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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K [X]
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934or
 [  ]
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the transition period from  to
 Commission File Number 0-9385 BULL RUN CORPORATION  Georgia
(State or other jurisdiction
incorporation or organization)
    
    58-2458679
(I.R.S. Employer
Identification No.)4370 Peachtree Road, N.E., Atlanta, GA
(Address of principal executive offices)
    
    30319
(Zip Code)
 Registrants telephone number, including area code (404) 266-8333 Securities registered pursuant to Section 12(b) of the Act: Title of each class: None
    
    Name of each exchange on which registered: N/A
 Securities registered pursuant to Section 12(g) of the Act:
    
    Common Stock, $.01 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.  [X]  Yes  [   ]  No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (§229.405 of this chapter) 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).  [   ]  Yes  [X]  No The aggregate market value of the voting and non-voting common equity held by
non-affiliates was $1,094,623 based on the price at which Bull Runs common
stock was last sold on February 27, 2004, the last business day of Bull Runs
most recently completed second fiscal quarter, as reported on the Pink Sheets,
a centralized quotation service for OTC securities. The number of shares
outstanding of Bull Runs common stock as of November 22, 2004 was 6,413,879. DOCUMENTS INCORPORATED BY REFERENCE Documents
    
    Form 10-K ReferencePortions of the Definitive Proxy Statement for
the 2004 Annual Meeting of Shareholders,
to be filed not later than December 29, 2004
    
    Part II, Item 5 and Part III,
Items 10, 11, 12, 13 and 14




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BULL RUN CORPORATION
FORM 10-K
For the fiscal year ended August 31, 2004 INDEX PagePART IItem 1
    
    Business
    
    
    3Item 2
    
    Properties
    
    
    6Item 3
    
    Legal Proceedings
    
    
    6Item 4
    
    Submission of Matters to a Vote of Securities Holders
    
    
    7PART IIItem 5
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    8Item 6
    
    Selected Financial Data
    
    
    9Item 7
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 7A
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 8
    
    Financial Statements and Supplementary Data
    
    
    32Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    63Item 9A
    
    Controls and Procedures
    
    
    63Item 9B
    
    Other Information
    
    
    63PART IIIItem 10
    
    Directors and Executive Officers of the Registrant
    
    
    63Item 11
    
    Executive Compensation
    
    
    64Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    64Item 13
    
    Certain Relationships and Related Transactions
    
    
    64Item 14
    
    Principal Accountant Fees and Services
    
    
    64PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    65Signatures
    
    
    68Ex-21Ex-23.1Ex-31.1Ex-31.2Ex-32.1Ex-32.2
  2




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PART I 
 Item 1. Business General Bull Run Corporation (Bull Run or the Company), based in Atlanta, Georgia,
is a sports and affinity marketing, printing and publishing, and association
management company through its sole operating business, Host Communications,
Inc. (Host), acquired in December 1999 (the Host-USA Acquisition). Hosts
Collegiate Marketing and Production Services business segment provides sports
marketing and production services to a number of collegiate conferences and
universities, and on behalf of the National Collegiate Athletic Association
(NCAA). Hosts Association Management Services business segment provides
various associations with services such as member communication, recruitment
and retention, conference planning, Internet web site management, marketing and
administration. In August 2004, the Company announced its intent to suspend and sell its
Affinity Events business segment due to the segments historical operating
losses and the Companys intention to focus on its collegiate, printing and
publishing and association management businesses. As a result, the Affinity
Events segment has been reflected in the Companys financial statements as a
discontinued operation. In January 2004, the Company determined that that it would not be engaged in
providing consulting services to Gray Television, Inc. (Gray), a business
whose executive officers are also executive officers of the Company, or any
other party in the future. Previously, the Company periodically provided
consulting services to Gray in connection with Grays acquisitions and
dispositions. As a result, the Consulting segment has likewise been reflected
in the Companys financial statements as a discontinued operation. For financial information for each of our business segments described below,
see Note 19 of the Notes to Consolidated Financial Statements appearing in Item
8 Financial Statements and Supplemental Data. Collegiate Marketing and Production Services Segment Collegiate Sports The Company, through Host, provides sports and marketing
services for a number of NCAA Division I universities and athletic conferences.
The agreements relating to the services rendered by the Company vary by school
or conference, but typically provide for some or all of the following: (a) the
production of radio and television broadcasts of certain athletic events and
coaches shows; (b) sale of advertising during radio and television broadcasts
of games and coaches shows; (c) sale of media advertising and venue signage;
(d) sale of official sponsorship rights to corporations; (e) publishing,
printing and vending of game-day and other programs; (f) creative design of
materials, video production, and construction and management of Internet web
sites; and (g) coaches endorsements and pay-per-view telecasts. Institutions
and organizations with which the Company has agreements are the University of
Arizona, Boston College, Florida State University, the University of Kentucky,
the University of Michigan, Mississippi State University, Oklahoma State
University, the University of Tennessee, the University of Texas, the Metro
Atlantic Athletic Conference and the Southeastern Conference. The Company also
has marketing rights to the SBC Red River Shootout featuring the University of
Texas and University of Oklahomas annual football rivalry, and the Lone Star
Showdown series of games featuring Texas and Texas A&M University. The Company
has published Dave Campbells Texas Football Magazine and has had marketing
rights to an annual series of football games that features six prominent Texas
high school teams. Contracts with institutions and organizations for marketing and production
services are generally three to five years in length and require the Company to
pay to the institution or organization: (a) 3




