total | 2005 | 2006 | 2007   | 2008 | 2009 and
Thereafter
|------------------------------------ | ----- | ---- | ---- | ------ | ---- | -------------------
|                                    
|Long-term debt, and all debt service |       |      |      |        |      |                    
|interest payments                    |       |      | $    | 55,675 |      | $                  
|Operating leases                     |       |      |      | 2,960  |      |                    
|Redeemable Stock                     |       |      |      | 443    |      |                    
|Purchase Commitments                 |       |      |      | 253    |      |                    
|                                     |       |      |      |        |      |                    
|Total contractual cash obligations   |       |      | $    | 59,331 |      | $                  
|                                     |       |      |      |        |      |                    

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 27
|------------------------------------ | -------------- | -------

Cash flow and
liquidity are discussed further below, and in the footnotes to our consolidated
financial statements.

The following
details our commercial commitments included in contractual obligations:

|                              | Total Amount | Outstanding atOctober 31, 2004 |   | Date of Expiration
|----------------------------- | ------------ | ------------------------------ | - | ------------------
|
|Line of credit, bank          |              |                                | $ | 1,000             
|Line of credit, related party |              |                                |   | 3,000             
|Line of credit, bank          |              |                                |   | 4,000             
|Line of credit, bank          |              |                                |   | 4,000             
|Line of credit, related party |              |                                |   | 15,000            

(1) In February 2005, the bank extended the maturity date of the line
of credit to February 28, 2005

Our net cash
used in continuing operations for the year ended October 31, 2004 was $4,220.
This is comprised of a loss from continuing operations of $8,033, offset by
non-cash depreciation and amortization of $3,499, increases in accounts
receivable of $1,222, inventories of $595, other assets of $88, accounts payable
of $2,264, accrued expenses of $195 and deferred taxes of $98 and decreases of
customer deposits of $199. In addition, we had non-cash losses on minority
interest of $72, accretion of interest of $297, stock-based compensation of $40
and a gain on sale of equipment of $352.

Net cash flow
provided from financing activities for the year ended October 31, 2004 was
$6,649. This is comprised of capital contributions from the acquisition of
Classic of $350, net borrowings on lines of credit of $673, borrowings of
long-term debt and net borrowings of short-term debt including related parties
of $8,334, offset by principal repayments of long-term debt of $3,440, debt
issuance costs of $46 and related party advances net of $778.

Cash flow was
used in investing activities for the year ended October 31, 2004 of $2,889. This
is comprised of purchases of property and equipment of $1,831, proceeds from the
sale of property and equipment of $664 and acquisition of subsidiary of
$1,722.

The total
increase (decrease) in cash is summarized as follows:

|                                                     | Year Ended October 31, |  |  
|---------------------------------------------------- | ---------------------- |  | -
|
|Net cash provided by (used in) continuing operations |                        |  | $
|Net cash used in investing activities                |                        |  |  
|Net cash provided by financing activities            |                        |  |  
|Net cash flow provided by (used in) discontinued     |                        | 
|operations                                           |                        |  |  
|                                                     |                        |  |  
|Increase (decrease) in cash and cash equivalents     |                        |  | $
|                                                     |                        |  |  

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 28
|------------------------------------ | -------------- | -------

CRITICAL ACCOUNTING POLICIES

Our significant
accounting policies are summarized in the footnotes to our financial statements. Some of
the most critical policies are also discussed below.

As a matter of policy,
we review our major assets for impairment. Our major operating assets are
accounts receivable, inventory, intangible assets and property and equipment. We
have not historically experienced significant bad debts expense, although the
filing of Chapter 11 bankruptcy during fiscal 2002 of a customer resulted in a
bad debt charge of $379. However, we believe our reserve for doubtful accounts
of $743 should be adequate for any exposure to loss in our October 31, 2004
accounts receivable. We have also established reserves for slow-moving and
obsolete inventories and believe the reserve of $222 is adequate. We depreciate
our property and equipment and amortize intangible assets (except for goodwill)
over their estimated useful lives. Property and equipment are reviewed for
impairment when events and circumstances indicate impairment factors may be
present. During fiscal 2004, certain equipment became idle due to the
realignment of the plant at U.S. Rubber. The equipment will be used in the
future for replacement of existing equipment as needed. Due to the uniqueness of
the equipment and the high cost to buy new similar pieces, the net book value of
$353 was transferred to other assets under idle equipment and is subject to
impairment valuation. Accordingly, we continue to analyze the Danzer and US
Rubber assets for impairment in conjunction with our analysis of the continuing
operations of these facilities. In assessing the recoverability of our property
and equipment, we must make various assumptions regarding estimated future cash
flows and other factors in determining the fair values of the respective assets.
If these estimates or related assumptions change in the future, we may be
required to record impairment charges for these assets in future periods. Any
such resulting impairment charges could be material to our results of
operations. As of October 31, 2004 we determined there is no impairment of our
property and equipment.

Goodwill and
intangibles are reviewed annually for impairment as of the first day of the
fourth quarter or more frequently when events and circumstances indicate
potential impairment factors are present. The realization of goodwill of $7,055
is primarily dependent on the future operations of the operating entities where
the goodwill is allocated. Historical operating results, current product demand
and estimated future results indicate the results of operations should be
adequate to continue to realize this amount. However, future results may not
meet expectations due to economic or other factors, including the ability to
pass through material cost increases to our customers, to maintain revenues and
to improve gross margins. Failure to meet expectations may result in the
goodwill not being fully realizable and accordingly result in impairment charge
which could be material to our operating results.

The initial
cost of coaches acquired is depreciated over a straight-line basis to a salvage
value of 38% of original cost. Subsequent enhancements and refurbishments of
coaches are depreciated over five years using the straight-line method. The age
of coaches in our fleet range from less than one year to ten years, with an
average age of approximately five years. Actual value of coaches after 15 years
is dependent on several factors including the level of maintenance and the
market conditions at the time of disposal. We recently disposed of two coaches
which did not result in a material gain or loss. We continue to evaluate our
estimates with respect to the actual depreciation of such vehicles based on
market conditions and our experience in disposals when they occur. Depreciation
expense related to the coaches for the year ended October 31, 2004 was
approximately $786. If future factors indicate that our salvage value on the
coaches should be reduced to 20%, depreciation expense would have to be
increased approximately $195 to $981. If it is determined that the coaches have
no salvage value, estimated depreciation expense for the coaches for the year
ended October 31, 2004 would have approximated $1,198.

In
conjunction with financing of the acquisition of United, the Company issued
154,482 shares of common stock to Huntington Capital Investment Corporation
(Huntington). The note purchase agreement includes a provision that
gives Huntington the option to require the Company to repurchase these shares at
90% of market value upon the earlier of: a) fifth anniversary of issuance of
such shares, b) default under the subordinated debt agreement, c) other factors
related to a sale of substantially all assets of the Company as defined in the
agreement. Increases in the value of the Companys stock will result in a
corresponding increase to this repurchase requirement. Accordingly, a
substantial increase in stock price at the repurchase date may have an adverse
impact on the Companys liquidity. At October 31, 2004, the Company
violated certain financial covenants and did not meet its EBITDA and fixed
charge coverage ratios defined in the subordinated debt agreement with
Huntington. The Company received a waiver of these violations as of October 31,
2004.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 29
|------------------------------------ | -------------- | -------

With the
acquisition of Classic effective May 1, 2004, we issued 170,451 shares of our
common stock to the former owners of Classic. The purchase agreement for Classic
included a provision that gives the sellers the right to have us redeem these
shares at a price of $6.5970 per share within five years of the date of issuance
of the shares. The sellers have the right to partially redeem these shares in
increments of 10,000 or more shares per transaction. The agreement also has an
automatic termination provision if the Companys shares have traded at a
closing price of greater than $7.33 per share for any consecutive period of 60
trading days during the period of time commencing on the date there are no
restrictions on the sellers sale of shares and ending on the fifth
anniversary of the agreement.

CONTINGENCIES

The Company
is party to ordinary litigation incidental to its business. No current pending
litigation is expected to have a material adverse effect on results of
operations, financial condition or cash flows.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Due to the
nature of our operations and the highly leveraged acquisitions incurred with
variable debt we are subject to exposures that arise from fluctuations in
interest rates. To manage the volatility relating to this exposure, we evaluate
our exposures and attempt to minimize any negative effects by
refinancing.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 30
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except per share and share data)

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of DirectorsObsidian Enterprises, Inc.
Indianapolis, Indiana

We have audited the accompanying consolidated balance sheets of Obsidian
Enterprises, Inc. and Subsidiaries as of October 31, 2004 and 2003, and the
related consolidated statements of operations, stockholders' equity (deficit)
and comprehensive loss, and cash flows for each of the three years in the period
ended October 31, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Obsidian
Enterprises, Inc. and Subsidiaries as of October 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
period ended October 31, 2004, in conformity with U.S. generally accepted
accounting principles.

As discussed in Note 8 and Note 15 to the financial statements, the Company has
borrowings totaling $20,299,000 from DC Investments, LLC and its subsidiary,
Fair Holdings, LLC, entities controlled by the Company's chairman.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
its total liabilities exceeds its total assets, has not complied with the terms
of its debt financing agreements and will continue to rely on cash inflow from
related parties. This raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Our audit of the consolidated financial statements of Obsidian Enterprises, Inc.
and Subsidiaries included Schedule II, contained herein, for the three years in
the period ended October 31, 2004. In our opinion, such schedule presents fairly
the information required to be set forth therein, in conformity with U.S.
generally accepted accounting principles.

/s/  McGladrey & Pullen, LLP

Elkhart, Indiana
February 4, 2005

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 31
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except per share and share data)

|                                                            | October 31,
2004 | October 31,
2003
|----------------------------------------------------------- | ---------------- | ----------------
|
|Assets                                                      |                  |                 
|                                                           
|Current assets:                                             |                  |                 
|Cash and cash equivalents                                   |                  |                 
|Marketable securities                                       |                  |                 
|Accounts receivable, net of allowance for doubtful accounts |                  |                 
|of $743 for 2004 and $496 for 2003                          |                  |                 
|Accounts receivable, related parties (Note 15)              |                  |                 
|Inventories, net (Note 6)                                   |                  |                 
|Prepaid expenses and other assets                           |                  |                 
|Deferred income tax assets (Note 14)                        |                  |                 
|                                                            |                  |                 
|                                                           
|Total current assets                                        |                  |                 
|                                                           
|Property, plant and equipment, net(Note 7)                  |                  |                 
|                                                           
|Other assets:                                               |                  |                 
|Goodwill not subject to amortization                        |                  |                 
|Intangible assets (Notes 3 and 5):                          |                  |                 
|Noncompete agreements, less accumulated amortization        |                  |                 
|of $783 for 2004 and $399 for 2003                          |                  |                 
|Trade name and customer relations, less accumulated         |                  |                 
|amortization of $390 for 2004 and $290 for 2003             |                  |                 
|Deferred debt costs, less accumulated amortization          |                  |                 
|of $289 for 2004 and $218 for 2003                          |                  |                 
|Idle Equipment                                              |                  |                 
|Other                                                       |                  |                 
|                                                            |                  |                 
|                                                           
|                                                            |                  |                 
|                                                            |                  |                 

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 32
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except per share and share data)

|                                                                         | October 31,
2004 | October 31,
2003
|------------------------------------------------------------------------ | ---------------- | ----------------
|Liabilities and Stockholders' Deficit                                    |                  |                 
|                                                                        
|Current liabilities:                                                     |                  |                 
|Current portion of long-term debt (Note 8)                               |                  |                 
|Accounts payable, trade                                                  |                  |                 
|Accounts payable, related parties (Note 15)                              |                  |                 
|Accrued compensation                                                     |                  |                 
|Accrued expenses                                                         |                  |                 
|Customer deposits                                                        |                  |                 
|                                                                         |                  |                 
|                                                                        
|Total current liabilities                                                |                  |                 
|                                                                        
|Accounts payable, related parties (Note 15)                              |                  |                 
|                                                                        
|Long-term debt, net of current portion (Note 8)                          |                  |                 
|                                                                        
|Long-term debt, related parties (Note 8 and 15)                          |                  |                 
|                                                                        
|Deferred income tax liabilities (Note 14)                                |                  |                 
|                                                                        
|Commitments and contingencies (Note 16)                                  |                  |                 
|                                                                        
|Minority interest                                                        |                  |                 
|                                                                        
|Redeemable stock (Note 11):                                              |                  |                 
|Common stock, 324,933 shares outstanding for 2004                        |                  |                 
|Class of Series C Preferred Stock: 386,206 shares outstanding for 2003   |                  |                 
|Class of Series D Preferred Stock: 32,143 shares outstanding for 2003    |                  |                 
|                                                                        
|Stockholders' deficit (Note 12):                                         |                  |                 
|Common stock, par value $.0001 per share; 10,000,000 shares authorized;  |                  |                 
|3,109,333 in 2004, 720,157 in 2003                                       |                  |                 
|Preferred stock, 5,000,000 shares authorized, no shares outstanding in   |                  |                 
|2004; Class of Series C convertible preferred stock, par value $.001,    |                  |                 
|4,600,000 authorized, 3,982,193 issued and outstanding for 2003, 200,000 |                  |                 
|shares of undesignated preferred stock authorized                        |                  |                 
|Preferred stock, 200,000 shares authorized, no shares outstanding in     |                  |                 
|2004; Class of Series D convertible preferred stock, par value $.001,    |                  |                 
|88,330 shares issued and outstanding in 2003                             |                  |                 
|Additional paid-in capital                                               |                  |                 
|Accumulated other comprehensive loss                                     |                  |                 
|Accumulated deficit                                                      |                  |                 
|                                                                         |                  |                 
|                                                                        
|Total stockholders' deficit                                              |                  |                 
|                                                                         |                  |                 
|                                                                        
|                                                                         |                  |                 
|                                                                         |                  |                 
|                                                                         |                  |                 

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 33
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share and share data)

|                                                                                                                         | Year Ended October 31,
|------------------------------------------------------------------------------------------------------------------------ | ----------------------
|
|                                                                                                                        
|Net sales                                                                                                                |                       
|                                                                                                                        
|Cost of sales                                                                                                            |                       
|                                                                                                                         |                       
|                                                                                                                        
|GROSS PROFIT                                                                                                             |                       
|                                                                                                                        
|Selling, general and administrative expenses                                                                             |                       
|Loss on asset impairment (Note 3)                                                                                        |                       
|Insurance settlement                                                                                                     |                       
|                                                                                                                         |                       
|                                                                                                                        
|Income (loss) from operations                                                                                            |                       
|                                                                                                                        
|Other income (expense):                                                                                                  |                       
|Interest expense (Note 8)                                                                                                |                       
|Other income                                                                                                             |                       
|Other expense                                                                                                            |                       
|                                                                                                                         |                       
|                                                                                                                        
|Loss before income taxes, discontinued  operations, and cumulative effect of change  in accounting principle             |                       
|                                                                                                                        
|Income tax benefit (Note 14)                                                                                             |                       
|                                                                                                                         |                       
|                                                                                                                        
|Loss from continuing operations before  discontinued operations and cumulative  effect of change in accounting principle |                       
|                                                                                                                        
|Loss from discontinued operations, net of tax (Note 4)                                                                   |                       
|                                                                                                                         |                       
|                                                                                                                        
|Loss before cumulative effect of change in  accounting principle                                                         |                       
|                                                                                                                        
|Cumulative effect of change in accounting principle, net                                                                 |                       
|of tax (Note 3)                                                                                                          |                       
|                                                                                                                         |                       
|                                                                                                                        
|Loss before minority interest                                                                                            |                       
|                                                                                                                        
|Minority interest                                                                                                        |                       
|                                                                                                                         |                       
|                                                                                                                        
|Net loss                                                                                                                 |                       
|                                                                                                                         |                       
|                                                                                                                         |                       
|                                                                                                                        
|Basic and diluted loss per share attributable to common                                                                  |                       
|shareholders (Note 2):                                                                                                   |                       
|From continuing operations                                                                                               |                       
|Discontinued operations, net of tax                                                                                      |                       
|Cumulative effect of accounting change, net of tax                                                                       |                       
|                                                                                                                         |                       
|                                                                                                                        
|Net loss per share                                                                                                       |                       
|                                                                                                                         |                       
|                                                                                                                        
|Weighted average common and common equivalent shares                                                                     |                       
|outstanding, basic and diluted:                                                                                          |                       
|                                                                                                                         |                       