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an annual guaranteed rights fee; (b) a percentage of revenues or profits derived
from the relationship; or (c) a combination thereof. NCAA Group Under an agreement with CBS Sports (the Host-CBS Contract), the
Company has the exclusive rights to produce, distribute and sell all of the
approximately 150 game programs and publications in connection with 87 NCAA
championships, including the Mens and Womens Final Four Division I basketball
championships. The Host-CBS Contract expires in 2005, however the Company is
currently negotiating with CBS a three-year extension of these printing and
publishing rights. In addition to the sublicensing rights through CBS Sports, the Company has an
exclusive license with NCAA Football USA, Inc. (NCAA Football), a separate
501(c)(4) entity organized to promote college football. Under the terms of
this agreement, the Company is entitled to retain 40% of all revenues derived
through the sale of corporate sponsorships and all merchandise licensing
associated with the brand. Through its Integrated Media Group, the Company
produces various commercial spots and other media to promote the brand. The
Companys current contract with NCAA Football expires in 2013. Integrated Media Group The Company produces more than 700 publications
annually for a variety of clients, including the NCAA, college football
conferences, universities, and various collegiate associations. The Companys
publications include game programs, media guides, posters and marketing
brochures. The Company also provides high quality printing services for
corporations and non-profit organizations nationwide, consisting of
directories, annual reports, brochures, posters, programs and catalogs. The Company produces television programs, videos, radio broadcasts, commercial
audio and Internet related services, and administers the regional radio
networks of seven NCAA Division I universities and the Southeastern Conference.
The Companys digital recording studios handle network quality soundtracks for
radio, television and multi-image presentations. Association Management Services Segment Under Host, the Association Management Services segment (formerly called
Affinity Management Services), provides a full range of management services to
multi-national associations, including CrossSphere (formerly the National Tour
Association, a nearly 4,000-member global association for the packaged travel
industry, which has been a client since 1974), Quest (the J.D. Edwards software
user group association) and the International SPA Association. The Companys
services include association management, financial reporting, accounting,
marketing, publishing, government lobbying, education, event management,
Internet web site management and membership growth activities. Discontinued Segments The Companys Affinity Events segment formerly produced and managed large
participatory sporting events throughout the United States and Canada. In
connection with these events, the Company provided professional marketing and
management services to corporations. The Company organized and promoted the
events, sold national, regional and local sponsorships and advertising, and
generated merchandise sales. Sponsors and advertisers received, among other
benefits, on-site consumer interactive opportunities, print and other media
advertising, and signage. Events tours operated under the Affinity Events
segment included the Hoop-It-Up® 3-on-3 basketball tour and the 3v3 Soccer
Shootout. The Company also created and executed specific events and
promotional tours for corporate clients, including mobile marketing units. In
August 2004, the Company announced its plan to suspend the Events business and
offer it for sale. 4




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The Company formerly provided consulting services to Gray from time to time.
Consulting services have included transaction search, analysis, due diligence,
negotiation and closing. Fees were
based on a rate of 1% of transaction value. Gray has stated that it does not
intend to engage the Company for such services in the future and during the
fiscal year ended August 31, 2004, the Company determined that it did not
intend to pursue such business from Gray or any other party in the future. The Company formerly marketed and sold heavy-duty dot matrix and thermal
printers under the Datasouth name. The Company sold its Datasouth business
in September 2000. For additional information with respect to discontinued business segments,
including financial reporting as discontinued operations, see Managements
Discussion and Analysis  Discontinued Operations in Item 7 hereof and Note 4
to the Companys Consolidated Financial Statements in Item 8. Sales and Marketing The Company provides advertising and sponsorship opportunities to a variety of
corporate clients having access to all of the Companys vertically-integrated
fulfillment capabilities. The Company also provides sports and marketing
services for a number of NCAA Division I universities and conferences, under
contracts typically ranging from three to five years in length. However, a
renewal of the Companys contract with the University of Kentucky was recently
executed covering a period of ten years. The Company intends to continue to
seek long-term sponsorship agreements. Initial multi-media rights agreements
with universities and conferences generally result from a competitive bid
proposal process. These contracts generally contain provisions for exclusive
negotiation periods of contract renewal terms. The Company employs a full-time national sales and marketing staff and has
dedicated a senior group of sales and marketing executives to identify
potential client relationship opportunities and promote the Companys expertise
and range of services. The Company solicits prospective clients and
advertisers through its sales team and through personal contacts by members of
Hosts management. Each university, athletic conference and association
property has its own dedicated sales team that generally solicits local
sponsorships and advertising, complemented by a national/regional sales team.
Personnel assigned to university and athletic conference properties are
generally located at the particular university campuses or athletic conference
location. Competition As a provider of marketing services, the Company competes with suppliers of
traditional advertising in broadcast and print media as well as with other
marketing service producers and internal marketing programs. The competition
for brand marketing expenditures is very intense and highly fragmented. The
Company believes that certain of its competitors have capabilities and
resources comparable to and in some respects greater than those of the Company;
however, the Company does not believe that there is any other competitor that
currently provides all of the marketing and integrated media services offered
by the Company. The Companys success will depend in part on its ability to
create value-added marketing opportunities that utilize its uniquely wide range
of service capabilities. Seasonality The Companys Collegiate Marketing and Production Services business is
seasonal, in that the majority of the revenue and operating profit is derived
from the period beginning in September and concluding in March, since much of
the revenue derived in this segment is related to events and promotions held
during the collegiate football and basketball seasons. 5




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Employees The Company has approximately 275 full-time employees, of whom, approximately
215 are employed by Host at its Lexington, Kentucky facilities. The
rest of the employees are located in offices throughout the United States supporting
either sales or the collegiate properties. The Company is not a party to any
collective bargaining agreements and believes its relations with its employees
are satisfactory. Executive Officers The information contained in Item 10 hereof is incorporated herein by
reference. Available Information The Companys Internet address is www.bullruncorp.com, where the Company makes
available, free of charge, the Companys annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and any amendments to those
reports, as soon as practicable after such reports are electronically filed
with, or furnished to, the SEC. The SEC reports can be accessed through the
SEC Reports link in the index on the Companys web site. Other information
found on our web site is not part of this or any other report we file with or
furnish to the SEC. The public may also read and copy any materials the Company files with the SEC
at the SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, at www.sec.gov. 
 Item 2. Properties The Companys executive offices are located in Atlanta, Georgia in
approximately 2,000 square feet of office space leased on a month-to-month
basis from Delta Life Insurance Company, a company in which the Companys
Chairman of the Board is an executive officer and principal stockholder. The Company owns seven acres of land and a building with approximately 25,000
square feet of production, office and warehouse space in Lexington, Kentucky
for Hosts Printing and Publishing Divisions. Host also has approximately
41,000 square feet of leased office space in two locations in Lexington
expiring in April 2006; approximately 49,000 square feet of office space under
lease in Dallas, Texas through December 2005, of which, all space except
approximately 1,700 square feet still utilized by the Company is currently
subleased through December 2005; and approximately 4,300 square feet of vacant
office space under lease in New York City through August 2010 which is being
marketed for sublease. Host also has small regional and local field offices
primarily located close to the universities and conferences with which it has
contracts. 
 Item 3. Legal Proceedings Sarkes Tarzian, Inc. v. Bull Run Corporation and Gray Television, Inc. In January 1999, the Company acquired shares of Sarkes Tarzian, Inc.
(Tarzian) common stock, $4.00 par value, (the Tarzian Shares) from the
Estate of Mary Tarzian (the Estate) for $10.0 million. In March 1999, the
Company and Gray entered into an option agreement whereby Gray purchased an
option to acquire the Tarzian Shares from the Company, and in December 2001, 6