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 34
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
(dollars in thousands)

|                                                                                                                                 | ComprehensiveLoss | Common StockShares      Amount | Series C ConvertiblePreferred StockShares      Amount | Series D ConvertiblePreferred StockShares      Amount | AdditionalPaid-InCapital | AccumulatedOtherComprehensiveIncome (Loss) | AccumulatedDeficit | Total
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------------------------------ | ----------------------------------------------------- | ----------------------------------------------------- | ------------------------ | ------------------------------------------ | ------------------ | -----
|Balance at
  October 31, 2001                                                                                                    |                   |                                |                                                       |                                                       |                          |                                            | 720,157            |      
|Issuance of 30,000 shares
  of Series C Preferred
  Stock associated with
  U.S. Rubber, net of tax                              |                   |                                | $                                                     | ---                                                   |                          |                                            | ---                |      
|Issuance of 589,230
  shares of Series C
  Preferred Stock
  associated with 
  Fair Holdings and
  Obsidian 
  Capital Partners |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Issuance of 88,330 shares
  of Series D Preferred
  Stock associated with
  Fair Holdings and
  Obsidian Capital
  Partners      |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Exercise of stock warrants
  in exchange for 10,000
  shares of Series C
  Preferred Stock                                       |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Distributions to members
  of DW Leasing                                                                                         |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Unrealized loss on
  available-for-sale
  marketable securities                                                                  |                   |                                |                                                       | (86                                                   | )                        |                                            | ---                |      
|Fair value adjustment on
  redeemable preferred
  stock                                                                          |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|2002 net loss                                                                                                                    |                   |                                |                                                       | (6,330                                                | )                        |                                            | ---                |      
|                                                                                                                                 |                   |                                |                                                       |                                                       |                          |                                            |                    |      
|                                                                                                                                
|Total comprehensive loss                                                                                                         |                   |                                | $                                                     | (6,416                                                | )                       
|                                                                                                                                 |                  
|                                                                                                                                
|Balance
  at October 31, 2002                                                                                                    |                   |                                |                                                       |                                                       |                          |                                            | 720,157            |      
|                                                                                                                                
|Contribution to capital
  from sale of Champion
  to related party                                                               |                   |                                | $                                                     | ---                                                   |                          |                                            | ---                |      
|Tax effect of sale
  of coaches to DC
  Investments Leasing                                                                      |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Extension of stock
  options                                                                                                     |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Assignment of 16,072
  shares of Series D
  mandatory redeemable
  Preferred Stock                                               |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Issuance of 14,285 shares
  of Series D Preferred
  Stock associated with
  Obsidian Capital Partners                            |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Loss on available-for-sale
  marketable securities                                                                               |                   |                                |                                                       | 49                                                    |                          |                                            | ---                |      
|Fair value adjustment on
  redeemable
  Preferred Stock                                                                          |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|2003 net loss                                                                                                                    |                   |                                |                                                       | (3,873                                                | )                        |                                            | ---                |      
|                                                                                                                                 |                   |                                |                                                       |                                                       |                          |                                            |                    |      
|                                                                                                                                
|Total comprehensive loss                                                                                                         |                   |                                | $                                                     | (3,824                                                | )                       
|                                                                                                                                 |                  
|                                                                                                                                
|Balance
  at October 31, 2003                                                                                                    |                   |                                |                                                       |                                                       |                          |                                            | 720,157            |      
|                                                                                                                                
|Assignment of 16,071
  shares of Series D
  mandatory redeemable
  Preferred Stock                                               |                   |                                | $                                                     | ---                                                   |                          |                                            | ---                |      
|Issue Common Stock
  shares for the purchase
  of Classic                                                                        |                   |                                |                                                       | ---                                                   |                          |                                            | 170,451            |      
|Reclassification to
  redeemable
  Preferred Stock                                                                               |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Extension of
  stock options                                                                                                     |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|Conversion of
  Series C and
  Series D convertible
  Preferred Stock to
  common stock                                          |                   |                                |                                                       | ---                                                   |                          |                                            | 2,218,725          |      
|Loss on available-for-sale
  marketable securities                                                                               |                   |                                |                                                       | (40                                                   | )                        |                                            | ---                |      
|Fair value adjustment
  on redeemable
  Preferred Stock                                                                          |                   |                                |                                                       | ---                                                   |                          |                                            | ---                |      
|                                                                                                                                
|2004 net loss                                                                                                                    |                   |                                |                                                       | (8,033                                                | )                        |                                            |                    |      
|                                                                                                                                 |                   |                                |                                                       |                                                       |                          |                                            |                    |      
|                                                                                                                                
|Total comprehensive loss                                                                                                         |                   |                                | $                                                     | (8,073                                                | )                       
|                                                                                                                                 |                  
|                                                                                                                                
|Balance
at October 31, 2004                                                                                                      |                   |                                |                                                       |                                                       |                          |                                            | 3,109,333          |      
|                                                                                                                                 |                   |                                |                                                       |                                                       |                          |                                            |                    |      

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 35
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                 | Year Ended October 31, |  |  
|---------------------------------------------------------------- | ---------------------- |  | -
|
|                                                                
|Cash flow from operating activities from continuing operations:  |                        |  |  
|Loss from continuing operations                                  |                        |  | $
|Adjustments to reconcile loss from continuing operations         |                        | 
|to net cash used in operating activities:                        |                        | 
|Cumulative effect of change in accounting principle              |                        |  |  
|Loss on asset impairment                                         |                        |  |  
|Depreciation and amortization                                    |                        |  |  
|Loss on debt refinancing                                         |                        |  |  
|Loss (gain) on sale of equipment                                 |                        |  |  
|Loss on marketable securities                                    |                        |  |  
|Stock-based compensation                                         |                        |  |  
|Minority interest                                                |                        |  |  
|Accretion of interest                                            |                        |  |  
|Deferred income taxes                                            |                        |  |  
|Changes in operating assets and liabilities net of               |                        | 
|effect of acquisitions:                                          |                        | 
|Accounts receivable, net                                         |                        |  |  
|Inventories, net                                                 |                        |  |  
|Other assets                                                     |                        |  |  
|Accounts payable, trade                                          |                        |  |  
|Accrued expenses                                                 |                        |  |  
|Customer deposits                                                |                        |  |  
|                                                                 |                        |  |  
|                                                                
|Net cash used in operating activities from continuing operations |                        |  |  
|                                                                 |                        |  |  
|                                                                
|Cash flows from investing activities from continuing operations: |                        | 
|Capital expenditures                                             |                        |  |  
|Proceeds from sale of equipment                                  |                        |  |  
|Cash payments in connection with the purchase of                 |                        | 
|Classic, net of cash acquired                                    |                        |  |  
|                                                                 |                        |  |  
|                                                                
|Net cash used in investing activities from continuing operations |                        |  |  
|                                                                 |                        |  |  

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 36
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                     | Year Ended October 31, |  |  
|-------------------------------------------------------------------- | ---------------------- |  | -
|
|                                                                    
|Cash flows from financing activities from continuing operations:     |                        |  |  
|Advances from (repayments to) related parties                        |                        |  |  
|Net borrowings on lines of credit                                    |                        |  |  
|Borrowings on long-term debt                                         |                        |  |  
|Borrowings on long-term debt, related parties                        |                        |  |  
|Principal repayments on long-term debt                               |                        |  |  
|Principal repayments on long-term debt, related parties              |                        |  |  
|Debt issuance costs                                                  |                        |  |  
|Distributions to members of DW Leasing                               |                        |  |  
|Exercise of warrant                                                  |                        |  |  
|Proceeds from capital contributions and                              |                        | 
|sale of common stock                                                 |                        |  |  
|                                                                     |                       
|                                                                    
|Net cash provided by financing activities from continuing operations |                        |  |  
|                                                                     |                       
|                                                                    
|Net cash flow provided by (used in) discontinued operations          |                        |  |  
|                                                                     |                       
|                                                                    
|Increase (decrease) in cash and cash equivalents                     |                        |  |  
|                                                                     |                       
|                                                                    
|Cash and cash equivalents, beginning of year                         |                        |  | $
|                                                                     |                       
|                                                                    
|Cash and cash equivalents, end of year                               |                        |  | $
|                                                                     |                       
|                                                                    
|Interest paid                                                        |                        |  | $
|                                                                     |                       
|                                                                    
|Taxes paid                                                           |                        |  | $
|                                                                     |                       
|                                                                    
|Noncash investing and financing activities:                          |                        | 
|Contribution to capital from sale of Champion to related party       |                        |  | $
|Issuance of  redeemable stock in conjunction with the sale of        |                        | 
|Champion                                                             |                        |  | $
|Assignment and assumption of redeemable stock to Fair Holdings       |                        |  | $
|Tax effect of sale of coaches to a related party recorded as a       |                        | 
|reduction of equity                                                  |                        |  | $
|Reclassification of debt due to assumption of credit agreement by    |                        | 
|Fair Holdings                                                        |                        |  | $
|Refinancing of debt, including related-party amounts                 |                        |  | $
|Conversion of contributed amounts to equity                          |                        |  | $
|Coaches and equipment purchased with debt                            |                        |  | $
|Fair value changes of redeemable stock                               |                        |  |  
|Purchase price adjustment                                            |                        |  | $
|Stock issued in purchase of Classic                                  |                        |  | $

The accompanying notes are an integral part of the consolidated financial statements.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 37
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

1.    DESCRIPTION OF BUSINESS AND CHANGE OF NAME

Obsidian
Enterprises Inc. (Obsidian Enterprises), formerly Danzer
Corporation, was reorganized through an acquisition with U.S. Rubber Reclaiming,
Inc. and Related Entities (U.S. Rubber Companies), which was
consummated on June 21, 2001 (the Effective Date). The
reorganization of Obsidian Enterprises and U.S. Rubber Companies was accounted
for as a reverse merger as the shareholders of the U.S. Rubber Companies owned a
majority of the outstanding stock of Obsidian Enterprises subsequent to the
acquisition. For accounting purposes, U.S. Rubber Reclaiming, Inc. (U.S.
Rubber) is deemed to have acquired Obsidian Enterprises.

The resulting
entities, considered accounting subsidiaries of U.S. Rubber (the accounting
acquirer) and legal subsidiaries of Obsidian Enterprises (formerly Danzer) after
the reorganization are as follows:

Obsidian
Enterprises, Inc. (Obsidian Enterprises, formerly Danzer, the legal
acquirer), a holding company.

Butyl-Rubber Reclaiming

| | » | U.S. Rubber Reclaiming, Inc. ("U.S. Rubber", the accounting acquirer), which is
engaged in reclaiming scrap butyl rubber into butyl reclaim for resale to
manufacturers of rubber products.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Coach Leasing

| | » | Pyramid Coach, Inc. (Pyramid), which is engaged in the leasing of
coaches, designed and fitted out for use for travel by country, rock bands and
other business enterprises, primarily on weekly to monthly leases. The coach
leasing segment also includes the assets, liabilities, equity and results of
operations of DW Leasing, LLC (DW Leasing), formed December 1, 2002,
Obsidian Leasing Company, Inc. (Obsidian Leasing), formed November
1, 2001, and DC Investments Leasing, LLC (DC Investments Leasing), formed
December 13, 2002. DW Leasing and DC Investments Leasing are controlled by
individuals who are also controlling shareholders of Obsidian Enterprises and,
accordingly, Pyramid. In addition, these entities meet the requirements for
consolidation under FASB Interpretation No. 46 (FIN No. 46), Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51. DW Leasing, Obsidian Leasing and DC Investments Leasing also own the
majority of the coaches operated by Pyramid. All intercompany transactions are
eliminated in consolidation.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Trailer and Related Transportation Equipment Manufacturing

| | » | United Acquisition, Inc., which we operate as United Expressline, Inc.
("United"), manufactures and sells general use cargo trailers and specialty
trailers used in the racing industry and for other special purposes.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Danzer Industries, Inc. ("Danzer"), which is principally engaged in the design,
manufacture and sale of truck bodies and cargo trailers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | » | Classic Manufacturing, Inc. ("Classic") was acquired in May 2004. Classic
manufactures steel-framed cargo, fifth wheel, gooseneck, motorcycle, race,
snowmobile and stacker/lift trailers and open trailers used in the landscape
industry.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Champion Trailer, Inc. (Champion) manufactures and sells transport trailers to
be used primarily in the auto racing industry. Effective October 2002, the Companys
Board of Directors agreed to a plan to dispose of Champion as further described in Note 4.
The sale of Champion was completed January 30, 2003. Accordingly, the operations of
Champion are classified as discontinued operations in the accompanying financial
statements.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 38
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

The
accompanying consolidated financial statements present the accounts of Obsidian
Enterprises and its wholly owned subsidiaries described in Note 1 for the
periods ended October 31, 2004, 2003 and 2002. The entities are collectively
referred to herein as the Company. All significant intercompany
transactions and balances have been eliminated in consolidation. The fiscal 2004
and fiscal 2003 results of operations include the operations of DC Investments
Leasing from December 2002 (its inception). The fiscal 2004 results of
operations include the operations of Classic from May 1, 2004
(acquisition).

BASIS OF PRESENTATION:

The
Companys financial statements have been presented on the basis that it is
a going concern which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. In the period since June 2001,
Obsidian Enterprises and its subsidiaries have incurred losses and reductions in
equity on a consolidated basis. The Company and certain of its subsidiaries are
also in violation of certain financial covenants in their respective credit
agreements as of October 31, 2004 and we have been unable to obtain waivers for
certain of these violations (as discussed in "Financial Covenants" below). All
amounts outstanding as of October 31, 2004 under these credit agreements have
been classified as current on our balance sheet. We are currently negotiating to
obtain waivers or refinance the credit agreements where covenant violations
exist and we do not expect these violations to impair our ability to fund
current and future obligations of the Company. Historically, losses and certain
third-party debt repayments have been financed with DC Investments, LLC ("DC
Investments") and its subsidiary Fair Holdings, Inc. ("Fair Holdings"), entities
controlled by the Company's Chairman, on terms that may not have been available
from other sources. As of October 31, 2004, Fair Holdings is in violation of
certain covenants in the credit agreement with its lender. These violations have
not been waived, nor has the lender agreed not to take action against Fair
Holdings as a result of the violations. Action by the lender to require
repayment of all amounts due from Fair Holdings may impair Fair Holdings'
ability to loan further amounts to the Company under its credit agreement with
Fair Holdings. As of October 31, 2004, total debt outstanding to DC Investments
and Fair Holdings was $20,299.

Management,
as a part of its plan towards resolving these issues has taken actions during
the year and subsequent to year end as described below. Although management
believes these actions will improve operations and liquidity, there can be no
assurance that these actions will improve operations or liquidity, or occur on
terms acceptable to the Company.

| | » | During the year ended 2004, Obsidian Enterprises secured an additional financial
commitment from Fair Holdings to provide, additional borrowings under a $15,000
line of credit agreement, which expires on January 1, 2007. Approximately $4,185
is currently available under the agreement. As of October 31, 2004, Fair Holdings was in technical
violation of certain covenants with its lender. These violations are not
expected to impair the ability to fund current and future obligations of the
Company.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | United is in negotiations with another lender for a line of credit and
term loan. Management expects to complete the refinancing of this debt during
the first half of fiscal 2005. Under the expected terms the maximum
borrowing availability will increase by $1,000. Upon completion, this will improve
Uniteds working capital by approximately $4,100 as the debt will be
reclassified from current to long term less the current portion as it relates to
the new agreement.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Obsidian Leasing has current debt obligations due of $3,400. Management is
actively working to refinance this debt with other banks. Management expects to
complete the refinancing during the first half of fiscal 2005. In November 2004,
management sold two older coaches and reduced its debt by $209 and is in
negotiations to sell three more coaches which will reduce the debt by an
estimated $354.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | US Rubber has a balloon payment on its debt which will be due October 24, 2005.
Management is in the initial stages of negotiating and refinancing this debt
prior to October 2005.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Classic received an amendment to its credit facility to temporarily increase its
line of credit availability by $250 through April 2005.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 39
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

| | » | Management is actively working to restructure or refinance portions of its high
interest rate debt on more favorable terms. Approximately $19,800 of our debt
bears interest from rates ranging from 10% to 15%.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Obsidian Enterprises has an agreement with the investors of Obsidian Capital
Company, a significant shareholder of Obsidian Enterprises, that gives Obsidian
Enterprises the right to mandate capital contributions if the lenders to U.S.
Rubber or United were to declare a default. In either of those events, the
Company has the right to enforce a capital contribution agreement up to $1,370
on U.S. Rubber and $1,000 on United to fund the respective subsidiarys
shortfall. These payments, if any, would be applied directly to reduce the
respective subsidiarys debt obligations to the lender.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Cost reduction and other initiatives are being put in place at various Obsidian
subsidiaries including the use of alternative materials and
additional discounts through volume purchasing by pooling purchasing power from
all affiliated companies. Any additional increases in raw material costs are
expected to be passed through to customers through price increase surcharges.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Management also continues to look for ways to strengthen liquidity, equity and
working capital through ongoing evaluations of merger and acquisition candidates
and other recapitalization methods.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

REVENUE RECOGNITION:

Sales are
recorded when title passes to the customer (FOB shipping point) or when services
are performed in accordance with agreements with customers. The Company
accumulates costs of trailers in work-in-process inventory until completion. The
Company recognizes repair revenue when services are provided to the customer.
Shipping and handling charges billed to the customers are included in net sales.
Shipping and handling costs incurred by the Company are included in selling,
general, and administrative expenses. Shipping and handling costs amounted to
$153, $94, and $118 for the years ended October 31, 2004, 2003, and 2002,
respectively.

For operating
leases, income is recognized on a straight-line basis over the lease term.
Recognition of income is suspended when management determines that collection of
future income is not probable (generally after 90 days past due). Recognition is
resumed if the receivable becomes contractually current and the collection of
amounts is again considered probable. Operating lease equipment is carried at
cost less accumulated depreciation and is depreciated to estimated residual
value using the straight-line method over the lease term or projected economic
life of the asset.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying
amounts of cash and cash equivalents, receivables, accounts payable, and accrued
liabilities approximate fair value because of the short maturity of these
instruments. The carrying amount of investments approximates fair market value.
The carrying amount of variable rate debt and fixed rate debt to unrelated
parties approximates fair value, as a result of the current interest rates paid
on the Companys borrowings being at market. The fair value of fixed rate
debt to related parties is impractical to determine based on the nature of the
obligations and the relationship to the lender. The carrying value of redeemable
stock approximates market value determined based on the thirty-day average
closing price of the Companys common stock.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 40
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

MARKETABLE SECURITIES:

The Company classifies
its marketable securities as available for sale. The securities consist of
equity securities, which are stated at fair value, with net unrealized gains or
losses on the securities recorded as accumulated other comprehensive income
(loss) in stockholders equity (deficit). Realized gains and losses are
included in earnings and are derived using the specific identification method
for determining the cost of the securities. Decreases in the market value of the
securities considered to be other than temporary are recorded in earnings. For
the year ended October 31, 2003, the Company recorded $72 in the statement of
operations related to the permanent decline in the fair value of the marketable
securities. This amount includes a reclassification of $49 from accumulated
other comprehensive income for unrealized losses previously recorded.