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Gray exercised such option, purchasing the Tarzian Shares from the Company for
$10.0 million.
During the option period, the Company received fees from Gray in the aggregate
amount of $3.2 million. On February 12, 1999, Tarzian filed suit in the United States District Court
for the Southern District of Indiana against U.S. Trust Company of Florida
Savings Bank as Personal Representative of the Estate, claiming that Tarzian
had a binding and enforceable contract to purchase the Tarzian Shares from the
Estate. On February 3, 2003, the Court entered judgment on a jury verdict in
favor of Tarzian for breach of contract and awarded Tarzian $4.0 million in
damages. On June 23, 2003, the Court denied the Estates renewed motion
for judgment as a matter of law, and alternatively, for a new trial on the
issue of liability; denied Tarzians motion to amend the judgment to award
Tarzian specific performance of the contract and title to the Tarzian Shares;
and granted Tarzians motion to amend the judgment to include pre-judgment
interest on the $4.0 million damage award. The Estate has appealed the
judgment and the Courts rulings on the post-trial motions and Tarzian has
cross-appealed. The Company cannot predict when the final resolution of this
litigation will occur. On March 7, 2003, Tarzian filed suit in the United States District Court for
the Northern District of Georgia against Gray and the Company for tortious
interference with contract and conversion. The lawsuit alleges that Bull Run
and Gray purchased the Tarzian Shares with actual knowledge that Tarzian had a
binding agreement to purchase the stock from the Estate. The lawsuit seeks
damages in an amount equal to the liquidation value of the interest in Tarzian
that the stock represents, which Tarzian claims to be as much as $75 million,
as well as attorneys fees, expenses, and punitive damages. The lawsuit also
seeks an order requiring Gray and the Company to turn over the Tarzian Shares
to Tarzian and relinquish all claims to the stock. The stock purchase
agreement with the Estate would permit the Company to make a claim against the
Estate in the event that title to the Tarzian Shares is ultimately awarded to
Tarzian. There is no assurance that the Estate would have sufficient assets to
honor any or all of such claim. The Company filed its answer to the lawsuit on
May 14, 2003 denying any liability for Tarzians claims. The Company believes
it has meritorious defenses and intends to vigorously defend the lawsuit. The
Company cannot predict when the final resolution of this litigation will occur. 
 Item 4. Submission of Matters to a Vote of Security Holders The Company did not submit any matter to a vote of security holders during the
quarter ended August 31, 2004. 7




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PART II 
 Item 5. Market for the Registrants Common Equity and Related Stockholder
Matters Market Information The Companys common stock, par value $.01 per share, is traded on the Pink
Sheets (www.pinksheets.com) centralized quotation service for OTC securities.
Until January 2004, it was traded on the Nasdaq SmallCap Market under the
symbol BULL. The following table sets forth for each period indicated the
high and low sale prices for the Companys common stock as reported by the Pink
Sheets, a quotation service for over-the-counter securities, and previously, by
The Nasdaq Stock Market. Such prices reflect interdealer prices without
adjustments for retail markups, markdowns or commissions. Per share amounts
have been retroactively adjusted for a 1-for-10 reverse stock split effective
May 18, 2003. High
    
    LowFiscal Year Ended August 31, 2003First Quarter ended November 30, 2002
    
    $
    7.20
    
    
    $
    4.30Second Quarter ended February 28, 2003
    
    
    10.20
    
    
    
    3.00Third Quarter ended May 31, 2003
    
    
    5.70
    
    
    
    3.00Fourth Quarter ended August 31, 2003
    
    
    3.78
    
    
    
    2.74Fiscal Year Ended August 31, 2004First Quarter ended November 30, 2003
    
    $
    3.61
    
    
    $
    1.01Second Quarter ended February 29, 2004
    
    
    1.80
    
    
    
    .51Third Quarter ended May 31, 2004
    
    
    .65
    
    
    
    .48Fourth Quarter ended August 31, 2004
    
    
    .50
    
    
    
    .18
 Holders As of November 11, 2004, there were 2,193 holders of record of the Companys
common stock. Dividends Since its inception, the Company has not declared or paid a cash dividend on
its common stock. It is the present policy of the Companys Board of Directors
to retain all earnings to finance the development and growth of the Companys
business. The Companys future dividend policy will depend upon its earnings,
capital requirements, financial condition and other relevant circumstances
existing at that time. The Companys bank credit agreement also contains
restrictions on the Companys ability to declare and pay dividends on its
common stock. Equity Plan Compensation Information The information required by the item is set forth under the caption Management
Compensation -Equity Plan Compensation Information in the Companys Proxy
Statement to be filed with the Commission not later than 120 days after the end
of the Companys fiscal year, which is incorporated by reference herein. 8




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Recent Sales of Unregistered Securities On October 8, 2003, certain holders of the Companys subordinated notes
exchanged subordinated debt having an aggregate face amount of approximately
$8.0 million for an aggregate 8,016 shares of the Companys series E
convertible preferred stock (Series E Preferred Stock), including
subordinated notes having an aggregate face amount of approximately $5.3
million acquired by the Companys Chairman immediately prior to the exchange.
Also on October 8, 2003, 1,783 shares of the Companys series D convertible
preferred stock (Series D Preferred Stock) issued to a former director of the
Company and his spouse (both of whom were formerly holders of subordinated notes and parties to
an exchange of their subordinated notes for the shares of Series D Preferred
Stock in the fiscal year ended August 31, 2003) were exchanged for the same
number of shares of Series E Preferred Stock. Each share of the Series E
Preferred Stock is convertible at the holders option into 0.14286 shares of
the Companys common stock beginning one year following the date of issuance of
the Series E Preferred Stock (initially, October 8, 2004). On November 26, 2003, the Company issued 2,000 shares of the Companys series F
convertible preferred stock (Series F Preferred Stock) to the Companys
Chairman, for cash of $2.0 million. Each share of the Series F Preferred Stock
is convertible at the holders option into 0.78125 shares of the Companys
common stock beginning in November 2006. The issuance of shares of Series E Preferred Stock and Series F Preferred Stock
were made under the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended, because the issuances did not involve any
public offering. 
 Item 6. Selected Financial Data Set forth below are certain selected historical consolidated financial data of
the Company. This information should be read in conjunction with the audited
consolidated financial statements of the Company and related notes thereto
appearing elsewhere herein, as well as Managements Discussion and Analysis.
The selected consolidated financial data as of and for the fiscal years ended
August 31, 2004 and 2003; as of and for the two months ended August 31, 2002;
and as of and for the fiscal years ended June 30, 2002 and 2001 are derived
from the audited consolidated financial statements of the Company. The selected
consolidated financial data for the two months ended August 31, 2001, and for
the year ended June 30, 2000 are derived from unaudited condensed consolidated
financial statements of the Company. 9




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The Company discontinued its Consulting and its Affinity Events business
segments during the fiscal year ended August 31, 2004. As a result, all
historical financial information included in the Selected Financial Data
presents the operating results of the Consulting and Affinity Events business
segments as discontinued operations, and all current liabilities of the
discontinued segments, net of current assets and all noncurrent liabilities of
such segments, as discontinued. SELECTED FINANCIAL DATA  OPERATING RESULTS: Year Ended
    
    Two Months EndedAugust 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001Total revenue
    
    $
    55,779
    
    
    $
    64,129
    
    
    $
    4,591
    
    
    $
    7,853Direct operating costs
    
    
    (35,699
    )
    
    
    (42,603
    )
    
    
    (2,854
    )
    
    
    (5,233
    )Selling, general and administrative
    
    
    (18,220
    )
    
    
    (20,397
    )
    
    
    (3,766
    )
    
    
    (4,199
    )Amortization and impairment of acquisition
intangibles
    
    
    (4,554
    )
    
    
    (22,141
    )
    
    
    (183
    )
    
    
    (150
    )Loss from operations
    
    
    (2,694
    )
    
    
    (21,012
    )
    
    
    (2,212
    )
    
    
    (1,729
    )Equity in losses of affiliated companies
    
    
    
    
    
    
    (204
    )
    
    
    (110
    )
    
    
    (554
    )Other income (expense) derived from
investments in affiliates, net
    
    
    
    
    
    
    9,622
    
    
    
    
    
    
    
    (250
    )Net change in value of derivatives
    
    
    1,294
    
    
    
    (1,035
    )
    
    
    (423
    )
    
    
    (632
    )Interest expense and other, net
    
    
    (5,737
    )
    
    
    (10,593
    )
    
    
    (1,201
    )
    
    
    (1,948
    )Loss from continuing operations beforeincome taxes and cumulative effect
    
    
    (7,137
    )
    
    
    (23,222
    )
    
    
    (3,946
    )
    
    
    (5,113
    )Income tax benefit (provision)
    
    
    
    
    
    
    (5,222
    )
    
    
    
    
    
    
    1,623Loss from continuing operations
    
    
    (7,137
    )
    
    
    (28,444
    )
    
    
    (3,946
    )
    
    
    (3,490
    )Income (loss) from discontinued operations, net of tax
    
    
    (7,474
    )
    
    
    (9,542
    )
    
    
    (1,409
    )
    
    
    62Net loss
    
    
    (14,611
    )
    
    
    (37,986
    )
    
    
    (5,355
    )
    
    
    (3,428
    )Preferred dividends
    
    
    (2,237
    )
    
    
    (1,149
    )
    
    
    (93
    )
    
    
    (45
    )Net loss available to common stockholders
    
    $
    (16,848
    )
    
    $
    (39,135
    )
    
    $
    (5,448
    )
    
    $
    (3,473
    )
 See Notes to the Selected Financial Data on page 11. 10




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SELECTED FINANCIAL DATA, continued OPERATING RESULTS: Year Ended June 30,2002
    
    2001
    
    2000Total revenue
    
    $
    93,813
    
    
    $
    96,136
    
    
    $
    59,377Direct operating costs
    
    
    (75,567
    )
    
    
    (66,337
    )
    
    
    (40,974
    )Selling, general and administrative
    
    
    (24,065
    )
    
    
    (25,596
    )
    
    
    (16,490
    )Amortization and impairment of acquisition
intangibles
    
    
    (7,707
    )
    
    
    (4,406
    )
    
    
    (2,717
    )Loss from operations
    
    
    (13,526
    )
    
    
    (203
    )
    
    
    (804
    )Equity in earnings losses of affiliated companies
    
    
    (2,912
    )
    
    
    (4,235
    )
    
    
    (2,533
    )Correction of purchase price allocation
    
    
    
    
    
    
    
    
    
    
    (11,330
    )Other income (expense) derived from
investments in affiliates, net
    
    
    242
    
    
    
    (6,796
    )
    
    
    (2,360
    )Net change in value of derivatives
    
    
    (3,345
    )
    
    
    2,988Interest expense and other, net
    
    
    (12,042
    )
    
    
    (11,891
    )
    
    
    (7,909
    )Loss from continuing operations before
income taxes and cumulative effect
    
    
    (31,583
    )
    
    
    (20,137
    )
    
    
    (24,936
    )Income tax benefit
    
    
    1,925
    
    
    
    5,114
    
    
    
    4,806Loss from continuing operations before
cumulative effect, net of tax
    
    
    (29,658
    )
    
    
    (15,023
    )
    
    
    (20,130
    )Cumulative effect of accounting change,
net of tax
    
    
    (2,620
    )
    
    
    (1,120
    )Loss from continuing operations
    
    
    (32,278
    )
    
    
    (16,143
    )
    