PROPERTY, PLANT AND EQUIPMENT:

Building,
equipment, furniture and fixtures are recorded at historical cost with
depreciation taken using primarily the straight-line method over their estimated
useful lives. Life ranges for property and equipment are as follows:

|Buildings and improvements    | 8  39 years
|----------------------------- | ------------
|Plant machinery and equipment | 5  7 years 
|Furniture and fixtures        | 5  7 years 
|Coach fleet                   | 15 years    
|Coach refurbishments          | 5 years     
|Vehicles                      | 5  10 years

The
Companys coach leasing business consists of a fleet of luxury coaches
(generally a 45 foot bus shell converted to a luxury coach) that are leased to
entertainment personalities, corporate groups and other traveling programs. The
coach fleet is comprised of a mixture of vehicles ranging from new (the most
recent acquired in January 2004) to approximately 10 years old. The average age
of the coaches is five years. They can be segregated as follows:

|Age        |           
|---------- | ----------
|1-3 years  | 11 coaches
|4-6 years  | 20 coaches
|7-10 years | 8 coaches 

The initial cost of
coaches acquired is depreciated over a straight-line basis to a salvage value of 38% of
original cost. Subsequent enhancements and refurbishments of coaches are depreciated over
five years using the straight-line method. Actual value of coaches after 15 years is
dependent on several factors including the level of maintenance and the market conditions
at the time of disposal. Subsequent to year end, the Company disposed of two coaches which
did not result in a material gain or loss. Accordingly, management continues to evaluate
our estimates with respect to the actual depreciation of such vehicles based on market
conditions and managements experience in disposals when they occur. Should future
factors indicate the current depreciation policy is not adequate, the Company will adjust
the depreciation rates, and such adjustments may have an adverse impact on the
Companys results of operations.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 41
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

CONCENTRATION OF CREDIT RISK:

The Company
maintains cash balances at various banks, which at various times throughout the
year exceeded the Federal Deposit Insurance Corporation (FDIC) limit.

Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of trade receivables. The Companys customers are
not concentrated in any one specific geographic region. The credit risk
associated with trade receivables within the various industries may be affected
by changes in economic or other conditions and may, accordingly, impact the
Companys overall credit risk. The Company reviews a customers credit
history before extending credit. Allowances for doubtful accounts are
established based on specific customer risk, historical trends and other
information. Three of the Companys reclaimed butyl rubber customers
accounted for a substantial portion of the Companys butyl rubber sales in
2004:

| | ¤ | Michelin:  40%
| | - | --------------

| | ¤ | Kelley Springfield:  22%
| | - | ------------------------

| | ¤ | Tyco Adhesives:  12%
| | - | --------------------

The loss of
any of the largest customers would materially and adversely affect our
revenues.

ORGANIZED LABOR:

Certain of
Danzers employees, which represent 10% of total employees, are currently
represented by the United Brotherhood of Carpenters and Joiners of America,
Local Union No. 340, whose contract is in effect to January 2006. The contract
contains provisions that affect compensation to be paid to employees included in
the union.

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

The Company
records an allowance for doubtful accounts based on specifically identified
amounts that are believed to be uncollectible. An additional allowance is
recorded based on certain percentages of aged receivables, which are determined
based on historical experience and assessment of the general financial
conditions affecting the Companys customer base. If actual collections
experience changes, revisions to the allowance may be required. The Company has
a limited number of customers with individually large amounts due at any given
balance sheet date. Any unanticipated change in one of those customers
credit worthiness or other matters affecting the collectibility of amounts due
from such customers could have a material affect on results of operations in the
period in which such changes or events occur. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance.
Customers generally pay accounts on 30 to 60-day terms.

GOODWILL:

Goodwill, net
was $7,055 and $5,784 at October 31, 2004 and 2003 respectively. In accordance
with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, goodwill is not being amortized in the
financial statements. The Company adopted SFAS No. 142 and completes impairment
testing on the first day of the fourth quarter. This testing resulted in an
impairment charge of $2,015 in fiscal 2002 that has been recorded as a change in
accounting principle as discussed in Note 3. In addition, the Company completed
additional impairment testing in the fourth quarter of fiscal 2002, as further
discussed in Note 3, resulting in an impairment charge of $720. There was no
impairment charges recorded in fiscal 2004 or 2003.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 42
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

IMPAIRMENT OF LONG-LIVED ASSETS, INCLUDING INTANGIBLES:

The Company
evaluates the carrying value of long-lived assets, primarily property, plant and
equipment and related goodwill and other intangible assets, whenever significant
events or changes in circumstances indicate the carrying value of these assets
may be impaired. Impairment losses are recognized when the fair value is less
than the assets carrying value. When indicators of impairment are present,
the carrying values of the assets are evaluated in relation to the operating
performance and future undiscounted cash flows of the underlying business. The
Company evaluates potential impairment of long-lived assets by comparing the
carrying value of the assets to the expected future cash flows resulting from
the use of the assets. The net book value of the underlying assets is adjusted
to fair value if the sum of expected future undiscounted cash flows is less than
book value. Fair values are based on quoted market prices and assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates, reflecting varying degrees of perceived risk.

DEFERRED DEBT COSTS:

Deferred debt
issuance costs are amortized over the term of the related debt, primarily four
to five years.

STOCK-BASED COMPENSATION:

The Company
accounts for stock-based compensation under the provisions of APB No. 25. The
Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation. Accordingly, no compensation expense is recognized
if the exercise price of stock options equals the fair market value of the
underlying stock at the date of grant. Had compensation expense for the
Companys stock option plans been determined based on the fair value at the
grant date for awards consistent with the provisions of SFAS No. 123, the
Companys basic and diluted net loss per share would remain the same. The
fair value of each option grant is estimated on the date of grant using the
Black Scholes option-pricing model. There were no stock options issued for the
years ending October 31, 2004, 2003 or 2002. During fiscal 2004, certain options
were extended and expired June 30, 2004.

INCOME TAXES:

The Company
accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes, as required. Under SFAS No. 109, deferred tax assets and liabilities are
recorded for any temporary differences between the financial statement and tax
bases of assets and liabilities, using the enacted tax rates and laws expected
to be in effect when the taxes are actually paid or received. (See Note
14.)

USE OF ESTIMATES:

The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts of assets, liabilities,
revenues and expenses and the related disclosures of contingent assets and
liabilities. Significant items subject to such estimates and assumptions include
valuation allowances for accounts receivable, inventories and deferred tax
assets, the fair values of assets and liabilities when allocating the purchase
price of acquisitions, and the carrying value of property and equipment and
goodwill. Goodwill is valued based upon historical and future cash flows of the
Company. Actual results may differ from those estimates.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 43
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

CASH EQUIVALENTS:

For purposes
of the statement of cash flows presentation, cash equivalents are unrestricted,
highly liquid short-term cash investments with an original maturity of three
months or less.

EARNINGS PER SHARE:

Basic per-share amounts
are computed, generally, by dividing net income or loss attributable to common
shareholders by the weighted-average number of common shares outstanding.
Diluted per-share amounts are computed similar to basic per-share amounts except
that the weighted-average shares outstanding are increased to include additional
shares for the assumed exercise of stock options and warrants, if
dilutive.

All
references in the financial statements related to share amounts, per share
amounts and average shares outstanding have been adjusted retroactively to
reflect the 1-to-50 reverse stock split of our common stock effective February
16, 2004.

We have a
note payable agreement which is convertible by the holder to common stock
totaling 100,000 shares at a conversion rate of $5.00 per share. However,
because we incurred a loss for all periods presented, the inclusion of those
potential common shares in the calculation of diluted loss per share would have
an antidilutive effect.

Our Series C
Preferred Stock and Series D Preferred Stock, which have all the rights and
privileges of our common stock, were convertible into common stock at rates of
..40-to-1 and 3.50-to-1, respectively. Following the effective date of the
50to-1 reverse split of the common stock, these shares were converted to
common stock, and such shares are included in the weighted average common shares
outstanding from the date of conversion. There were no shares of preferred stock
outstanding as of October 31, 2004.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 44
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

Basic and diluted loss per share have been computed as follows:

|                                                             | Year Ended October 31, |  |  
|------------------------------------------------------------ | ---------------------- |  | -
|
|Loss before discontinued operations and cumulative effect of |                        |  |  
|accounting change                                            |                        |  | $
|Change in fair value of  redeemable stock                    |                        |  |  
|                                                             |                        |  |  
|                                                            
|Loss attributable to common shareholders before discontinued |                        | 
|operations and cumulative effect of accounting change        |                        |  |  
|                                                            
|Loss from discontinued operations, net of tax                |                        |  |  
|Cumulative effect of change in accounting principle          |                        |  |  
|                                                             |                        |  |  
|                                                            
|Net loss attributable to common shareholders                 |                        |  | $
|                                                             |                        |  |  
|                                                            
|Weighted average common and common equivalent shares         |                        | 
|outstanding, basic and diluted                               |                        |  |  
|                                                             |                        |  |  
|                                                            
|Loss per share, basic and diluted, attributable to common    |                        | 
|shareholders:                                                |                        | 
|From continuing operations                                   |                        |  | $
|Discontinued operations                                      |                        |  |  
|Cumulative effect of accounting change                       |                        |  |  
|                                                             |                        |  |  
|                                                            
|Net loss per share                                           |                        |  | $
|                                                             |                        |  |  

STOCK OPTIONS

The Company accounts
for stock-based compensation under the provisions of APB No. 25. The Company has
adopted the disclosure-only provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Accordingly, no compensation expense is recognized if
the exercise price of stock options equals the fair market value of the
underlying stock at the date of grant. Had compensation expense for the
Companys stock option plans been determined based on the fair value at the
grant date for awards consistent with the provisions of SFAS No. 123, the
Companys basic and diluted net loss per share would remain the same. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. There were no stock options issued for the
years ended October 31, 2004 and 2003. During fiscal 2004, certain options were
extended and expired June 30, 2004. Their effect on pro forma net income was
immaterial.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 45
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

INSURANCE RECOVERY:

On May 21, 2004
Danzers facility in Hagerstown, Maryland was damaged by a fire. The
Company completed processing its claims with its insurance carrier for damaged
equipment and facilities. A gain on involuntary conversion as a result of the
fire was recognized in the amount of $404. Insurance recovery related to the
business interruption claim is not settled and will be recognized when its final
amount is determined.

On May 16, 2002, U.S.
Rubber was damaged by a fire at an adjacent property. The Company completed processing its
claims with its insurance carrier for damaged equipment and facilities and business
interruption losses on August 16, 2002. There was no material gain or loss on involuntary
conversion as a result of this fire. An insurance recovery related to the business
interruption claim, net of incurred costs, in the amount of $325 has been recognized as
reduction of operating costs in fiscal 2002.

COMPREHENSIVE INCOME:

SFAS No. 130, Reporting
Comprehensive Income, establishes standards for reporting and display of
comprehensive income and its components in financial statements. It requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income consists of net earnings, the net unrealized gains or losses on
available-for-sale marketable securities and is presented in the consolidated
statement of stockholders equity.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In December 2004,
the Financial Accounting Standards Board (FASB) issued Statement No. 123R,
Share-Based Payment, requiring that the compensation cost relating to stock
options and other share-based compensation transactions be recognized at fair
value in financial statements. Statement No. 123R is effective for the
Company for its quarter ending November 30, 2005. The Company will then be
required to record any compensation expense using the fair value method in
connection with option grants to employees that have an exercise price at or
above fair market value at the grant date and for shares issued under its
employee stock purchase plan. Management is still evaluating but does not
believe that its adoption will have a material impact on the Companys
results of operations or financial position.

3.    CHANGE IN ACCOUNTING PRINCIPLES, GOODWILL AND
INTANGIBLE ASSETS, AND IMPAIRMENT OF LONG-LIVED ASSETS

The Company
adopted the new rules on accounting for goodwill and other intangible assets.
Accordingly, with the adoption of SFAS No. 142, goodwill is no longer amortized
but is instead subject to an annual impairment test. The Company completed its
transitional impairment test in conjunction with the adoption of SFAS No. 142
during fiscal 2002. The impairment test indicated that a portion of the goodwill
related to the trailer manufacturing segment was impaired. Accordingly, $2,015
has been recorded as a cumulative effect of change in accounting principle in
fiscal 2002. This charge was reflected in the first quarter pursuant to the
implementation guidelines.

Other intangible
assets, net were $1,762 and $1,774 at October 31, 2004 and 2003, respectively.
These amounts include trade names, customer relations, non-competes and backlogs
and other items, which are being amortized on a straight-line basis over lives
ranging from three months to 10 years. At October 31, 2004 and 2003, accumulated
amortization amounted to $1,173 and $689, respectively.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 46
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

3.    CHANGE IN ACCOUNTING PRINCIPLES, GOODWILL AND
INTANGIBLE ASSETS, AND IMPAIRMENT OF LONG-LIVED ASSETS, CONTINUED

Amortization
of other intangible assets described above for the years ended October 31, 2004,
2003 and 2002 was $484, $259 and $440, respectively. Estimated amortization
expense for each of the ensuing years through October 31, 2009, is,
respectively, $565, $468, $250, $227 and $226.

During October 2002,
the Company also evaluated the recoverability of the long-lived assets,
including the remaining goodwill associated with Danzer. Deteriorating
performance, including reduced sales and the bankruptcy of a major customer,
brought the recoverability of those assets into question. The evaluation
resulted in an additional goodwill impairment charge of $720. There was no
goodwill impairment charges recorded in fiscal 2003 and 2004.

The truck
body division at Danzer continues to negatively impact our cash flows. The
trailer production line was put in place in the fourth quarter of 2002 to
provide a new product line to the existing customers of Danzer and open a
potential new market along the East coast of the U.S. Given the current state of
the telecommunications industry and economic conditions, we will continue to
evaluate the operations and progress with the implementation of the trailer
production. In conjunction with the analysis of the Danzer operations, we have
continued to analyze the potential for asset impairment at the Danzer operation.
Total assets of Danzer as of October 31, 2004 were $3,812 which consists of
$1,688 of current assets and $2,114 of net property and equipment, and
represents approximately 7.8% of total consolidated assets. The analysis has not
resulted in an impairment charge.

The changes
in the carrying amounts of goodwill related to continuing operations are as
follows:

|                                                 | Trailer
Manufacturing
Segment
|------------------------------------------------ | -----------------------------
|                                                
|
|Balance, October 31, 2002 and 2003               |                              
|Goodwill arising from the acquisition of Classic |                              
|                                                 |                              
|                                                
|Balance, October 31, 2004                        |                              
|                                                 |                              

4.    DISCONTINUED OPERATIONS

On October
30, 2002, the Companys Board of Directors agreed to sell the assets of
Champion to an entity controlled by Messrs. Durham and Whitesell (Officers of
the Company) for the assumption of all liabilities of Champion excluding its
subordinated debt. The decision to divest Champion was based on the
entitys inability to achieve profitable operations in the foreseeable
future without substantial cash infusion. The Company also agreed in principle
to settle the outstanding subordinated debt due to Markpoint Equity Fund J.V.
(Markpoint) from Champion in exchange for a cash payment of $675 and
issuance to the Markpoint of 32,143 shares of the Companys Series D
Preferred Stock. In addition, the agreement provided Markpoint the option to
require the Company to repurchase these shares at a price of $21 per share.
During fiscal 2003 the option agreement was assigned to Fair Holdings, and
Markpoint exercised their option under the agreement. The sale of Champion was
completed on January 30, 2003. Champion is accounted for as a discontinued
operation and therefore the results of operations and cash flows have been
removed from the Companys continuing operations for all periods
presented.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 47
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

4.    DISCONTINUED OPERATIONS, CONTINUED

The sale of
Champion resulted in an increase in equity of the Company of $1,142, net of tax
of $97. No gain or loss was recognized on the sale because of the involvement of
related parties.

A summary of
the Companys discontinued operations for the years ended October 31, 2004,
2003, and 2002 follows.

|                       | Year Ended October 31, |  |          
|---------------------- | ---------------------- |  | ---------
|
|Net sales              |                        |  | $     ---
|Operating expenses     |                        |  | ---      
|Other income (expense) |                        |  | ---      
|Interest expense       |                        |  | ---      
|Net loss               |                        |  | ---      

5.    ACQUISITION OF CLASSIC MANUFACTURING, INC.

In May 2004,
Obsidian Enterprises acquired all of the outstanding shares of capital stock of
Classic, a Michigan-based manufacturer of open and enclosed trailers. The
purchase was a strategic acquisition to complement other subsidiaries that
manufacture similar trailers. The purchase price totaled $3,598 of which $2,348
consisted of cash and $1,250 in Obsidian common stock or 170,451 shares. The
value of the stock was determined by the average share price over the latest 30
days prior to closing.

The purchase
price and purchase accounting was allocated to the assets and liabilities of
Classic based on their fair values. The allocation to tangible assets included
$2,767 and liabilities assumed of $963. The excess of the purchase price over
the fair value of the identifiable tangible net assets of $1,794 was allocated
to goodwill and identifiable intangible assets. The allocation of purchase price
to intangibles includes existing brand name and customer base, noncompete, and
the backlog. Intangibles included $354 for brand name and customer base, $118 for noncompete, and
$51 for the backlog. The remaining $1,271 was allocated to goodwill none of
which is expected to be deductible for tax purposes.

Intangible
assets, other than goodwill are amortized over their estimated useful lives,
ranging from three months for the backlog, five years for non-compete and ten
years for brand name and customer base, using the straight-line method and are
reviewed for potential impairment whenever events or circumstances indicate that
carrying amounts may not be recoverable.

The period
for which the results of operations of Classic are included in the
consolidated income statement is for the six months from May 1, 2004
(acquisition) through October 31, 2004.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 48
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

5.    ACQUISITION OF CLASSIC MANUFACTURING, INC., CONTINUED

The following
schedule is a description of acquisition costs of Classic and the purchase price
allocation (in thousands):

|                                                          | 
|--------------------------------------------------------- | 
|
|Purchase Price:                                           | 
|Common stock                                              | 
|Cash to seller                                            | 
|Acquisition costs                                         | 
|                                                          | 
|                                                         
|Total purchase price                                      | 
|                                                          | 
|                                                         
|Purchase Price Allocation:                                | 
|Current assets, including accounts receivable and         | 
|inventory                                                 | 
|Machinery and equipment                                   | 
|Goodwill                                                  | 
|Intangibles                                               | 
|Liabilities assumed                                       | 
|                                                          | 
|                                                         
|Total                                                     | 
|                                                          | 
|                                                         
|Supplemental cash flow disclosure related to acquisition: | 
|Net assets acquired                                       | 
|Less: Common stock issued                                 | 
|Less: Cash acquired                                       | 
|                                                          | 
|                                                         
|Cash paid at acquisition                                  | 
|                                                          | 

PRO FORMA INFORMATION (UNAUDITED):

The unaudited
condensed consolidated results of operations shown below are presented on a pro
forma basis and represent the results of Classic as if the business combinations
of these entities occurred at the beginning of the periods presented.

|                                     | Year Ended October 31, |  |  
|------------------------------------ | ---------------------- |  | -
|
|                                    
|Net sales                            |                        |  | $
|                                    
|Net loss                             |                        |  | $
|                                    
|Loss per share, basic and diluted,   |                        | 
|attributable to common shareholders: |                        | 
|From continuing operations           |                        |  | $
|Discontinued operations              |                        |  |  
|Cumulative effect of accounting      |                        | 
|Change                               |                        |  |  
|                                     |                        |  |  
|                                    
|Net loss per share                   |                        |  | $
|                                     |                        |  |  
|                                     |                        | 

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 49
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

5.    ACQUISITION OF CLASSIC
MANUFACTURING, INC. CONTINUED

The pro forma
financial information is presented for informational purposes only and is not
indicative of the operating results that would have occurred had the acquisition
been consummated as of the above dates, nor are they necessarily indicative of
future operating results.

6.    INVENTORIES

Inventories
are stated at the lower-of-cost (first-in, first-out method) or market and are
comprised of the following components:

|                  | October 31,
2004 | October 31,
2003
|----------------- | ---------------- | ----------------
|Raw materials     |                  |                 
|Work-in-process   |                  |                 
|Finished goods    |                  |                 
|Valuation reserve |                  |                 
|                  |                  |                 
|                 
|Total             |                  |                 
|                  |                  |                 

The Company
provides valuation reserves for inventory considered obsolete or not currently
available for use in production. Inventory reserves at U.S. Rubber are related
to excess scrap butyl rubber not currently available for use without further
processing; therefore, it has minimal value. Changes in the valuation reserve
are as follows:

|Balance at October 31, 2002 |  |  | $ | (466 | )
|--------------------------- |  |  | - | ---- | -
|                           
|Use of reserved inventory   |  |  |   | 145  |  
|                           
|                            | 
|Balance at October 31, 2003 |  |  |   | (321 | )
|                           
|Use of reserved inventory   |  |  |   | 99   |  
|                            | 
|                           
|Balance at October 31, 2004 |  |  | $ | (222 | )
|                            | 

7.    PROPERTY, PLANT AND EQUIPMENT

Property,
plant and equipment is summarized by major classification as follows:

|                                  | October 31,
2004 | October 31,
2003
|--------------------------------- | ---------------- | ----------------
|
|Land and improvements             |                  |                 
|Buildings and improvements        |                  |                 
|Plant machinery and equipment     |                  |                 
|Furniture and fixtures            |                  |                 
|Coach fleet and vehicles          |                  |                 
|Coach refurbishments              |                  |                 
|                                  |                  |                 
|                                 
|Total                             |                  |                 
|Less accumulated depreciation     |                  |                 
|                                  |                  |                 
|                                 
|Net property, plant and equipment |                  |                 
|                                  |                  |                 

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 50
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

7.    PROPERTY, PLANT AND EQUIPMENT, CONTINUED

Depreciation
expense of property, plant and equipment for the years ended October 31, 2004,
2003, and 2002 included in continuing operations was $2,678, $2,401, and $2,128,
respectively. During 2004, certain equipment became idle due to the realignment
of the plant at U.S. Rubber. The equipment will be used in the future for
replacement of existing equipment as needed. Due to the uniqueness of the
equipment and the high cost to buy new similar pieces, the net book value of
$353 was transferred to other assets under idle equipment and is subject to
impairment valuation.

8.    FINANCING ARRANGEMENTS

The Company
has the following outstanding debt as of October 31, 2004 and 2003:

|                                                                            | Debt Amount | 
|--------------------------------------------------------------------------- | ----------- | 
|
|U.S. Rubber                                                                 |             | 
|                                                                           
|Line of credit issued by a bank, bearing interest at prime plus 0.5% (5.25% |             | 
|at October 31, 2004), borrowings not to exceed the greater of $4,000 or the |             | 
|borrowing base (85% of eligible accounts receivable and 42% of eligible     |             | 
|inventories), interest payable monthly, balance due October 2005,           |             | 
|collateralized by substantially all assets of U.S. Rubber                   |             | 
|                                                                           
|Note payable to a bank, interest payable monthly at prime plus 1% (5.75% at |             | 
|October 31, 2004), monthly principal payments of $48, due October 2005,     |             | 
|collateralized by substantially all assets of U.S. Rubber                   |             | 
|                                                                           
|Note payable to DC Investments, interest payable monthly at 15%, balloon    |             | 
|payment due March 2007, subordinate to bank debt                            |             | 
|                                                                           
|Other                                                                       |             | 
|                                                                            |             | 
|                                                                           
|Subtotal U.S. Rubber                                                        |             | 
|                                                                            |             | 

U.S. Rubber's debt is subject to financial covenants, the most restrictive of
which is a fixed charge coverage ratio.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 51
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

|                                                                                                                           | Debt Amount | 
|-------------------------------------------------------------------------------------------------------------------------- | ----------- | 
|
|Pyramid, DW Leasing, Obsidian Leasing and DC Investments Leasing                                                           |             | 
|                                                                                                                          
|Various installment loans, repayable in monthly installments totaling $151                                                 |             | 
|including interest ranging from the three-month LIBOR rate plus .12% (1.987%                                               |             | 
|at October 31, 2004) to 13.1% through January 2014 and applicable balloon                                                  |             | 
|payments thereafter through January 2014, less unamortized discount ($30 at                                                |             | 
|October 31, 2004) first lien on assets financed (finance acquisition and                                                   |             | 
|asset purchases). A portion of the borrowings guaranteed by the members of                                                 |             | 
|DW Leasing, Fair Holdings, DC Investments, and its partners.                                                               |             | 
|                                                                                                                          
|Notes payable to Fair Holdings, repayable in monthly installments of interest                                              |             | 
|ranging from 10% to 14% through October 2012 and applicable balloon payments                                               |             | 
|through December 2012.  Collateralized by all assets of the borrower, collateral position second to that of senior lender. |             | 
|                                                                                                                          
|Other                                                                                                                      |             | 
|                                                                                                                           |             | 
|                                                                                                                          
|Subtotal Pyramid, DW Leasing, Obsidian Leasing and DC Investments Leasing                                                  |             | 
|                                                                                                                           |             | 

The Coach Leasing segments debt is subject to financial covenants, the most
restrictive of which is cash flow coverage ratio and debt service
coverage.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 52
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

|                                                                              | Debt Amount | 
|----------------------------------------------------------------------------- | ----------- | 
|
|                                                                             
|Danzer                                                                        |             | 
|                                                                             
|Line of credit to Fair Holdings, maximum borrowing equal to $3,000, interest  |             | 
|payable monthly at the LIBOR Daily Floating Rate plus 3.2% (5.187% at         |             | 
|October 31, 2004), due April 2006. Collateralized by substantially all        |             | 
|assets of Danzer.                                                             |             | 
|                                                                             
|Note payable to Fair Holdings, requires monthly principal installments of $6, |             | 
|interest accrues at the LIBOR Daily Floating Rate plus 3.2% (5.187% at        |             | 
|October 31, 2004), due April, 2006. Collateralized by substantially all       |             | 
|assets of Danzer.                                                             |             | 
|                                                                             
|Term loans payable to US Amada, Ltd. Monthly payments currently aggregating   |             | 
|$13 including interest at 10%, loans due January 2003, collateralized by      |             | 
|equipment financed, paid in December 2003.                                    |             | 
|                                                                             
|Equipment loans payable---monthly payments currently aggregating $2 including |             | 
|interest of 9.50% to 11.30% through November 2007. Collateralized by          |             | 
|equipment financed.                                                           |             | 
|                                                                             
|Other                                                                         |             | 
|                                                                              |             | 
|                                                                             
|Subtotal Danzer                                                               |             | 
|                                                                              |             | 

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 53
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

|                                                                                | Debt Amount | 
|------------------------------------------------------------------------------- | ----------- | 
|
|                                                                               
|United                                                                          |             | 
|                                                                               
|Line of credit to a bank, maximum borrowing equal to $4,000, with a base of     |             | 
|80% of eligible accounts receivable plus 50% of raw material,                   |             | 
|work-in-process and finished goods inventory. Interest payable monthly at       |             | 
|prime plus .75% (5.5% at October 31, 2004), due November 1, 2004.               |             | 
|Collateralized by substantially all assets of United and guaranteed by          |             | 
|Obsidian Enterprises*.  Line of credit has matured and United is currently      |             | 
|working on a forebearance agreement with the bank as well as looking to         |             | 
|refinance with another lender.                                                  |             | 
|                                                                               
|Temporary overline of credit with bank, interest payable monthly at prime       |             | 
|plus .75% (5.5% at October 31, 2004), due on demand, collateralized by          |             | 
|substantially all assets of United and guaranteed by Obsidian Enterprises       |             | 
|paid in April 2004.                                                             |             | 
|                                                                               
|Notes payable to a bank, requires monthly principal installments of $11 plus    |             | 
|interest of prime plus 1% (5.75% at October 31, 2004), due through July         |             | 
|2006, collateralized by substantially all assets of United and guaranteed by    |             | 
|Obsidian Enterprises*.                                                          |             | 
|                                                                               
|Subordinated note payable to Huntington Capital Investment Company, interest    |             | 
|payable quarterly at 14% per annum, balloon payment of outstanding principal    |             | 
|balance due July 26, 2006, less unamortized discount ($794 and $1,091 at        |             | 
|October 31, 2004 and 2003, respectively). Unsecured and subordinate to line     |             | 
|of credit and notes payable above.*                                             |             | 
|                                                                               
|Note payable to former shareholder, interest payable monthly at 9% per annum,   |             | 
|balloon payment of outstanding principal balance due July 27, 2006.             |             | 
|Unsecured and subordinate to line of credit, notes payable and Huntington       |             | 
|debt above.*                                                                    |             | 
|                                                                               
|Note payable to Renaissance, interest payable monthly at 8% per annum, with     |             | 
|monthly principal payments of $5 beginning July 2004, due July 2008.            |             | 
|Convertible at the option of the holder to common stock of Obsidian Enterprises |             | 
|at a conversion price of $5.00 per share. The loan agreement also restricts     |             | 
|dividend payments without the prior consent of the lender.                      |             | 

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 54
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

|                                                                              | Debt Amount | 
|----------------------------------------------------------------------------- | ----------- | 
|
|                                                                             
|United, continued                                                             |             | 
|                                                                             
|Other                                                                         |             | 
|                                                                              |             | 
|                                                                             
|Subtotal United                                                               |             | 
|                                                                              |             | 
|                                                                             
|*United was in technical default of certain loan covenants with its senior    |             | 
|and subordinated lender at October 2004                                       |             | 
|                                                                             
|Obsidian Enterprises                                                          |             | 
|                                                                             
|Line of credit to Fair Holdings, maximum borrowing equal to $15,000, interest |             | 
|payable monthly at 10%, due January 2007, collateralized by all assets of     |             | 
|Obsidian Enterprises and personally guaranteed by certain officers.           |             | 
|                                                                             
|Note payable to Fair Holdings, interest payable monthly at 15%, balloon       |             | 
|payment due March 2007, personally guaranteed by certain officers.            |             | 
|                                                                              |             | 
|                                                                             
|Subtotal Obsidian Enterprises                                                 |             | 
|                                                                              |             | 

United's debt is subject to financial covenants, the most restrictive of which
is a fixed charge ratio and funded debt to EBITDA.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 55
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

|                                                                             | Debt Amount | 
|---------------------------------------------------------------------------- | ----------- | 
|
|                                                                            
|Classic                                                                      |             | 
|                                                                            
|Line of credit to a bank, maximum borrowing equal to the lesser of $1,000 or |             | 
|85% of eligible accounts receivable plus the lesser of 60% of all            |             | 
|outstanding line of credit advances, $500, or the sum of 60% of finished     |             | 
|goods and raw material eligible inventory plus the lesser of 60% of          |             | 
|work-in-process eligible inventory or $90 minus inventory reserves. Interest |             | 
|payable monthly at prime plus 0.5% (5.25% at October 31, 2004), due May 1,   |             | 
|2006. Collateralized by substantially all assets of Classic and guaranteed   |             | 
|by Obsidian Enterprises and the Chairman of Obsidian Enterprises.            |             | 
|                                                                            
|Notes payable to a Bank, monthly principal installments of $2 plus interest  |             | 
|at prime plus 0.5% (5.25% at October 31, 2004), due through May 1, 2009      |             | 
|Collateralized by substantially all assets of Classic and guaranteed by      |             | 
|Obsidian Enterprises and certain officers.                                   |             | 
|                                                                            
|Notes payable to a Bank, monthly principal installments of $23 plus interest |             | 
|at prime plus 1% (5.75% at October 31, 2004), due through May 1, 2007        |             | 
|Collateralized by substantially all assets of Classic and guaranteed by      |             | 
|Obsidian Enterprises and certain officers.                                   |             | 
|                                                                            
|Other                                                                        |             | 
|                                                                             |             | 
|                                                                            
|Subtotal Classic                                                             |             | 
|                                                                             |             | 
|                                                                            
|Total all companies                                                          |             | 
|Less related-party amounts presented separately                              |             | 
|Less current portion                                                         |             | 
|                                                                             |             | 
|                                                                             |             | 
|                                                                             |             | 

Classic's debt is subject to financial covenants, the most restrictive of which
is a leverage ratio and a fixed charge coverage ratio.

Following are the maturities of long-term debt for each of the next five years
and thereafter:

|2005       |  |  | $ | 18,383 | 
|---------- |  |  | - | ------ | 
|2006       |  |  |   | 7,330  | 
|2007       |  |  |   | 15,979 | 
|2008       |  |  |   | 3,412  | 
|2009       |  |  |   | 100    | 
|Thereafter |  |  |   | 2,025  | 
|           | 
|          
|           |  |  | $ | 47,229 | 
|           | 

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 56
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

The Company has an
agreement with Obsidian Capital Partners (Partners) that gives the Company the
right to mandate a capital contribution from Partners if the lenders to U.S. Rubber and/or
United were to declare a default. In that event, the Company has the right to enforce a
capital contribution agreement with Partners and to receive a capital contribution in
amounts up to $1,370 for U.S. Rubber and $1,000 for United to fund the respective
subsidiarys shortfall. Those payments, if any, would be applied directly to reduce
the respective subsidiarys debt obligations to the lender. During fiscal 2003, a
capital call was made for $250 for U.S. Rubber to bring the Company in compliance with
certain bank covenants. Partners received 14,285 shares of Series D Preferred Stock in
exchange for the capital call.

The following details
significant changes in debt during the year ended October 31, 2004, or subsequent thereto:

FINANCIAL COVENANTS

Significant financial
covenants in our credit agreements are the maintenance of minimum ratios, levels of
earnings to funded debt and fixed charge coverage ratios. The Company did not meet
requirements and covenants in certain debt agreements.

At October 31, 2004,
United did not meet financial covenants with its Bank and Huntington Capital
Investment Company. United did not meet its EBITDA and fixed charge coverage
ratios. The Capital Investment Company waived their covenant violations as of
October 31, 2004. The amount for the Capital Company is classified as current
until completion of an amendment to cure future violations. The bank debt has
matured and the Company is currently working with the bank on a short term
extension until it is refinanced. The total debt of $7,693 is classified as
current.

Obsidian Leasing was
notified by its lender by letter dated November 3, 2004 that it was in technical default
of its fixed charge coverage ratio under its promissory notes with a bank and that the
maturity date of the related promissory notes were being accelerated, making the notes due
an payable on December 1, 2004. The Company is currently discussing a forbearance
agreement and the total related debt of $3,430 is classified as current. Management is
currently exploring options with regard to refinancing the outstanding debt. Should
refinancing or an extension of the current agreement not be obtained by the expiration
date of the forbearance agreement, the debt will be repaid through current sources of
availability including borrowings under the Companys line of credit with Fair
Holdings.

US Rubber did not meet financial its covenant related to delivery of audited
statements within 90 days. No waiver was received and the total balance of
$5,307 is classified as current.

Obsidian Enterprises
did not meet financial its covenant related to minimum working capital requirement and
delivery of audited statements within 90 day covenants with RENN Capital. No waiver was
received and the total balance of $500 is classified as current.

PYRAMID, DW LEASING, OBSIDIAN LEASING AND DC INVESTMENTS LEASING:

On January 3, 2003,
Obsidian Leasing paid off debt in the amount of $928 to former shareholders of Pyramid and
related companies with proceeds from a note with Fair Holdings which includes monthly
interest payments of 13% of the outstanding principal amount and a balloon principal
payment in January 2006.

On December 17, 2002,
Obsidian Leasing sold four coaches to DC Investments Leasing in exchange for DC
Investments Leasings satisfaction of the debt outstanding on such coaches.
In addition, DC Investments Leasing also acquired five additional coaches that
were previously to be purchased by the Company, thereby eliminating the
Companys existing purchase commitment for such coaches. The Company
refinanced the debt on the four coaches in addition to financing the five
additional coaches. DC Investments Leasing entered into an agreement with First
Indiana for $2,741 of the debt with interest payable at prime plus 1⁄2% and
a maturity of December 2007. DC Investments Leasing also incurred debt with Fair
Holdings for the remaining 20% of the net book value of the transferred and new
coaches. Terms of the debt with Fair Holdings include monthly interest payments
on the principal amount of $677 at 14% and a maturity of January 2008. DC
Investments Leasing also entered into a management agreement with Pyramid under
which all nine coaches described above will be leased by Pyramid.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 57
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

8.    FINANCING ARRANGEMENTS, CONTINUED

DANZER:

As of January
31, 2003, Danzer was in violation of certain covenants included in its credit
agreement and First Forbearance Agreement dated October 14, 2002 with its senior
lender. On February 28, 2003, the Company and the lender entered into a Second
Forbearance Agreement waiving these violations. On March 28, 2003, the credit
agreement was assumed by Fair Holdings under an assumption and continuation
agreement. An amendment was made as of the effective date of the agreement to
extend the maturity date of the line of credit agreement to April 1, 2006 and
the debt covenants required by the senior lender were waived through the end of
the term. In September 2003 the line of credit was amended to increase the total
availability from $1,000 to $1,500. All other terms of the agreement will
continue as stated in the original agreement dated August 15, 2001.