    
    (20,130
    )Loss from discontinued operations, net of tax
    
    
    (2,280
    )
    
    
    (2,561
    )
    
    
    (7,694
    )Net loss
    
    
    (34,558
    )
    
    
    (18,704
    )
    
    
    (27,824
    )Preferred dividends
    
    
    (396
    )Net loss available to common stockholders
    
    $
    (34,954
    )
    
    $
    (18,704
    )
    
    $
    (27,824
    )
 LOSS PER SHARE: Year Ended
    
    Two Months EndedAugust 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001Loss per share available to common stockholders -
Basic and Diluted:Loss available to common stockholders
from continuing operations
    
    $
    (2.01
    )
    
    $
    (7.42
    )
    
    $
    (1.07
    )
    
    $
    (0.98
    )Income (loss) from discontinued operations, net of tax
    
    $
    (1.60
    )
    
    $
    (2.40
    )
    
    $
    (0.37
    )
    
    $
    0.02Net loss available to common stockholders
    
    $
    (3.61
    )
    
    $
    (9.82
    )
    
    $
    (1.44
    )
    
    $
    (0.96
    )Weighted average shares outstanding -
Basic and Diluted
    
    
    4,668
    
    
    
    3,987
    
    
    
    3,793
    
    
    
    3,599
 LOSS PER SHARE: Year Ended June 30,2002
    
    2001
    
    2000Loss per share available to common stockholders -
Basic and Diluted:Loss available to common stockholders
from continuing operations before
cumulative effect of accounting change
    
    $
    (8.24
    )
    
    $
    (4.25
    )
    
    $
    (6.93
    )Loss available to common stockholders
from continuing operations
    
    $
    (8.96
    )
    
    $
    (4.57
    )
    
    $
    (6.93
    )Loss from discontinued operations, net of tax
    
    $
    (0.62
    )
    
    $
    (0.73
    )
    
    $
    (2.65
    )Net loss available to common stockholders
    
    $
    (9.58
    )
    
    $
    (5.30
    )
    
    $
    (9.58
    )Weighted average shares outstanding -
Basic and Diluted
    
    
    3,649
    
    
    
    3,531
    
    
    
    2,904
 See Notes to the Selected Financial Data on page 11. 11




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SELECTED FINANCIAL DATA, continued FINANCIAL POSITION: As of August 31,
    
    As of June 30,2004
    
    2003
    
    2002
    
    2002
    
    2001
    
    2000Working capital (deficit)
    
    $
    (19,146
    )
    
    $
    (12,034
    )
    
    $
    (32,252
    )
    
    $
    (26,827
    )
    
    $
    (16,951
    )
    
    $
    5,449Investment in affiliated
companies
    
    
    
    
    
    
    
    
    
    
    25,013
    
    
    
    25,115
    
    
    
    50,399
    
    
    
    64,782Total assets
    
    
    60,942
    
    
    
    73,812
    
    
    
    143,780
    
    
    
    151,007
    
    
    
    201,061
    
    
    
    227,787Long-term obligations
    
    
    64,625
    
    
    
    72,641
    
    
    
    93,091
    
    
    
    98,091
    
    
    
    107,693
    
    
    
    122,794Stockholders equity
(deficit)
    
    
    (56,551
    )
    
    
    (27,002
    )
    
    
    (2,188
    )
    
    
    (1,274
    )
    
    
    37,604
    
    
    
    51,864
 NOTES TO THE SELECTED FINANCIAL DATA The changes from year to year are primarily a result of the following items: 2004  Intangibles impairment charge of $3.3 million; and the classification of
redeemable preferred stock of $24.3 million as noncurrent liabilities (of
which, $19.7 million is held by the Companys Chairman or one of his
affiliates) due to the Chairman owning more than 50% of the Companys
outstanding common stock as of August 31, 2004 (such preferred stock was
previously included as a component of stockholders deficit). 2003  Sale of investments in Gray common stocks, warrants for Gray common
stocks and Rawlings common stock, resulting in an aggregate gain of $17.2
million, with $38 million of the proceeds being applied to long-term debt;
impairment charge of $30.5 million taken to reduce the carrying value of
goodwill and other acquisition intangible assets (of which, $7.0 million
included in discontinued operations); and an aggregate of $5.2 million in
valuation impairment charges taken to reduce carrying value of investments in
affiliates and non-trade receivables. 2002  Sale of investments in Gray preferred stock and Tarzian common stock
with such proceeds being applied to long-term debt; and the acceleration of
costs and expenses, including an intangibles impairment charge of $6.6 million,
as a result of a change in a significant contractual relationship;
proportionate share of Grays accounting change cumulative effect adjustment,
net of tax. 2001  First full year of Host operating results included in the Companys
consolidated financial statements; $9.0 million pretax charge recognized to
reduce book value of certain equity investments; and the change in accounting
for certain derivatives resulting in a cumulative effect adjustment, which also
resulted in the initial inclusion of the net change in the value of derivatives
in the Companys operating results. No dividends were declared or paid during the periods presented. Certain reclassifications for the presentation of the Companys Affinity Events
and Consulting business segments as discontinued operations have been made in
the results of operations and financial position for all prior periods to
conform to the August 31, 2004 presentation. 
 Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations OVERVIEW Bull Run Corporation (Bull Run or the Company), based in Atlanta, Georgia,
is a sports and affinity marketing and management company through its sole
operating business, Host Communications, Inc. (Host), acquired in December
1999 (the Host-USA Acquisition). Hosts Collegiate Marketing and Production
Services business segment provides sports marketing and production services to
a number of collegiate conferences and universities, and on behalf of the
National Collegiate Athletic Association (NCAA). Hosts Association
Management Services (formerly called Affinity Management Services) business
segment provides various associations with services such as member
communication, recruitment and retention, conference planning, Internet web
site management, marketing and administration. The Company discontinued its Consulting and its Affinity Events business
segments during the fiscal year ended August 31, 2004. In January 2004, the
Company determined 12