In July 2004 the Fair
Holdings line of credit was amended to increase the total availability from $1,500 to
$3,000. All other terms of the agreement will continue as stated in the original and
amended agreement dated August 15, 2001.

UNITED:

On December 26, 2002,
United amended its credit agreement to provide additional working capital. The amendment
included a temporary overline line of credit with maximum borrowings not to
exceed the lesser of $650 or the remainder of the borrowing base less the outstanding
principal amount of the revolving line of credit. Interest is payable monthly at a rate of
prime plus 0.75%.

On January 28, 2004,
United amended its line of credit agreement to extend the maturity date of the
original $4,000 line to November 2004, to waive Uniteds current debt
violations, and to modify the covenants for future reporting periods. The bank
debt has matured and United is currently working with the bank on a short term
extension until it is refinanced. United is in negotiations for a new line of
credit and term loan with a different lender. United expects to complete the
refinancing of this debt during the first half of fiscal 2005.

CLASSIC:

On December 28, 2004,
the credit agreement was temporarily amended to increase the borrowing base through April
1, 2005 to the following: The borrowing base is equal to 85% of eligible accounts
receivable plus the lesser of 75% of all outstanding line of credit advances, $750, or the
sum of 60% of finished goods and raw material eligible inventory plus the lesser of 60% of
work-in-process eligible inventory or $90 minus inventory reserves. On April 1, 2005, the
borrowing base will revert to the original agreement.

OBSIDIAN ENTERPRISES:

In fiscal 2004,
Obsidian Enterprises line of credit with Fair Holdings was amended. Maximum
borrowings were increased from $8,000 to $15,000, and the maturity date was extended from
January 2005 to January 2007.

---

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

9.    LEASING ARRANGEMENTS

The Company
has various operating lease commitments, principally related to machinery and
equipment, office equipment, and facilities. The approximate future minimum
annual rentals under the terms of these leases, which expire on various dates
through the year ending October 31, 2012, are as follows:

|Year Ending October 31, | Third Party | Related Party | Total
|----------------------- | ----------- | ------------- | -----
|2005                    |             |               | $    
|2006                    |             |               |      
|2007                    |             |               |      
|2008                    |             |               |      
|2009 and thereafter     |             |               |      
|                        |             |               |      
|Total                   |             |               | $    
|                        |             |               |      

Rental
expense under operating leases for the years ended October 31, 2004, 2003, and
2002 was $658, $594, and $562, respectively. Rental expense under a month to
month lease with Fair Holdings for the years ended October 31, 2004, 2003 and
2002 was $64, $31 and none, respectively.

10.    EMPLOYEE BENEFIT PLANS

The Company, through
certain of its subsidiaries, has defined contribution 401(k) plans which permit voluntary
contributions up to 20% of compensation and which provide Company-matching contributions
of up to 10% of employee contributions not to exceed 6% of employee compensation. 401(k)
plan expense for the years ended October 31, 2004, 2003, and 2002 was approximately $102,
$128, and $148, respectively. The Companys health insurance is through a partially
self funded plan which has a maximum claim limit of $70 per employee. Claims in excess of
these limits are reimbursed by a separate re-insurance plan which carries a plan limit of
$1,000.

11.    REDEEMABLE STOCK

In conjunction with the
United acquisition in 2001, the Company issued 154,482 shares of Common Stock to
Huntington Capital Investment Corporation (Huntington), the senior
subordinated lender of United. The note purchase agreement included a provision giving
Huntington the option to require the Company to repurchase these shares at 90% of market
value at the date of redemption upon the earlier of: a) fifth anniversary of issuance of
such shares, b) default under the subordinated debt agreement, c) other factors related to
a sale of substantially all assets of the Company as defined in the agreement.

A portion of the note
purchase agreement proceeds of $3,500 was allocated to the stock issued based on the
thirty day average closing value of the Companys common stock prior to the
transaction. As the redemption value is variable, the Company recognizes changes in the
estimated fair value each quarter. Changes in fair value are adjusted through additional
paid in capital or retained earnings when additional paid in capital related to the fair
value change has been reduced to zero. At October 31, 2004, the estimated redemption
requirement is $443 to be paid July 2006.

In conjunction with the
sale of Champion discussed in Note 4, the Company agreed to settle the outstanding
subordinated debt due to Markpoint from Champion in exchange for a cash payment of $675
and issuance to the debt holder of 32,143 shares of the Companys Series D Preferred
Stock. The agreement provided Markpoint the option to require the Company to repurchase
these shares at a price of $21 per share. The repurchase option was available to Markpoint
as follows: 16,072 shares during the period May 1, 2003 to June 1, 2003 and 16,071
shares during the period November 1, 2003 to December 1, 2003. On May 12, 2003, under an
Assignment Agreement, the Company transferred all rights, title and interest in the
repurchase option to Fair Holdings. Markpoint exercised the repurchase option and was paid
$338 by Fair Holdings. The exercise of the option resulted in the reduction of the
liability and an increase in additional paid in capital of $337 as of October 31, 2003. On
November 10, 2003, Markpoint exercised the option for the remaining shares and those
shares also were acquired by Fair Holdings. The exercise of the option resulted in a
reduction in redeemable stock and an increase in additional paid-in capital of $337.

---

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

11.    REDEEMABLE STOCK, CONTINUED

With the acquisition of
Classic effective May 1, 2004, the Company issued 170,451 shares of our common stock to
the former owners of Classic. These shares are classified as redeemable stock. The
purchase agreement for Classic included a provision that gives the sellers the right to
have us redeem these shares at a price of $6.5970 per share within five years of the date
of issuance of the shares. The sellers have the right to partially redeem these shares in
increments of 10,000 or more shares per transaction. The agreement also has an automatic
termination provision if the Companys shares have traded at a closing price of
greater than $7.33 per share for any consecutive period of 60 trading days during the
period of time commencing on the date there are no restrictions on the sellers sale of
shares and ending on the fifth anniversary of the agreement.

12.    STOCKHOLDERS EQUITY

PREFERRED STOCK:

On March 7, 2002, the
Company completed a series of transactions with the subordinated lender at U.S. Rubber
resulting in an increase in equity and a decrease in liabilities of $1,017. The
subordinated lender received 30,000 shares of Series C Preferred Stock in this
transaction.

On April 30, 2002, the
Company converted $1,290 of debt and accrued interest owed to Partners and $596 of debt
and accrued interest owed to Fair Holdings to equity through the issuance to Partners and
Fair Holdings of 402,906 shares and 186,324 shares, respectively, of Series C Preferred
Stock which are convertible into an aggregate of 11,784,600 shares of common stock of the
Company.

In August 2002,
warrants for 10,000 shares of Series C Convertible Stock were exercised. The shares were
issued in exchange for a cash payment of $20.

On October 24, 2002,
the Company amended its Articles of Incorporation to authorize 200,000 shares of Series D
Preferred Stock. The Series D Preferred Stock is convertible at the option of the holder
at any time, unless previously redeemed, into shares of common stock of the Company at an
initial conversion rate of 175 shares of common stock for each share of Series D Preferred
Stock. However, the stock may not be converted prior to the Company filing a registration
statement for such shares. Holders of the Series D Preferred Stock have voting rights
which entitle them to cast the number of votes equal to the number of shares of common
stock into which such shares of Series D Preferred could be converted on each matter
submitted to a vote of the stockholders of the Company.

On October 24, 2002,
88,300 of the Series D Preferred Stock shares were sold in the transactions described
below which were exempt from Securities Act registration under Section 4(2) of the
Securities Act, relating to sales by an issuer not involving a public offering.

On October 24, 2002,
the Company converted $1,276 of debt to Partners in exchange for 72,899 shares
of Series D Preferred Stock. The conversion was the result of Partners
requirement under the Agreement and Plan of Reorganization between the Company
and U.S. Rubber to fund through the purchase of additional preferred stock
certain ongoing administrative expenses of the Company to complete the Plan of
Reorganization, complete all required current and prior year audits to meet the
regulatory filing requirements, and ensure all annual and quarterly SEC filings
are completed to enable the registration of the preferred stock issued to
Partners.

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

12.    STOCKHOLDERS EQUITY, CONTINUED

On October 24, 2002,
the Company converted $270 of debt to Fair Holdings in exchange for 15,431 shares of
Series D Preferred Stock. The conversion was the result of Fair Holdings agreement
to cover similar expenses as Partners as described above in excess of the amount Partners
was obligated to pay.

On May 12, 2003, 16,072
shares of Series D Preferred Stock, previously classified as redeemable stock (see Note
11) were acquired by Fair Holdings from Markpoint.

On October 13, 2003,
the Company issued 14,285 shares of Series D Preferred Stock for $250. The issuance was as
a result of a capital call from Partners who were obligated to fund additional capital
required to maintain compliance with the debt covenants of U.S. Rubber.

On December 3, 2003,
the Companys stockholders and Board of Directors approved a 50-to-1 reverse stock
split. The reverse stock split was effective for trading purposes as of February 16, 2004.
As a result of the reverse stock split and the amendment to the Certificate of
Incorporation, approximately 720,157 shares of common stock remained outstanding and the
number of authorized shares of common stock was reduced to 10,000,000.

On March 12, 2004, all
outstanding Series C and D preferred shares were converted to common stock, which
increased common stock outstanding by 2,218,725 shares including 154,482 shares classified
as redeemable stock. As of October 31, 2004, there were five million shares authorized
with no preferred shares issued or outstanding.

STOCK OPTIONS:

The
stockholders approved a stock option plan to issue both qualified
and nonqualified stock options. Under the plan, 16,000 options to
purchase shares of the Companys common stock may be issued at the
discretion of the Companys Board of Directors. The option price per share
is determined by the Companys Board of Directors, but in no case will the
price be less than 85% of the fair value of the common stock on the date of
grant. Options under the plan will have a term of not more than ten years with
accelerated termination upon the occurrence of certain events.

The Board
adopted, and the Companys stockholders approved a 2001 Long Term Incentive
Plan. The 2001 Plan authorizes the granting to the Companys directors, key
employees, advisors and consultants of options intended to qualify as Incentive
Options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the Code), options that do not so qualify
(Non-Statutory Options), restricted stock and Other Stock-Based
Awards that are not Incentive Options or Non-Statutory Options. The awards are
payable in Common Stock and are based on the formula which measures performance
of the Company. There was no performance award expense in 2004, 2003 or 2002. No
options under this plan were granted to any employees. Options are exercisable
for up to 10 years from the date of grant.

On December 13, 2003,
the Companys Board of Directors approved the extension of the expiration date of
4,000 fixed stock options, exercisable at $2.50. The original expiration date of December
31, 2002 was originally extended to December 31, 2003 and subsequently to June 30, 2004.
The Company recognized $30 and $40 respectively of compensation expense related to the
extension of the options during the years ended October 31, 2003 and 2004. The fixed stock
options expired and were not exercised as of June 30, 2004.

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

12.    STOCKHOLDERS EQUITY, CONTINUED

Following is a summary
of transactions of granted shares under option and adjusted for the 50:1 reverse stock
split in February 2004 for the years ended October 31, 2004, 2003 and 2002:

|                                    | 2004 | 2003 | 2002
|----------------------------------- | ---- | ---- | ----
|
|Outstanding, beginning of year      |      |      |     
|Issued during the year              |      |      |     
|Canceled or expired during the year |      |      |     
|Exercised during the year           |      |      |     
|                                    |      |      |     
|Outstanding, end of year            |      |      |     
|                                    |      |      |     
|Eligible, end of year for exercise  |      |      |     
|                                    |      |      |     

STOCK WARRANTS:

The Company has issued
warrants to purchase common stock to several parties. In January 2003, the
Company agreed to a modification of terms with the debenture holders to provide
for less stringent covenants. In exchange for this modification, the Company
issued warrants to the debenture holders to purchase up to 320 shares of the
Companys common stock at an exercise price of $10.00 per share. These
warrants expire January 24, 2006. In February 2004, the Company received an
extension of the requirement to provide audited financial statements to
debenture holders. In exchange for this extension, the Company issued warrants
to each of the debenture holders to purchase up to 160 shares of the
Companys common stock at an exercise price of $10.00 per share. These
warrants expire February 9, 2007. The issuance of the warrants had no material
impact on earnings.

The following
table summarizes the outstanding warrants for the years ended October 31, 2004
and 2003:

|                                         | OutstandingWarrantsOctober 31,2002 | Issued
During the
Year | ExercisePrice | Warrants
Exercised
in Period | OutstandingWarrantsOctober 31,2003 and 2004
|---------------------------------------- | ---------------------------------- | ---------------------- | ------------- | ---------------------------- | -------------------------------------------
|                                        
|Common Stock:                            |                                    |                        |               |                              |                                            
|Renaissance US Growth & Income Trust PLC |                                    |                        |               | 160                          |                                            
|BFSUS Special Opportunities Trust PLC    |                                    |                        |               | 160                          |                                            
|                                        
|
|                                        
|Common Stock:                            |                                    |                       
|Renaissance US Growth & Income Trust PLC |                                    |                        |               | ---                          |                                            
|BFSUS Special Opportunities Trust PLC    |                                    |                        |               | ---                          |                                            

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

CONVERTIBLE DEBT:

As described in Note 8,
the Company has a note payable agreement which is convertible by the holder to common
stock totaling 100,000 shares at a conversion rate of $5.00 per share.

13.    BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA

The Company operates in
three industry segments comprised of trailer and related transportation equipment
manufacturing; coach leasing; and butyl rubber reclaiming. All sales are in North and
South America primarily in the United States, Canada and Brazil. All segment information
is presented from continuing operations and before cumulative effect of change in
accounting method. Selected information by segment follows:

|                      | Year Ended October 31, 2004
|--------------------- | ---------------------------
|
|                     
|Sales:                |                            
|Domestic              |                            
|Foreign               |                            
|                      |                            
|                     
|Total                 |                            
|                     
|Cost of goods sold    |                            
|                     
|Loss before taxes and |                            
|minority interest     |                            
|                     
|Identifiable assets   |                            
|                     
|Goodwill              |                            
|                     
|Depreciation and      |                            
|amortization expense  |                            
|                     
|Interest expense      |                            

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

13.    BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED

|                      | Year Ended October 31, 2003
|--------------------- | ---------------------------
|
|                     
|Sales:                |                            
|Domestic              |                            
|Foreign               |                            
|                      |                            
|                     
|Total                 |                            
|                     
|Cost of goods sold    |                            
|                     
|Loss before taxes and |                            
|minority interest     |                            
|                     
|Identifiable assets   |                            
|                     
|Goodwill              |                            
|                     
|Depreciation and      |                            
|amortization expense  |                            
|                     
|Interest expense      |                            

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

13.    BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED

|                      | Year Ended October 31, 2002
|--------------------- | ---------------------------
|
|                     
|Sales:                |                            
|Domestic              |                            
|Foreign               |                            
|                      |                            
|                     
|Total                 |                            
|                     
|Cost of goods sold    |                            
|                     
|Loss before taxes and |                            
|minority interest     |                            
|                     
|Identifiable assets   |                            
|                     
|Goodwill              |                            
|                     
|Depreciation and      |                            
|amortization expense  |                            
|                     
|Interest expense      |                            

Obsidian
Enterprises (legal parent) allocates selling, general and administrative
expenses to the respective companies primarily based on a percentage of sales.
For the years ended October 31, 2004, 2003, and 2002, respectively, allocated
corporate expenses by segment were as follows:

|                        | Year Ended October 31, |  |  
|----------------------- | ---------------------- |  | -
|
|                       
|Trailer manufacturing   |                        |  | $
|Coach leasing           |                        |  |  
|Butyl rubber reclaiming |                        |  |  
|                        |                        |  |  
|                       
|                        |                        |  | $
|                        |                        |  |  

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

14.    INCOME TAXES

The Company files a
consolidated federal tax return. The parent and each subsidiary record their share of the
consolidated federal tax expense on a separate-return basis. Any additional income tax
expense or recovery realized as a result of filing a consolidated tax return is recorded
in consolidation. The Company and each subsidiary file separate state income tax returns.
The Company accounts for income taxes in compliance with SFAS No. 109, Accounting for
Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are recorded for any
temporary differences between the financial statement and tax bases of assets and
liabilities, using the enacted tax rates and laws expected to be in effect when the taxes
are actually paid or recovered.

The provision for
(expense) benefit for income taxes consists of the following:

|                                       | 2004 | 2003 | 2002
|-------------------------------------- | ---- | ---- | ----
|                                      
|Current:                               |      |      |     
|Federal                                |      |      | $   
|State                                  |      |      |     
|                                       |      |      |     
|                                      
|                                       |      |      |     
|                                       |      |      |     
|                                      
|Deferred:                              |      |     
|Federal                                |      |      |     
|State                                  |      |      |     
|Discontinued operations                |      |      |     
|                                       |      |      |     
|                                      
|                                       |      |      |     
|                                       |      |      |     
|                                      
|Total tax benefit                      |      |      |     
|                                      
|Less tax benefit from discontinued     |      |     
|operations                             |      |      |     
|                                      
|Tax benefit from continuing operations |      |      | $   
|                                       |      |      |     

A reconciliation of
income tax benefit (expense) from continuing operations at U.S. statutory rates
to actual income tax benefit (expense) is as follows:

|                                         | 2004 | 2003 | 2002
|---------------------------------------- | ---- | ---- | ----
|                                        
|Benefit (tax) at statutory rate (34%)    |      |      | $   
|Effect of nontaxable combined entity     |      |      |     
|State income tax                         |      |      |     
|Non-deductible goodwill                  |      |      |     
|Valuation reserve applied to equity      |      |      |     
|(Increase) decrease in valuation reserve |      |      |     
|Other                                    |      |      |     
|                                         |      |      |     
|                                        
|                                         |      |      | $   
|                                         |      |      |     

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

14.    INCOME TAXES, CONTINUED

*On November
1, 2001, 27 coaches owned by DW Leasing were transferred to Obsidian Leasing in
a tax-free exchange, as further described in Note 1. DW Leasing recorded a
charge to equity as a deemed distribution of $1,590 on the date of the
transaction, representing the deferred tax liability associated with the coaches
transferred. A reduction of deferred tax valuation reserve of $(1,267) was also
recorded in the consolidated financial statements as an increase in equity, as
the addition of the above deferred tax liability resulted in the Companys
ability to realize additional deferred tax assets on a consolidated
basis.

Deferred
income taxes represent the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
for income tax purposes. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some or all of a portion of the deferred tax assets will not be realized.
Significant components of the Companys deferred tax assets and liabilities
are as follows:

|                                       | 2004 | 2003
|-------------------------------------- | ---- | ----
|                                      
|Deferred tax assets (liabilities):     |      |     
|Accounts receivable                    |      |     
|Inventories                            |      |     
|Accrued expenses                       |      |     
|Intangibles                            |      |     
|Operating loss carryforwards           |      |     
|Property and equipment                 |      |     
|Other                                  |      |     
|                                       |      |     
|                                      
|                                       |      |     
|Less valuation reserves                |      |     
|                                       |      |     
|                                      
|Deferred tax assets (liabilities), net |      |     
|                                       |      |     

Included in the accompanying balance sheet under the following:

|                         | 2004 | 2003
|------------------------ | ---- | ----
|                        
|Deferred tax assets      |      |     
|Deferred tax liabilities |      |     
|                         |      |     
|                         |      |     
|                         |      |     
|                         |      |     

The amount of
federal tax net operating loss carryforwards available at October 31, 2004 was
approximately $21,500. Certain of these loss carryforwards were generated by
certain subsidiaries prior to the reverse merger transaction in June 2001 and
have expiration dates through the year 2021. The use of preacquisition operating
losses is subject to limitations imposed by the Internal Revenue Code.
Utilization of these loss carryforwards is impacted by such limitations.
Accordingly, the deferred tax assets related to premerger operating losses have
been reserved with a valuation allowance to the extent they are not offset by
deferred liabilities.

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|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

14.    INCOME TAXES, CONTINUED

Federal tax net
operating loss carryforwards and expiration dates as of October 31, 2004 are as
follows:

|Premerger | Expiration Dates | Postmerger | Expiration Dates 
|--------- | ---------------- | ---------- | -----------------
|
|$         | 2,996            |            | 2008 through 2021
|          |                  |           

Cash payments
of income taxes for the years ended October 31, 2004, 2003, and 2002 were $75,
$96, and $22, respectively.

15.    RELATED PARTIES

The Company
makes advances, receives loans and conducts other business transactions with
affiliates resulting in the following amounts for the periods ended:

|                                                      | October 31,
2004 | October 31,
2003
|----------------------------------------------------- | ---------------- | ----------------
|
|Balance sheets:                                       |                  |                 
|Current assets:                                       |                  |                 
|Accounts receivable, Obsidian Capital Company(2)      |                  |                 
|Accounts receivable, stockholders                     |                  |                 
|Accounts receivable, other affiliated entities        |                  |                 
|                                                      |                  |                 
|                                                     
|Total assets                                          |                  |                 
|                                                      |                  |                 
|                                                     
|Current liabilities:                                  |                  |                 
|Accounts payable, Obsidian Capital Company(2)         |                  |                 
|Accounts payable, stockholders                        |                  |                 
|Accounts payable, DC Investments and Fair Holdings(2) |                  |                 
|Accounts payable, other affiliated entities           |                  |                 
|Long-term portion:                                    |                  |                 
|Accounts payable, Obsidian Capital Company(2)         |                  |                 
|Accounts payable, stockholders                        |                  |                 
|Notes payable, DC Investments(2)                      |                  |                 
|Notes payable, Fair Holdings(2)                       |                  |                 
|Line of credit, Fair Holdings(2)                      |                  |                 
|                                                      |                  |                 
|Total liabilities                                     |                  |                 
|                                                      |                  |                 

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OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

15.    RELATED PARTIES, CONTINUED

|                                                       | October 31, 2004 | October 31, 2003 | October 31, 2002
|------------------------------------------------------ | ---------------- | ---------------- | ----------------
|
|Statements of Operations:                              |                  |                  |                 
|Interest expense, DC Investments and Fair Holdings(2)  |                  |                  | $               
|Interest expense, Obsidian Capital Partners(2)         |                  |                  |                 
|Rent expense, Fair Holdings(2)                         |                  |                  |                 
|Rent expense, Obsidian Capital Company(2)              |                  |                  |                 
|Sales to Champion(2)                                   |                  |                  |                 
|Purchases from Champion(2)                             |                  |                  |                 
|Rent expense, Roost Leasing(1)                         |                  |                  |                 
|Purchases, CCG Parma(2)                                |                  |                  |                 
|Other:                                                 |                  |                 
|Coach rebuild, Champion                                |                  |                  |                 
|Classic acquisition costs, Diamond Investments, LLC(2) |                  |                  |                 

(1)A leasing company owned by the former owners of Classic(2)An entity controlled by Tim Durham, the Chairman of Obsidian
Enterprises

Related-party
amounts classified as current reflect those portions of the total receivable or
payable that were currently due in accordance with the terms, or were collected
or paid subsequent to year end. Amounts classified as long term represent
amounts not currently due.

On February
13, 2002, DC Investments, a related party 50% owned by Mr. Durham (Chairman of
the Company), purchased accounts receivable from DW Leasing, recorded by DW
Leasing as deposits on trailers, in the amount of $1,051. DW Leasing used the
proceeds from the purchase of the accounts receivable to pay off the accounts
payable due Obsidian Capital Company in the amount of $624 and the amount due
shareholders and other related parties in the approximate amount of
$300.

The Company was
obligated to the stockholders and certain employees (that were formerly stockholders of
subsidiary companies) under note payable agreements acquired as part of the acquisitions.
In addition, the Company has entered into note payable agreements with other affiliated
entities. The details of these notes payable are included in Note 8.

On December 17, 2002,
Obsidian Leasing sold four coaches to DC Investments Leasing in exchange for DC
Investments Leasings satisfaction of the debt outstanding on such coaches. DC
Investments Leasing paid this debt through a refinancing at terms that included a
reduction in interest rates. In addition, DC Investments Leasing also acquired five
additional coaches that were previously to be purchased by us thereby eliminating our
existing purchase commitment for the coaches. DC Investments Leasing also entered into a
management agreement with Pyramid under which all nine coaches described above will be
leased by Pyramid.

In February and March
2004, the Company secured an additional financial commitment from Fair Holdings to
provide, as needed, additional borrowings under a line of credit agreement from $8,000 to
$15,000. The line bears interest at 10% and the line of credit arrangement expires on
January 1, 2007 at which time the total principal and interest is due and payable. No late
fees were charged on this loan.

In July 2004 the Fair
Holdings line of credit with Danzer was amended to increase the total availability from
$1,500 to $3,000. All other terms of the agreement will continue as stated in the original
and amended agreement dated August 15, 2001 which includes interest at LIBOR plus 3.2%. No
late fees have been assessed by Fair Holdings for this loan.

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 69
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

16.    COMMITMENTS AND CONTINGENCIES

In connection
with their dealers wholesale floor-plan financing of cargo trailers, the
Company has entered into repurchase agreements with various lending
institutions. Each repurchase commitment is on an individual unit basis with a
term from the date it is financed by the lending institution through payment
date by the dealer, generally not exceeding one year. Outstanding obligations
are approximately $2,375 at October 31, 2004. Repurchase agreements with third
party financing sources are ordinary and customary in the cargo trailer
industry. The repurchase obligations are limited to the repurchase of the
inventory, in like new condition, and only in the event a dealer is in default
under its agreement with the finance company. The Company is not responsible for
interest or any other carrying cost incurred by the dealer, and is not
responsible for any required curtailment payments to be made by the dealer to
the finance company based on the aging of the finance company receivable. The
dealer cannot initiate the repurchase obligation and has no right to return the
product to the Company. The Company receives credit approval from the third
party finance company prior to shipping the product and generally receives
payment with in a few days. The Companys repurchase activity under these
agreements has historically been infrequent and the losses incurred have been
minimal. The loss is limited to the difference between the repurchase amount and
the subsequent resale of the inventory. Losses incurred under such arrangements
have not been significant and the estimated liability for losses on contracts
outstanding at October 31, 2004 is not material.

In the normal course of
business, the Company is liable for contract completion and product performance. In the
opinion of management, such obligations will not significantly affect the Companys
financial position or results of operations.

Subsequent to October
31, 2004, U.S. Rubber entered into a number of agreements relating to the installation of
a cryogenic system. These commitments total approximately $253. Minimum future payments
under the commitments are as follows:

|                        | 
|----------------------- | 
|Year Ending October 31, | 
|                       
|2005                    | 
|2006                    | 
|2007                    | 
|2008                    | 
|2009 and thereafter     | 
|                        | 
|                        | 
|                        | 

17.    SUBSEQUENT EVENTS

In November 2004,
Obsidian Leasing sold two of its coaches. Total proceeds associated with the
sale of these coaches were approximately $220 of which $209 was used to pay off
commitments associated with the coaches. There was no material gain or loss
recorded on the sale. The Company is currently in the process of selling an
additional three coaches.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 70
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

17.    SUBSEQUENT EVENTS, CONTINUED

In December
2004 Pyramid and its parent, Obsidian Enterprises, and other affiliated
companies and members filed suit against the former owners of Pyramid for
violation of the terms of its non-compete agreement. The lawsuit was filed
against various individuals and operating entities that are directly competing with the
Company and is seeking punitive and compensating damages. While the ultimate result of the
lawsuit is unknown at this time, management believes that the outcome will be favorable.

Effective December 28,
2004, the credit agreement for the line of credit with Classic was temporarily amended to
increase the borrowing base until April 1, 2005 to the following: The borrowing base is
equal to 85% of eligible accounts receivable plus the lesser of 75% of all outstanding
line of credit advances, $750, or the sum of 60% of finished goods and raw material
eligible inventory plus the lesser of 60% of work-in-process eligible inventory or $90
minus inventory reserves. On April 1, 2005, the borrowing base will revert to the original
agreement.

18.    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
        (dollars in thousands, except
per share amounts)

YEAR ENDED OCTOBER 31, 2004

|                                    | First Qtr.
Ended 1/31/04 | Second Qtr.
Ended 4/30/04 | Third Qtr.
Ended 7/31/04 | Fourth Qtr.
Ended 10/31/04
|----------------------------------- | ------------------------ | ------------------------- | ------------------------ | --------------------------
|                                   
|Net sales                           |                          |                           | $                        | 12,046                    
|                                   
|Gross profit                        |                          |                           |                          | 1,067                     
|                                   
|Loss from continuing operations     |                          |                           |                          | (2,218                    
|                                   
|Loss from continuing operations per |                          |                          
|basic common and common equivalent  |                          |                          
|share                               |                          |                           |                          | (3.32                     
|                                   
|                                   
|YEAR ENDED OCTOBER 31, 2003        
|
|                                   
|Net sales                           |                          |                           | $                        | 10,899                    
|                                   
|Gross profit                        |                          |                           |                          | 1,160                     
|                                   
|Loss from continuing operations     |                          |                           |                          | (1,517                    
|                                   
|Loss from continuing operations per |                          |                          
|basic common and common equivalent  |                          |                          
|share                               |                          |                           |                          | (2.25                     

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 71
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

18.    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED),
CONTINUED

YEAR ENDED OCTOBER 31, 2002

|                                         | First Qtr.
Ended 1/31/02 | Second Qtr.
Ended 4/30/02 | Third Qtr.
Ended 7/31/02 | Fourth Qtr.
Ended 10/31/02
|---------------------------------------- | ------------------------ | ------------------------- | ------------------------ | --------------------------
|                                        
|Net sales                                |                          |                           | $                        | 11,466                    
|                                        
|Gross profit                             |                          |                           |                          | 1,518                     
|                                        
|Income (loss) from continuing operations |                          |                           |                          | (1,207                    
|                                        
|Income (loss) from continuing            |                          |                          
|operations per basic common and common   |                          |                          
|equivalent share                         |                          |                           |                          | (1.68                     

**The fourth quarter includes the charge for the impairment of goodwill of $720 for October 31, 2002.
***The fourth quarter includes a charge related to inventory at United of $500

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 72
|------------------------------------ | -------------- | -------

SCHEDULE IIVALUATION AND QUALIFYING OF ACCOUNTS
Year Ended October 31, 2004
(in thousands)

|                                |  | Column C---Additions |   |       | 
|------------------------------- |  | -------------------- | - | ----- | 
|
|                               
|Allowance for doubtful accounts |  |                      | $ | 496   | 
|                                |  |                      |   |       | 
|Inventory valuation             |  |                     
|allowances                      |  |                      | $ | 321   | 
|                                |  |                      |   |       | 
|Deferred tax valuation          |  |                     
|reserve                         |  |                      | $ | 1,971 | 
|                                |  |                      |   |       | 

Year Ended October 31, 2003
(in thousands)

|                                |  | Column C---Additions |   |       | 
|------------------------------- |  | -------------------- | - | ----- | 
|
|                               
|Allowance for doubtful accounts |  |                      | $ | 495   | 
|                                |  |                      |   |       | 
|Inventory valuation             |  |                     
|allowances                      |  |                      | $ | 466   | 
|                                |  |                      |   |       | 
|Deferred tax valuation          |  |                     
|reserve                         |  |                      | $ | 1,171 | 
|                                |  |                      |   |       | 

(1) Recovery of amounts previously reserved.(2) Use of inventory previously reserved.(3) Additional valuation reserve recorded related to adjustment to net
operating loss carryforwards. No income or loss recorded
      in the financial statements.(4) Reduction from the sale of Champion to a related
party. No income or loss recorded due to involvement of related parties.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 73
|------------------------------------ | -------------- | -------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands, except per share and share data)

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES.
None

ITEM 9A.    CONTROLS AND PROCEDURES.

The Company
maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports we file pursuant to the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms. The
Companys management recognizes that, because the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events and also is subject to other inherent limitations, disclosure
controls and procedures, no matter how well designed and operated, can provide
only reasonable, and not absolute, assurance of achieving the desired
objectives.

Under the
supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of the Companys
disclosure controls and procedures as of October 31, 2004. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, for the reasons more fully set forth below, the Companys
disclosure controls and procedures were not effective on October 31, 2004 in
providing reasonable assurance that information required to be disclosed in the
reports we file pursuant to the Securities Exchange Act of 1934 was recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms.

More
specifically, the Companys management has concluded that (i) additional
accounting personnel were needed both at the parent company level and at certain
subsidiaries at October 31, 2004 to ensure that certain disclosure controls and
procedures were operating effectively; (ii) greater segregation of duties was
needed in the accounting functions; and (iii) certain procedures should be
documented to ensure that personnel turnover does not result in a failure of
those procedures. In fiscal 2004 the Company hired two additional employees to
join the accounting staff and is evaluating how best to utilize the time of
these new employees. The Company will continue to evaluate the need for
additional staff at the parent and subsidiary levels, but given the size and
location of the Companys subsidiaries the Company believes it will
continue to face challenges in attracting and retaining qualified personnel.
Additionally, the Company is also in the process of evaluating ways in which the
impact of personnel turnover on the implementation of disclosure controls and
procedures can be reduced. Finally, as discussed below, the Company believes
that the implementation of its new accounting system will enhance the
segregation of duties of accounting personnel without the necessity of adding
personnel.

In fiscal
2004, the Company implemented an enterprise wide, integrated accounting system
that replaced the separate accounting systems previously maintained by the
several subsidiaries and since that date has implemented an enhanced segregation
of duties of various accounting personnel. There have been no other significant
changes in the Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the date of the October 31,
2004 evaluation.

ITEM 9B.    OTHER INFORMATION.

None.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 74
|------------------------------------ | -------------- | -------

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table
sets forth information with respect to all directors and executive officers of
the Company, including their ages, present principal occupations, other business
experience during the last five years.

|Name                 | Age | Position                                                    | Director Since
|-------------------- | --- | ----------------------------------------------------------- | --------------
|Timothy S. Durham    | 42  | Chief Executive Officer and Chairman of the Board           | 2001          
|Terry G. Whitesell   | 65  | President, Chief Operating Officer and Director             | 2001          
|Jeffrey W. Osler     | 36  | Executive Vice President, Secretary, Treasurer and Director | 2001          
|D. Bruce Johnston+   | 54  | Director                                                    | 2004          
|John A. Schmit*+     | 37  | Director                                                    | 2001          
|D. Scott McKain*     | 50  | Vice Chairman and Director                                  | 2001          
|Daniel S. Laikin+    | 42  | Director                                                    | 2001          
|Rick D. Snow         | 41  | Executive Vice President and Chief Financial Officer        | N/A           
|Anthony P. Schlichte | 49  | Executive Vice President of Corporate Finance               | N/A           

---

*Members of the Compensation Committee
+Members of the Audit Committee

Mr. Durham has served as the Chief Executive Officer and Chairman of the Board
and as a director of the Company since June 2001. He has served as a Managing
Member and Chief Executive Officer of Obsidian Capital Company LLC, which is the
general partner of Obsidian Capital Partners, a major shareholder of the Company
since April 2000. Beginning in 1998, Mr. Durham founded and maintained a
controlling interest in several investment funds, including Durham Capital
Corporation, Durham Hitchcock Whitesell and Company LLC, and Durham Whitesell
& Associates LLC. From 1991 to 1998, Mr. Durham served in various capacities
at Carpenter Industries, Inc., a school bus manufacturer, including as Vice
Chairman, President and Chief Executive Officer. Mr. Durham also serves as a
director of National Lampoon, Inc. Mr. Durham is Mr. Oslers
brother-in-law.

Mr. Whitesell has served as the President and Chief Operating Officer and as a
director of the Company since June 2001. Prior to that time he co-founded
several entities with Mr. Durham, including Obsidian Capital Company, LLC,
Durham Hitchcock Whitesell and Company LLC and Durham Whitesell & Associates
LLC. Mr. Whitesell also is a Managing Member of Obsidian Capital Company LLC.
From April 1992 until September 1998, Mr. Whitesell served as Executive Vice
President of Carpenter Industries, Inc., which manufactured school
buses.