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that it would not be engaged in consulting services to Gray
Television, Inc. (Gray), an affiliated party, or any other party in the
future. In August 2004, the Company announced its decision to suspend the
Affinity Events business, and declared its intent to offer the business unit
for sale. Accordingly, the operating results and net assets associated with the
Consulting and the Affinity Events
business segments as of and for the fiscal year ended August 31, 2004 and all
prior periods presented herein have been reflected as discontinued operations
in the accompanying consolidated financial statements. The Company has reached
an agreement to sell the assets associated with the basketball and soccer tours
operated within the Affinity Events business segment. The transaction is
expected to close within the next 30 days. Accrued restructuring charges
associated with the discontinuation of this segment have been reduced by the
estimated amount of proceeds to be ultimately derived from the sale. Actual
amounts ultimately realized on the sale and any other unanticipated income or
expenses, including income from the
future subleases of vacated office space, could differ materially from amounts
assumed in arriving at the loss on termination of the business. To the extent
actual proceeds or other amounts differ from the estimates that are reflected
as of August 31, 2004, or as managements estimates are revised, the variance
will be reported in discontinued operations in future periods. Likewise, the
results of any remaining Events operations occurring subsequent to August 31,
2004 will be reported in discontinued operations in future periods. CERTAIN RELATIONSHIPS J. Mack Robinson, Chairman of the board of the Company, is the beneficial owner
of approximately 57.0%of the Companys common stock as of November 22, 2004,
and Mr. Robinson and his affiliates also own shares of the Companys
convertible preferred stock having an aggregate face amount of approximately
$19.8 million as of that date representing approximately 88.4%of the aggregate
face amount of all outstanding preferred stock on that date. Mr. Robinson is
also Chief Executive Officer, Chairman and a director of Gray, and the
beneficial owner of Gray common stocks representing approximately 28.8% of the
combined voting power of Grays two classes of common stock as of March 22,
2004. Robert S. Prather, Jr., President, Chief Executive Officer and a director
of the Company, is President, Chief Operating Officer and a director of Gray,
and the beneficial owner of Gray common stocks representing approximately 2.6%
of the combined voting power of Grays two classes of common stock as of March
22, 2004. Hilton H. Howell, Jr., the Companys Vice President and Secretary, is
Vice Chairman and a director of Gray, and the beneficial owner of Gray common
stocks representing approximately 7.0% of the combined voting power of Grays
two classes of common stock as of the same date. Beneficial ownership
percentages include warrants and options to acquire shares of Gray common
stocks that were exercisable on, or within 60 days after, such date. Mr. Robinson personally guarantees substantially all of the debt outstanding
under the Companys bank credit facility. Under the terms of his guarantee, Mr.
Robinson has the option to purchase the entire loan from the banks, and thereby
would become the holder of the debt currently payable to the banks and the
related lien on the Companys assets. As of August 31, 2004, W. James Host, a director of the Company until his
resignation in January 2004, owned along with his wife, shares of the Companys
convertible preferred stock having an aggregate face amount of approximately
$1.8 million. In October 2004, Mr. Host and his wife exercised their right to
convert their shares of preferred stock to approximately 255,000 shares of the
Companys common stock. Other officers or directors of the Company own shares
of the Companys preferred stock having an aggregate face value of
approximately $0.2 million. 13




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Through a rights-sharing agreement with Gray, the Company participates jointly
with Gray in the marketing, selling and broadcasting of certain collegiate
sporting events and in related programming, production and other associated
activities. The agreement commenced April 1, 2000 and terminates after five
years. As a result of the rights-sharing agreement, Gray may be called upon for
payment of a share of certain guaranteed rights fees. During the fiscal year
ended August 31, 2004, Gray had paid approximately $1.5 million under this
provision, and as of August 31, 2004, the Company has accrued fees payable to
Gray of approximately $1.7 million. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
judgments and estimations that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. The Company considers the following accounting policies to be
critical policies that require judgments or estimations in their application
where variances in those judgments or estimations could make a significant
difference to future reported results. Revenue Recognition and Rights Fee Expenses - Revenue from services is recognized as the services are rendered. Corporate
sponsor license fee revenue that is not related to specific events is
recognized ratably over the term of the sponsorship. In certain circumstances,
the Company enters into contractual arrangements with associations or
institutions it represents in various capacities which involve payment of
guaranteed rights fees. Guaranteed rights fee expense that is not related to
specific events is recognized ratably over the term specified in the contract.
The Companys contractual arrangements with associations or institutions may
also involve net profit sharing arrangements (profit splits) based on the net
profit associated with services rendered under the contract. Profit split
expense is accrued over the contract period, based on estimates, and is
adjusted at the end of the contract term in order to reflect the actual profit
split. Goodwill and Other Intangible Assets - Prior to July 1, 2001, goodwill was amortized over 20 years. Effective July 1,
2001, the Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, (SFAS 142) which eliminated the
requirement to amortize goodwill, and also affected the Companys accounting
for its equity in losses of affiliated companies. Under the provisions of SFAS
142, the Company is required to periodically assess the carrying value of
goodwill associated with each of four distinct business units that comprise two
business segments of the Companys continuing operations to determine if an
impairment in value has occurred. Prior to the fiscal year ended August 31,
2004, such an assessment was also required in connection with a discontinued
business segment. Annual impairment tests prior to the fiscal year ended August
31, 2003 concluded that the carrying amount of goodwill for each acquired
business unit did not exceed its net realizable value based on the Companys
estimate of expected future cash flows to be generated by each of the business
units. However, the Company updated its assessment as of August 31, 2003
and concluded that based on a valuation model incorporating expected future
cash flows in consideration of historical cash flows and operating results, a
goodwill impairment charge of $23.4 million was necessary to reduce the
carrying value of goodwill to net realizable value, $2.4 million of which was
attributable to the discontinued business segment. Management further
determined that an additional goodwill impairment charge of $3.3 million was
necessary during the fiscal year ended August 31, 2004, upon managements
consideration of current fiscal year operating results and the forecasted
operating results and business plans for one of the Companys business units.
If the 14