Mr. Osler has served as the Executive Vice President, Secretary and Treasurer
and as a director of the Company since June 2001. He also is a Managing Member
of Obsidian Capital Company LLC and has served as Senior Vice President at
Durham Whitesell & Associates LLC and Durham Capital Corporation since
September 1998. Prior to that time, Mr. Osler served as the General Manager of
Hilton Head National Golf Club. Mr. Osler is Mr. Durhams
brother-in-law.

Mr. Johnston has served as a director of the Company since May 2004, when he was
appointed by the Board to fill the vacancy created by the resignation of a prior
director. Mr. Johnston currently provides consulting services through executive
workshops across the nation. He had served as President and Chief Executive
Officer of Gartmore Global Investments, the asset management fund subsidiary of
Nationwide Mutual Insurance Company from May 2002 to January 2004. From March
1998 to May 2002, he had served as Senior Vice President of Conseco Capital
Management.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 75
|------------------------------------ | -------------- | -------

Mr. Schmit
has been a director since July 2001. Since November 2004, Mr. Schmit has worked
to form an investment fund. From 1997 through November 2004 he served as Vice
PresidentInvestments at Renaissance Capital Group, Inc. Prior to joining
Renaissance Capital Group, Mr. Schmit practiced law with the law firm of Gibson,
Ochsner & Adkins in Amarillo, Texas from September 1992 to September 1994.
Between August 1994 and May 1996, Mr. Schmit attended Georgetown University
where he earned his L.L.M. in International and Comparative Law.

Mr. McKain has been a director of the Company since September 2001. He has
served as the Chairman of McKain Performance Group since 1981. Mr. McKain also
has been the Vice Chairman of Durham Capital Corporation since 1999. From 1983
to 1998, Mr. McKain was a broadcast journalist and television commentator. Mr.
McKain has also authored several books and is a keynote speaker who presents
high content workshops across the nation.

Mr. Laikin
has served as a director of the Company since September 2001. Mr. Laikin is
Chief Operating Officer and a director of National Lampoon, Inc., the owner of
the National Lampoon trademark and engaged in the entertainment
business. He has been a Managing Member of Fourleaf Management LLC, a management
company of an investment fund that invests in technology related entities, since
1999. Mr. Laikin served as the Chairman of the Board of Biltmore Homes from 1993
to 1998.

Mr. Snow was named Executive Vice President and Chief Financial Officer in April
2003. He continues to serve as Chief Financial Officer for Fair Finance, Inc., a
company for which Mr. Durham, the Companys Chairman and Chief Executive
Officer, also serves as Chief Executive Officer. Prior to joining Fair Finance,
Inc., in 2002, Mr. Snow had served as Senior Manager of Brockman, Coats,
Gedelian & Co., a regional accounting firm from 1991 to 2002. Prior to
joining Brockman, Coats, Gedelian & Co. in 1991, he was an accountant with
Grant Thornton LLP.

Mr. Schlichte has served as Executive Vice President of Corporate Finance since
April 2003. Previously he held vice president and senior lending officer
positions at First Indiana Bank from 1981 to 2003.

AUDIT COMMITTEE FINANCIAL EXPERT

The
Companys Board of Directors has determined that the three members of the
Audit Committee, Daniel S. Laikin, D. Bruce Johnston, and John A. Schmit, each
qualify as an audit committee financial expert as defined by Item
401(h) of Regulation S-K adopted pursuant to the Securities Exchange Act of
1934, as amended. Mr. Schmit has a bachelors degree in Finance and seven years
of experience in reading, interpreting and analyzing financial statements in his
role as Vice President, Investments for RENN Capital Group, Inc., a registered
Investment Adviser. Mr. Laikin and Mr. Johnston also have extensive business
experience that has involved the review of financial statements as more fully
described in the above biographical information. Messrs. Johnston and Schmit
also qualify as independent as that term is used in Item 7(d)(3)(iv)
of Schedule 14A of the Securities Exchange Act of 1934, as amended.

CODE OF ETHICS

The Company has adopted
a Code of Ethics for Chief Executive Officer and Senior Financial Officers (Code of
Ethics), which applies to the Companys principal executive officer and to its
principal financial and accounting officers. A copy of the Code of Ethics is attached as
Exhibit 14 to this Annual Report on Form 10-K.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Compliance
with Section 16(a) of the Securities Exchange Act of 1934 requires the
Companys directors, executive officers, and persons who own more than ten
percent of the Companys Common Stock (10% Shareholders)
to file reports of ownership and reports of changes in ownership of the
Companys Common Stock with the Securities Exchange Commission
(SEC). Officers, Directors and 10% Shareholders are required by SEC
regulation to furnish the Company with copies of all forms they file under
Section 16 (a). Based solely on its review of the copies of such forms received
by it with respect to its fiscal year ended October 31, 2004, and written
representations from certain reporting persons that no other reports were
required to be made by those persons, the Company believes that, except as
disclosed below, its officers, directors and 10% Shareholders have complied with
all Section 16(a) requirements for the fiscal year ended October 31, 2004.
Timothy S. Durham, the Company's Chief Executive Officer, was late in filing two
Form 4s to report his acquisition of additional partnership shares of Obsidian
Capital Partners, which increased his pecuniary interest in the common shares of
the Company held by Obsidian Capital Partners. Mr. Durham did, however,
previously report that all holdings of the Company's common shares held by
Obsidian Capital Partners were indirectly held by him.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 76
|------------------------------------ | -------------- | -------

ITEM 11.    EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

The following table
sets forth certain information concerning the compensation paid or accrued by the Company
for services rendered during the Companys past three fiscal years ended October 31
by the Chief Executive Officer and each of the Companys other most highly
compensated executive officers whose total annual compensation for fiscal 2004, based on
salary and bonus earned during fiscal 2004, exceeded $100,000 (the Named Executive
Officers). (No other executive officers of the Company received a salary and bonus
for fiscal 2004 in excess of $100,000 so as to require their inclusion in the table.)

|Annual Compensation                                             
|----------------------------------------------------------------
|
|Timothy S. Durham, Chief Executive Officer                      
|                                                                
|                                                                
|                                                                
|Terry G. Whitesell, President, Chief Operating Officer          
|                                                                
|                                                                
|                                                                
|Jeffrey W. Osler, Executive Vice President, Secretary, Treasurer
|                                                                
|                                                                
|(1) Other compensation is a total annual car allowance.         

OPTION/SAR GRANTS IN LAST FISCAL YEAR

No grants
were made to the Companys Chief Executive Officer or other Named Executive
Officers during fiscal 2004 pursuant to the Companys 1999 Stock Option
Plan or the Companys 2002 Long Term Incentive Plan.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

No options
have been granted during fiscal 2004 to the Companys Chief Executive
Officer or other Named Executive Officers.

LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR

No awards
were made in fiscal 2004 to the Chief Executive Officers of other Named
Executive Officers under any long-term incentive plan.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 77
|------------------------------------ | -------------- | -------

COMPENSATION OF DIRECTORS

Directors who
are not employees of the Company are entitled to a board meeting attendance fee
of $750, plus reimbursement of expenses for each meeting attended.

EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS

The Company does not
have an employment agreement with its Chief Executive Officer or other Named Executive
Officers.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.

The following table
sets forth information with respect to beneficial ownership of common stock as of January
1, 2005, by (i) all persons known to the Company to be the beneficial owner of five
percent or more of the common stock, (ii) each director of the Company, (iii) the Chief
Executive Officer and each of the Named Executive Officers; and (iv) all Company directors
and executive officers as a group. This table does not include shares of common stock that
may be purchased pursuant to options not exercisable within 60 days of the record date.
All persons listed have sole voting and investment power with respect to their shares
unless otherwise indicated.

Common Stock

|Name and Address of
Beneficial Owner | Number of
Shares
Beneficially
Owned | Percentage of
Shares
Beneficially
Owned
|------------------------------------ | ----------------------------------- | ---------------------------------------
|Executive Officers and               |                                     |                                        
|Directors:                          
|Timothy S. Durham(1)                 | 2,322,880                           | 74.7%                                  
|D. Scott McKain                      | 16,202                              | *                                      
|Jeffrey W. Osler(2)                  | 1,824,036                           | 58.7%                                  
|Terry G. Whitesell(3)                | 1,945,751                           | 62.6%                                  
|John A. Schmit                       | ---                                 | ---                                    
|Daniel S. Laikin                     | ---                                 | ---                                    
|D. Bruce Johnston                    | ---                                 | ---                                    
|All current officers and            
|directors as a group (9             
|persons)                             | 2,647,826                           | 85.2%                                  
|                                    
|Other 5% Owners:                    
|Fair Holdings(4)                     | 241,039                             | 7.8%                                   
|Huntington Capital                   |                                    
|Investment Company(5)                | 154,483                             | 5.0%                                   
|Obsidian Capital Partners(6)         | 1,807,492                           | 58.1%                                  
|CEDE & Co.(7)                        | 279,703                             | 9.0%                                   

*less than one percent

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 78
|------------------------------------ | -------------- | -------

|(1) | Includes 146,762 shares of common stock directly owned by Mr. Durham; 41,767
shares held by Diamond Investments, LLC, for which Mr. Durham serves as Managing
Member and for which shares Mr. Durham may be deemed to share voting and
dispositive power; 1,807,492 shares of common stock over which Mr. Durham shares
voting and dispositive power and that may be deemed to be beneficially owned by
Mr. Durham due to his position as a managing member of Obsidian Capital Company,
LLC, which is the general partner of Obsidian Capital Partners, which directly
owns such shares; 241,039 shares of common stock over which Mr. Durham shares
voting and dispositive power and that may be deemed to be beneficially owned by
Mr. Durham due to his position as an executive officer and shareholder of Fair
Holdings which directly owns such shares; 42,639 shares held by FIB Firsttrust,
for which Mr. Durham serves as Trustee and for which shares Mr. Durham may be
deemed to share voting and dispositive power; 42,639 shares held by Firsttrust
Indiana, for which Mr. Durham serves as Trustee and for which shares Mr. Durham
may be deemed to share voting and dispositive power; and 543 shares of common
stock over which Mr. Durham shares voting and dispositive power and that may be
deemed to be beneficially owned by Mr. Durham due to his position as a managing
member of Durham Whitesell and Associates, LLC, which directly owns such shares.
The address of Mr. Durham is 111 Monument Circle, Suite 4800, Indianapolis,
Indiana 46204.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 16,544 shares of common stock directly owned by Mr. Osler; and
1,807,492 shares of common stock over which Mr. Osler shares voting and
dispositive power and that may be deemed to be beneficially owned by Mr. Osler
due to his position as a managing member of Obsidian Capital Company, LLC, which
is the general partner of Obsidian Capital Partners, which directly owns such
shares. The address of Mr. Osler is 111 Monument Circle, Suite 4800,
Indianapolis, Indiana 46204.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes 137,717 shares of common stock directly owned by Mr. Whitesell;
1,807,492 shares of common stock over which Mr. Whitesell shares voting and
dispositive power and that may be deemed to be beneficially owned by Mr.
Whitesell due to his position as a managing member of Obsidian Capital Company,
LLC, which is the general partner of Obsidian Capital Partners, which directly
owns such shares; and 543 shares of common stock over which Mr. Whitesell shares
voting and dispositive power and that may be deemed to be beneficially owned by
Mr. Whitesell due to his position as a managing member of Durham Whitesell and
Associates, LLC, which directly owns such shares. The address of Mr. Whitesell
is 111 Monument Circle, Suite 4800, Indianapolis, Indiana 46204.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Consists of 241,039 shares of common stock directly owned by Fair Holdings.
The address of Fair Holdings is 111 Monument Circle, Suite 4800, Indianapolis,
Indiana 46204.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Consists of 154,483 shares of common stock directly owned by Huntington
Capital Investment Company. The address of Huntington Capital Investment Company
is 41 South High Street, 9th Floor, Columbus, Ohio 43215.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Consists of 1,807,492 shares of common stock directly owned by Obsidian
Capital Partners. Voting and dispositive power over the shares may be deemed to
be held by Obsidian Capital Partners, Obsidian Capital Company, LLC and the
managing members of Obsidian Capital Company LLC, which include Messrs. Durham,
Whitesell and Osler. The address of Obsidian Capital Partners is 111 Monument
Circle, Suite 4800, Indianapolis, Indiana 46204.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Consists of 279,703 shares of common stock directly owned by CEDE & Co. The
address of CEDE & Co. is Box 222 Bowling Green Station, New York , NY 10004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 79
|------------------------------------ | -------------- | -------

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

All dollar amounts in
this Item 13 are in thousands (except for share and per share information).

The Company subleases its
headquarters space from Fair Holdings under a sublease with a monthly rental payment of
$4,498.

DW Trailer, a company
owned by Messrs. Durham and Whitesell, has leased a forklift to Danzer under a 38 month
lease at $1 per month.

On March 28,
2003, Fair Holdings, a company controlled by Mr. Durham, acquired the line of credit and
term debt due to the senior lender of Danzer in the amount of $1,488 under an assignment
and assumption agreement. The maturity date of the line of credit included in the
assignment and assumption agreement was extended to April 2006, maximum borrowings under
the line of credit were increased from $1,000 to $1,500, and the debt covenants required
by the senior lender were waived through the end of the term. In July 2004 the Fair
Holdings line of credit with Danzer was amended to increase the total availability from
$1,500 to $3,000. All other terms of the agreement will continue as stated in the original
and amended agreement dated August 15, 2001 which includes interest at LIBOR plus 3.2%. No
late fees have been assessed by Fair Holdings for this loan.

In February and March,
2004, Obsidian Enterprises secured an additional financial commitment from Fair Holdings
to provide, as needed, additional borrowings under a line of credit agreement from $8,000
to $15,000. The line of credit arrangement expires on January 1, 2007 at which time the
total principal and interest is due and payable. No late fees were incurred or charged.
Fair Holdings is controlled by Mr. Durham.

The following
summarizes the current related party loans between the Company, Fair Holdings and DC
Investments:

Obsidian Enterprises

|                                                                              | Debt Outstanding
at October 31,
2004
|----------------------------------------------------------------------------- | ------------------------------------
|                                                                             
|Line of credit issued by Fair Holdings, maximum borrowing equal to $15,000,   | $10,815                             
|interest payable monthly at 10%, due January 2007, collateralized by all     
|assets of Obsidian Enterprises and personally guaranteed by certain officers 
|                                                                             
|Note payable to Fair Holdings, interest payable monthly at 15%, balloon      
|payment due March 2007, personally guaranteed by certain officers             | $     934                           
|                                                                             
|Danzer                                                                       
|                                                                             
|Line of credit issued by Fair Holdings, maximum borrowing equal to $3,000,   
|interest payable monthly at the LIBOR Daily Floating Rate plus 3.2% (5.187%  
|at October 31, 2004), due April 2006. Collateralized by substantially all    
|assets of Danzer and guaranteed by Obsidian Enterprises                       | $  2,253                            
|                                                                             
|Note payable to Fair Holdings, requires monthly principal installments of $6,
|interest accrues at the LIBOR Daily Floating Rate plus 3.2% (5.187% at       
|October 31, 2004), due April, 2006. Collateralized by substantially all      
|assets of Danzer and guaranteed by Obsidian Enterprises                       | $     894                           
|                                                                             
|Pyramid, DW Leasing, DC Investments Leasing and Obsidian Leasing             
|                                                                             
|Notes payable to Fair Holdings, repayable in monthly installments of interest
|ranging from 10% to 14% through October 2012 and applicable balloon payments 
|through December 2012                                                         | $  4,669                            
|                                                                             
|US Rubber                                                                    
|                                                                             
|Note payable to DC Investments, interest payable monthly at 15%, balloon     
|payment due March 2007, subordinate to bank debt                              | $     700                           

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 80
|------------------------------------ | -------------- | -------

The notes to
DC Investments and Fair Holdings did not incur any additional fees including
late fees. In addition to the notes the Company has an account payable to DC
Investments and Fair Holdings totaling $1,181.

Management
believes that the transactions described in this Item were on terms no less
favorable to the Company and its subsidiaries than would have been the case for
transactions with unrelated third parties. Please see Note 15 to the Notes to
Consolidated Financial Statements for additional information regarding related
party transactions which is incorporated by reference into this Item
13.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

McGladrey
& Pullen, LLP (McGladrey & Pullen) served as the
Companys independent auditors for 2004 and 2003. The services performed by
McGladrey & Pullen in this capacity included conducting an examination in
accordance with generally accepted auditing standards of, and expressing an
opinion on, the Companys consolidated financial statements. The Board of
Directors has selected McGladrey & Pullen as the independent public
accountants for the year ending October 31, 2005.

Audit Fees

McGladrey &
Pullens aggregate fees billed for professional services rendered in connection with
the audit and review of Forms 10-Q and all other SEC regulatory filings were $ 373, 217
for the 2004 fiscal year, and $217,850 for the 2003 fiscal year. The Company has paid and
is current on all billed fees.

Audit-Related Fees

McGladrey &
Pullens fees for audit related services rendered in connection with the audit of a
subsidiarys defined contribution plan were $16,662 for the 2004 fiscal year and
$7,035 for the 2003 fiscal year. The Company has paid and is current on all billed fees.

Tax Fees

McGladrey & Pullen
did not render any tax compliance advice or planning services for the 2004 and 2003 fiscal
years.

The Company has paid
and is current on all billed fees.

All Other Fees

McGladrey & Pullen
did not render any management advisory services for the 2004 and 2003 fiscal years.

Audit Committee

The Companys
Audit Committee pre-approves 100% of audit and audit related services with the exception
of tax, benefit and other management advisory services.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 81
|------------------------------------ | -------------- | -------

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)        
The following documents are filed as part of this Form 10-K:

| | 1. | Consolidated Financial Statements of
Obsidian Enterprises, Incorporated and Subsidiaries:
Independent Auditors Report
Consolidated Balance Sheets  October 31, 2004 and 2003
Consolidated Statements of Operations  Years ended October 31, 2004, 2003, and 2002
Consolidated Statements of Stockholders Equity (Deficit) and Comprehensive Loss
 Years ended October 31, 2004, 2003, and 2002 
Consolidated Statements of Cash Flows  Years ended October 31, 2004, 2003, and 2002
Notes to Consolidated Financial Statements.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Consolidated Financials Statement Schedule of Obsidian Enterprises, Incorporated and Subsidiaries:
Schedule II Valuation and Qualifying of Accounts  Years ended October 31,
2004, 2003, and 2002
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All other schedules are omitted
because they are not applicable or because the required information is included
in the consolidated financial statements or the notes thereto.

(b)        Exhibits:

See Exhibit Index

(c)        Additional Financial
Statements:

The individual financial
statements of the registrants subsidiaries have been omitted since the
registrant is primarily an operating company and all subsidiaries included in
the consolidated financials statements are wholly-owned subsidiaries.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 82
|------------------------------------ | -------------- | -------

SIGNATURES

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

|Dated:  February 14, 2005 | OBSIDIAN ENTERPRISES, INC.
By /s/ Timothy S. Durham
Timothy S. Durham
Chief Executive Officer
|------------------------- | ---------------------------------------------------------------------------------------------

In accordance
with the Exchange Act, this report was signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.

|Dated:  February 14, 2005 | /s/ Timothy S. Durham
Timothy S. Durham
Chief Executive Officer (Principal Executive Officer)
and Chairman of the Board and Director
|------------------------- | ------------------------------------------------------------------------------------------------------------------------------------

|Dated:  February 14, 2005 | /s/ Rick D. Snow
Rick D. Snow, Executive Vice President/Chief Financial
Officer (Principal Financial and Accounting Officer)
|------------------------- | ----------------------------------------------------------------------------------------------------------------------------

|Dated:  February 14, 2005 | /s/ Jeffrey W. Osler
Jeffrey W. Osler, Executive Vice President, Secretary
and Treasurer and Director
|------------------------- | -----------------------------------------------------------------------------------------------------

|Dated:  February 14, 2005 | /s/ Terry G. Whitesell
Terry G. Whitesell, Director
|------------------------- | ---------------------------------------------------

|Dated:  February 14, 2005 | /s/ D. Bruce Johnston
D. Bruce Johnston, III, Director
|------------------------- | ------------------------------------------------------

|Dated:  February 14, 2005 | /s/ John A. Schmit
John A. Schmit, Director
|------------------------- | -------------------------------------------

|Dated:  February 14, 2005 | /s/ D. Scott McKain
D. Scott McKain, Vice Chairman and Director
|------------------------- | ---------------------------------------------------------------

|Dated:  February 14, 2005 | /s/ Daniel S. Laikin
Daniel S. Laikin, Director
|------------------------- | -----------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 83
|------------------------------------ | -------------- | -------

EXHIBIT INDEX

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|3.1 |  | Amended Certificate of Incorporation |  | Incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration
Statement on Form S-4 filed on December 17, 2003
|--- |  | ------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Certificate of Designations, Preferences, Rights and Limitations of Series C
Preferred Stock |  | Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|--- |  | -------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Amended Certificate of Designations, Preferences, Rights and Limitations of
Series C Preferred Stock |  | Incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration
Statement on Form S-4 filed on December 17, 2003
|--- |  | ---------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Certificate of Designations, Preferences, Rights and Limitations of Series D
Preferred Stock |  | Incorporated by reference to Exhibit 3.4 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|--- |  | -------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Amended Certificate of Designations, Preferences, Rights and Limitations of
Series D Preferred Stock |  | Incorporated by reference to Exhibit 3.4(b) to Amendment No. 1 to the
Registration Statement on Form S-4 filed on December 17, 2003
|--- |  | ---------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------

|3.6 |  | Bylaws of the Registrant (Restated Effective as of September 27, 2002) |  | Incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|--- |  | ---------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Registration Rights Agreement, dated June 21, 2001 |  | Incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|--- |  | -------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Amendment and Joinder to Registration Rights Agreement, dated July 27, 2001 |  | Incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|--- |  | --------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

|4.3 |  | 8.00% Convertible Debenture Issued by Registrant on July 19, 2001 to HSBC Global
Custody Nominee Due July 19, 2008 |  | Incorporated by reference to Exhibit 2 to Schedule 13D filed September 20, 2001
by Russell Cleveland, Renaissance Capital Group, Inc.
|--- |  | ------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 84
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|4.4 |  | 8.00% Convertible Debenture Issued by Registrant on July 19, 2001 to Renaissance
US Growth & Income Trust PLC Due July 19, 2008 |  | Incorporated by reference to Exhibit 3 to Schedule 13D filed September 20, 2001
by Russell Cleveland, Renaissance Capital Group, Inc.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------

|4.5 |  | Convertible Loan Agreement, dated July 19, 2001, Among Registrant, BFSUS Special
Opportunities Trust PLC, Renaissance US Growth & Income Trust PLC and
Renaissance Capital Group, Inc. |  | Incorporated by reference to Exhibit 4.5 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

|10.1 |  | 2001 Long Term Incentive Plan* |  | Incorporated by reference to Appendix E to the Registrant's Proxy Statement
filed on September 18, 2001
|---- |  | ------------------------------ |  | -------------------------------------------------------------------------------------------------------

|10.2 |  | Management Agreement, dated June 16, 2001, between Pyramid, Inc. and D.W.
Leasing |  | Incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | --------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.3 |  | Promissory Note, dated June 1, 2001, from Obsidian Capital Company, LLC to U.S.
Rubber Reclaiming, Inc. |  | Incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | ------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Purchase Agreement, dated June 5, 2001, between United Expressline, Inc., United
Acquisition, Inc., J.J.M. Incorporated and the Shareholders of United
Expressline, Inc. and J.J.M. Incorporated |  | Incorporated by reference to Exhibit 10.13 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Promissory Note, dated July 27, 2001, from United Acquisition, Inc. to United
Expressline, Inc. |  | Incorporated by reference to Exhibit 10.14 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | ----------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Credit Agreement, dated July 27, 2001, between United Acquisition, Inc. and
First Indiana Bank |  | Incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | ---------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Loan and Security Agreement, dated January 21, 2000, between Danzer Industries,
Inc. and Banc of America Commercial Finance Corp. |  | Incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Subordinated Secured Promissory Note, dated December 29, 2000, from USRR
Acquisition Corp. to SerVaas, Inc. |  | Incorporated by reference to Exhibit 10.19 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | ----------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Form of Installment Loan from Edgar County Bank & Trust Co. to DW Leasing
Company, LLC, Related Documents and Schedule Identifying Material Details |  | Incorporated by reference to Exhibit 10.21 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 85
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|10.10 |  | Loan Agreement, dated December 10, 1999, between Old National Bank and DW
Leasing Company, LLC, and Related Documents |  | Incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|----- |  | --------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Form of Promissory Note from DW Leasing Company, LLC to Star Financial Bank,
Related Documents and Schedule Identifying Material Details |  | Incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Master Lease Agreement, dated May 17, 2000, between Old National Bank and DW
Leasing Company, LLC, and Related Documents |  | Incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|----- |  | ------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Loan Agreement, dated June 1, 2000, between DW Leasing Company LLC and Regions
Bank and Security Agreement |  | Incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|----- |  | ---------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Business Loan Agreement (Asset Based), dated August 15, 2001, between Danzer
Industries, Inc. and Bank of America, N.A. |  | Incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|----- |  | ----------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.15 |  | 1999 Stock Option Plan* |  | Incorporated by reference to Exhibit 10.29 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2001
|----- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.16 |  | Assignment and Assumption Agreement, dated February 20, 2002, between DW
Leasing, LLC and Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2002
|----- |  | ------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Replacement Promissory Note, dated February 26, 2002, from Obsidian Enterprises,
Inc. to Fair Holdings, Inc. in the principal amount of $700,000 due March 1,
2007 |  | Incorporated by reference to Exhibit 10.35 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Promissory Note from Obsidian Enterprises, Inc. in favor of Fair Holdings, Inc.
in the principal amount of $570,000 due February 1, 2007 |  | Incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2002
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Subscription Agreement of Fair Holdings, Inc. for 186,324 shares of Series C
Preferred Stock |  | Incorporated by reference to Exhibit 10.6 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2002
|----- |  | -------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Subscription Agreement of Obsidian Capital Partners, LP for 402,906 shares of
Series C Preferred Stock |  | Incorporated by reference to Exhibit 10.7 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2002
|----- |  | ------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 86
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|10.21 |  | Second Amendment to Credit Agreement, dated August 28, 2002, between United
Expressline, Inc. and First Indiana Bank, N.A. |  | Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q filed for the Quarter Ended July 31, 2002
|----- |  | -------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Promissory Note, dated January 17, 2002, from DW Leasing Company, LLC, to Fair
Holdings, Inc. |  | Incorporated by reference to Exhibit 10.40 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | --------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Promissory Note, dated September 3, 2002, from Obsidian Enterprises, Inc., to
Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.41 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Promissory Note, dated January 9, 2002, from Obsidian Enterprises, Inc. to Fair
Holdings, Inc. |  | Incorporated by reference to Exhibit 10.42 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ---------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Credit Agreement, dated October 31, 2002, between Obsidian Leasing Company, Inc.
and Old National Bank, N.A. and Related Documents |  | Incorporated by reference to Exhibit 10.43 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.26 |  | Stock Purchase Agreement, dated July 27, 2001, between Danzer Corporation and
The Huntington Capital Investment Company |  | Incorporated by reference to Exhibit A to the Schedule 13G filed by The
Huntington Capital Investment Company on August 6, 2001
|----- |  | ----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | Loan Agreement, dated September 24, 2002, between Edgar County Bank & Trust Co.
and Obsidian Leasing Company, Inc. |  | Incorporated by reference to Exhibit 10.45 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------

|10.28 |  | Term Promissory Note, dated September 26, 2002, from Obsidian Leasing Company,
Inc. to Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.46 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ---------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.29 |  | Note Purchase Agreement, dated July 27, 2001, between United Acquisition, Inc.
and The Huntington Capital Investment Company |  | Incorporated by reference to Exhibit 10.47 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Limited Forbearance Agreement, dated October 14, 2002, among Danzer Industries,
Inc., Obsidian Enterprises, Inc. and Bank of America, N.A. |  | Incorporated by reference to Exhibit 10.48 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Revolving Credit, Term Loan and Security Agreement, dated October 25, 2002,
between PNC Bank, N.A. and U.S. Rubber Reclaiming, Inc. and Related Documents |  | Incorporated by reference to Exhibit 10.49 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 87
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|10.32 |  | Term Promissory Note, dated October 31, 2002, from DW Leasing Company, LLC to
Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.50 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.33 |  | Rental Agreement, dated October 1, 2002, between DW Trailer, LLC and Danzer
Industries, Inc. |  | Incorporated by reference to Exhibit 10.51 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | -------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.34 |  | Commercial Equipment Lease Agreement, dated August 1, 2002, between Fair
Holdings, Inc. and Danzer Industries, Inc. |  | Incorporated by reference to Exhibit 10.52 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.35 |  | Commercial Equipment Lease Agreement, dated August 1, 2002, between Fair
Holdings, Inc. and Obsidian Enterprises, Inc. |  | Incorporated by reference to Exhibit 10.53 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2002
|----- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------

|10.36 |  | Promissory Term Note, dated November 18, 2002, from Obsidian Leasing Company,
Inc. to Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | --------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.37 |  | Third Amendment to Credit Agreement, dated December 26, 2002, between United
Expressline, Inc. and First Indiana Bank, N.A. |  | Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.38 |  | Credit Agreement, dated December 18, 2002, between DC Investments Leasing, LLC
and First Indiana Bank, N.A. and Related Documents |  | Incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.39 |  | Term Promissory Note, dated January 3, 2003, from Obsidian Leasing, Inc. to Fair
Holdings, Inc. |  | Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | ----------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.40 |  | Stock Purchase Warrant, dated January 24, 2003, issued by Obsidian Enterprises,
Inc. to Frost National Bank, Custodian, FBO Renaissance US Growth Investment
Trust PLC Trust No. WOO740100 |  | Incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.41 |  | Stock Purchase Warrant, dated January 24, 2003, issued by Obsidian Enterprises,
Inc., to HSBC Global Custody Nominee (UK) Limited, FBO BFS US Special
Opportunities Trust PLC |  | Incorporated by reference to Exhibit 10.6 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 88
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|10.42 |  | Second Limited Forbearance Agreement, dated February 28, 2003, between Danzer
Industries, Inc. and Obsidian Enterprises, Inc. |  | Incorporated by reference to Exhibit 10.7 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.43 |  | Form of Letter Amending Stock Options and Schedule Identifying Material Details* |  | Incorporated by reference to Exhibit 10.8 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | -------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.44 |  | First Amendment to Promissory Note, dated January 9, 2003 |  | Incorporated by reference to Exhibit 10.9 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | --------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|10.45 |  | Sublease, effective as of January 1, 2003, between Fair Holdings, Inc. and
Obsidian Enterprises, Inc. |  | Incorporated by reference to Exhibit 10.10 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | ----------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------

|10.46 |  | Commercial Equipment Lease Agreement, commencing November 20, 2002, between Fair
Holdings, Inc. and United Expressline, Inc. |  | Incorporated by reference to Exhibit 10.11 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended January 31, 2003
|----- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------

|10.47 |  | Assignment Agreement, dated May 12, 2003, between Obsidian Enterprises, Inc. and
Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2003
|----- |  | ---------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|10.48 |  | Assignment of Note and Other Loan Documents, dated March 28, 2003, between Bank
of America, N.A. and Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2003
|----- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------

|10.49 |  | First Amendment to Business Loan Agreement and Promissory Note (Line of Credit),
dated March 28, 2003, between Danzer Industries, Inc. and Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2003
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|10.50 |  | Second Amendment to Promissory Note (Line of Credit), dated April 1, 2003,
between Obsidian Enterprises, Inc. and Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 30, 2003
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------

|10.51 |  | Employment Agreement, dated April 30, 2003, between Obsidian Enterprises, Inc.
and Rick D. Snow* |  | Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended July 31, 2003
|----- |  | ------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 89
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|10.52 |  | Third Amendment to Promissory Note (Line of Credit), dated February 2, 2004,
between Obsidian Enterprises, Inc. and Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.70 on the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2003
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------

|10.53 |  | Term Promissory Note, dated September 19, 2003, from DC Investments Leasing, LLC
to Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.71 on the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2003
|----- |  | ------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------

|10.54 |  | Promissory Note, dated August 31, 2003, from DC Investments, Inc. to Fair
Holdings, Inc. |  | Incorporated by reference to Exhibit 10.72 on the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2003
|----- |  | ---------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------

|10.55 |  | Second Amendment to Revolver Promissory Note, dated September 31, 2003, between
Danzer Industries, Inc. and Fair Holdings, Inc. |  | Incorporated by reference to Exhibit 10.73 on the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2003
|----- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------

|10.56 |  | Stock Purchase Warrant, dated February 9, 2004, issued by Obsidian Enterprises,
Inc. to HSBC Global Custody Nominee (UK) Limited, FBO BFS US Special
Opportunities Trust PLC |  | Incorporated by reference to Exhibit 10.74 on the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2003
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------

|10.57 |  | Stock Purchase Warrant, dated February 9, 2004, issued by Obsidian Enterprises,
Inc. to Frost National Bank, Custodian, FBO Renaissance US Growth Investment
Trust PLC, Trust No. W00740100 |  | Incorporated by reference to Exhibit 10.75 on the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2003
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------

|10.58 |  | Third Amendment to Revolver Promissory Note by and among Danzer Industries, Inc.
and Fair Holdings, Inc., dated May 1, 2004 |  | Incorporated by reference to Exhibit 10.1 on the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended July 31, 2004
|----- |  | --------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------

|10.59 |  | Credit Agreement, dated as of April 28, 2004, between Classic Manufacturing
Acquisition Corp. and National City Bank of Indiana |  | Incorporated by reference to Exhibit 10.1 on the Registrant's Form 8-K dated May
14, 2004
|----- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------

|10.60 |  | Facility Lease for Pyramid Coach, Inc. with Fergusen Properties, dated November
16, 2004 |  | Attached
|----- |  | ---------------------------------------------------------------------------------------- |  | --------

|10.61 |  | Facility Lease for Classic Manufacturing, Inc. with Roost Leasing, dated April
27, 2004 |  | Attached
|----- |  | --------------------------------------------------------------------------------------- |  | --------

|10.62 |  | Amended Credit Agreement, dated December 28, 2004, between Classic Manufacturing
Acquisition Corp. and National City Bank of Indiana |  | Attached
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | --------

|10.63 |  | Third Amendment to Revolver Promissory Note by and among Danzer Industries, Inc.
and Fair Holdings, Inc., dated July 1, 2004 |  | Attached
|----- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | --------

|10.64 |  | Second Amendment to Promissory Note by and among Obsidian Leasing Company, Inc.
and Fair Holdings, Inc., dated August 31, 2004 |  | Attached
|----- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | --------

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|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 90
|------------------------------------ | -------------- | -------

|ExhibitNo. | Description | Incorporated byReference/Attached
|---------- | ----------- | ---------------------------------

|10.65 |  | Second Amendment to Note Purchase Agreement between United Expresslines and The
Huntington Capital Company |  | Attached
|----- |  | ---------------------------------------------------------------------------------------------------------- |  | --------

|14 |  | Code of Ethics for Chief Executive Officer and Senior Financial Officers |  | Incorporated by reference to Exhibit 14 to the Registrant's Annual Report on
Form 10-K for the Year Ended October 31, 2004
|-- |  | ------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------

|21 |  | List of Subsidiaries |  | Attached
|-- |  | -------------------- |  | --------

|31.1 |  | Sarbanes-Oxley Act Section 302 Certification |  | Attached
|---- |  | -------------------------------------------- |  | --------

|31.2 |  | Sarbanes-Oxley Act Section 302 Certification |  | Attached
|---- |  | -------------------------------------------- |  | --------

|32 |  | Sarbanes-Oxley Act Section 906 Certification |  | Attached
|-- |  | -------------------------------------------- |  | --------

*Indicates Exhibits that describe or evidence management contracts or
compensatory plans or arrangements required to be filed as Exhibits to this
Annual Report on Form 10-K.

---

|OBSIDIAN ENTERPRISES, INC. FORM 10-K | 2004 FORM 10-K | PAGE 91
|------------------------------------ | -------------- | -------