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Company concludes in the future that the adjusted carrying value of
goodwill for any of the four business units comprising the Companys continuing
operations exceeds its respective net realizable value, the Company would
expense such excess and decrease goodwill as reported in the consolidated
balance sheet. Other purchased intangibles, including customer relationships, are amortized
primarily over a 16-year average life. The use of a 16-year average life for
customer relationships acquired in the acquisition of Host, amortized on a
straight-line method, is not materially different from using the estimated life
of each individual relationship using a systematic allocation method. Prior to
the fiscal year ended August 31, 2003, the Company determined that an
impairment charge of approximately $6.6 million was necessary to reduce the
carrying amount of certain customer relationship intangible assets as a result
of a significant change in the contractual nature of the Companys underlying
relationship with the NCAA. An updated impairment analysis performed as of
August 31, 2003 indicated the need for an additional charge to reduce customer
relationships and other acquisition intangibles by approximately $7.0 million
at that date, all of which was attributable to a discontinued operating
segment. If the Company concludes in the future that
significant changes occur in its customer relationships, additional impairment
charges may be necessary. The remaining value assigned to acquisition intangibles other than goodwill
will continue to be amortized over a 16-year average life, at a rate of
approximately $0.7 million per year. The use of a 16-year average life of
customer relationships amortized on a straight-line method is not materially
different than using the estimated life of each individual relationship using a
systematic allocation method. Goodwill and intangible assets, net of accumulated amortization, were
approximately $48.7 million as of August 31, 2004 and $53.2 million as of
August 31, 2003, of which, goodwill was approximately $53.2 million and $43.7
million as of each date, respectively. The carrying value of goodwill and
acquired intangibles, net of accumulated amortization, represented
approximately 80% of the Companys total assets as of August 31, 2004. Deferred Income Taxes - Deferred income tax liabilities or assets at the end of each period are
determined using the tax rate expected to be in effect when the taxes are
actually paid or recovered. A valuation allowance is recognized on certain
deferred tax assets if it is more likely than not that some or all of these
deferred tax assets will not be realized. As of August 31, 2004 the Company
has recognized a full valuation allowance for net deferred tax assets thereby
resulting in a carrying amount for deferred taxes in the balance sheet of zero.
If and when the Company generates taxable income in the future and benefits
primarily from net operating loss carryforwards for federal tax purposes that
expire beginning in 2018, some or all of the deferred tax assets may be
reinstated on the balance sheet, and the Company would report income tax
benefits in the period that such reinstatement occurs. Derivative Instruments and Hedging Activities - Effective July 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Investments and Hedging
Activities (SFAS 133). SFAS 133 requires the Company to recognize all
derivative instruments (i.e., interest rate swap agreements, and until sold in
April 2003, warrants to purchase additional shares of Gray common stocks) on
the balance sheet at fair value. The aggregate fair market value of derivatives
as of August 31, 2004 and August 31, 2003 of approximately $(0.4) million and
$(1.7) million, respectively, is included in the Companys balance sheet as a
component of Other liabilities. Changes in the estimated fair value of
derivatives that do not meet the specific criteria in SFAS 133 for hedge
accounting are included in the earnings (losses) reported for the period of the
change. None of the Companys derivative instruments have 15




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been determined to qualify for hedge accounting treatment. Management estimates the fair value of
interest rate swap agreements based on estimated market values provided by the
counterparties to the swap agreements. Valuation of Certain Non-Trade Receivables - In the fiscal year ended August 31, 2003, the Company recorded an impairment
charge of approximately $5.2 million associated with its investment in and
amounts due from iHigh and an impairment charge of approximately $1.7 million
associated with a note receivable from the purchaser of Datasouth Computer
Corporation (Datasouth), the Companys former computer printer manufacturing
company. The Company performs ongoing credit evaluations of parties from such
non-trade receivables are due, and if and when management determines that the
carrying value of such receivables may not ultimately be realized, the
estimated impairment amount is charged to the earnings (losses) reported for
the period in which the determination is made. The impairment charges reduced
the carrying amount of the investment in and amounts due from iHigh to zero,
and the Companys note receivable from the purchaser of Datasouth to
approximately $1.7 million as of August 31, 2003. As a result of payments
received on the note subsequent to the adjustment to net realizable value at
August 31, 2003, the carrying amount of the note receivable has been further
reduced to approximately $1.2 million as of August 31, 2004. Recent Accounting Pronouncement - In May 2003, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 150 Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity (SFAS 150).
SFAS 150 establishes standards for classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 was effective for the Company as of September 1, 2003 and did not have any
impact on the Companys consolidated financial statements until August 31, 2004, at which date the Companys
Chairman and his affiliates had increased their ownership of the Companys
outstanding common stock to more than 50%. As a result, the Company
reclassified, in accordance with SFAS 150, all of the preferred stock issued
and outstanding as of August 31, 2004 from Stockholders deficit
to noncurrent liabilities. Management does not believe that any of the preferred
stock issued to the Chairman or his affiliates or any other party will be
redeemed in the foreseeable future, and any such redemption would require the
approval of the Companys bank lenders. LIQUIDITY AND CAPITAL RESOURCES As of August 31, 2004, the Companys indebtedness to its bank lenders was
approximately $55.9 million. In October 2004, the bank credit agreement was
amended and restated to provide an additional $3 million in financing, which
was borrowed in October 2004, thereby increasing the bank indebtedness to
approximately $58.9 million. The agreement, having a maturity date of November
30, 2005 at which time all amounts outstanding become due and payable, does not
require any payments of principal prior to maturity, nor does it provide for
any additional borrowing capacity. The agreement requires the maintenance of
interest coverage ratios, determined quarterly. The Companys debt to the banks is collateralized by a lien on all of the
Companys assets. In addition, the Companys Chairman personally guarantees
substantially all of the debt outstanding under the bank credit agreement, and
if the Company is unable to meet payment obligations under the agreement, it is
likely that the bank lenders would call the guarantee, thereby requiring the
Chairman to repay the amount of the loan to the banks. The Chairmans
guarantee is collateralized by certain personal holdings of marketable
securities pledged to the Companys bank lenders. Under the terms of his
guarantee, the 16




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Chairman has the option to purchase the entire loan from the
banks, and thereby becoming the holder of the debt currently payable to the
banks and the related lien on the Companys assets. The Chairman is
compensated by the Company for his guarantee in the form of newly issued shares
of the Companys common stock, valued at an annual rate of 1.625% of the
guarantee amount. The guarantee amount will reduce in the future if principal
payments are made to the bank lenders on the outstanding term loans, and may
increase if additional bank financing is made available to the Company. In September 2004, a company under the Chairmans control provided the Company
$1.5 million of cash which was used for working capital purposes, in exchange
for a subordinated note bearing interest at 6% per annum maturing on December
31, 2004. Under the terms of the credit agreement, as amended in October 2004,
up to an aggregate of $10 million in additional funding for working capital
purposes, if necessary, could be sourced from the issuance of equity
securities, including shares of the Companys preferred stock, or by the
issuance of subordinated debt. During the fiscal year ended August 31, 2004,
the Company received approximately $6.6 million from the Companys Chairman, of
which $2 million was invested in newly-issued shares of the Companys preferred
stock. The remaining investment of approximately $4.6 million is presented in
the consolidated balance sheet as Advances from stockholder. Management
believes that it is the Chairmans intention to convert these advances to
subordinated debt or equity securities during the fiscal year ending August 31,
2005. In connection with the credit agreement amendment, the Chairman
committed to the Company an additional aggregate cash investment of up to $3
million as and when needed at any time and from time to time on or prior to the
maturity date, and provided that up to $1.5 million of such cash investments
may be used to repay the $1.5 million subordinated note issued by his
affiliated company. Management anticipates that the Chairman will provide at least $1.5 million of his
committed cash investment prior to the maturity date of the $1.5 million
subordinated note. As amended in October 2004, the Companys bank credit agreement provides for
(a) two term loans (the Term Loans) for borrowings totaling approximately
$35.9 million and (b) two revolving loan commitments (the Revolvers) for
aggregate maximum borrowings of $23 million. All amounts outstanding bear
interest at either (a) the banks prime rate or (b) the London Interbank
Offered Rate (LIBOR) plus 2.75%, payable monthly. The Company anticipates
that it will continue to utilize fully the
availability under the Revolvers throughout the remaining term of the credit
agreement. In connection with the Host-USA Acquisition, the Company issued 8% subordinated
notes, representing long-term debt of approximately $8.7 million as of August
31, 2004. During the fiscal year ended August 31, 2004, holders of 8%
subordinated notes representing an aggregate face value of approximately $8.0
million exchanged their notes for shares of Series E Preferred Stock. Interest
is payable quarterly in cash on all but a $3.0 million subordinated note
payable to the Companys Chairman, on which interest is payable at maturity in
the form of cash or shares of the Companys common stock, at the Companys
option. The notes all have a maturity date of January 17, 2006. Payment of
interest and principal on all subordinated notes is subordinate to the
Companys bank credit agreement. Due to negative operating cash flow generated in the past, the Company
currently has trade payables and other cash obligations that exceed its current
assets. In the fiscal year ended August 31, 2004, the Companys Chairman
provided an aggregate total of $6.6 million in cash used for operating
purposes. In September 2004, a Company controlled by the Chairman provided an
additional $1.5 million in cash, the proceeds from which were used for
operating purposes in exchange for a subordinated note due December 31, 2004.
The Companys Chairman has formally committed to the Company to provide up to
$3 million in cash prior to the maturity date of the credit agreement at any
time if and when needed by 17




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the Company, of which, up to $1.5 million can be
used to repay the subordinated note. Management believes the Company has
sufficient liquidity sources, which include the Companys Chairman and his
affiliates, to meet its cash obligations until the November 30, 2005 maturity
date of its bank credit agreement. Prior to the November 30, 2005 maturity
date, the Company anticipates that will be required to refinance the total
amount due and payable to the banks at that time. The Companys ability to
continue this or similar financing beyond the November 30, 2005 maturity date
is significantly dependent on the continued support of the Companys Chairman
and, in part, on the Companys future operating results. There can be no
assurances with respect to either the Companys future operating results or the
continued support of its Chairman. In exchange for cash advances made in the
past or in the future by the Companys Chairman, his affiliates and/or other
parties, the Company may (a) issue and sell equity securities of the Company,
which may include the Companys preferred stock; (b) issue additional
subordinated debt; or (c) a combination thereof. The use of future cash
investments or advances in excess of an aggregate $10 million for purposes
other than the reduction of the bank debt would require approval of the
Companys bank lenders. The Companys capital expenditures are not expected to
exceed $600,000 for the fiscal year ending August 31, 2005. Historical Cash Flow Information  Summary - The following summarizes the Companys historical cash flow activities (amounts
in 000s): Year Ended
    
    Two Months Ended
    
    Year EndedJune 30,August 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Cash flows from operating activities:Continuing operations
    
    $
    (4,130
    )
    
    $
    6,831
    
    
    $
    (3,473
    )
    
    $
    (2,530
    )
    
    $
    (9,710
    )Discontinued operations
    
    
    (6,363
    )
    
    
    (11,918
    )
    
    
    (522
    )
    
    
    60
    
    
    
    4,262Cash flows from investing activities:Continuing operation investing activities
    
    
    (533
    )
    
    
    45,290
    
    
    
    (66
    )
    
    
    (74
    )
    
    
    15,760Discontinued operation investing activities
    
    
    447
    
    
    
    (117
    )
    
    
    (37
    )
    
    
    981
    
    
    
    774Cash flows from financing activities
    
    
    6,509
    
    
    
    (35,963
    )
    
    
    3,842
    
    
    
    (2,125
    )
    
    
    (13,070
    )Net increase (decrease) in cash and cash equivalents
    
    $
    (4,070
    )
    
    $
    4,123
    
    
    $
    (256
    )
    
    $
    (3,688
    )
    
    $
    (1,984
    )
 Historical Cash Flow Information  Cash Flows from Operating Activities - The following summarizes the Companys historical cash flows from operating activities (amounts
in 000s): Year Ended
    
    Two Months Ended
    
    Year EndedJune 30,August 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Operating loss from continuing operations
    
    $
    (2,694
    )
    
    $
    (21,012
    )
    
    $
    (2,212
    )
    
    $
    (1,729
    )
    
    $
    (13,526
    )Depreciation, amortization and impairment charges
included in the operating loss
    
    
    5,700
    
    
    
    32,949
    
    
    
    397
    
    
    
    377
    
    
    
    9,006Interest expense, net of interest income and dividends
    
    
    (4,416
    )
    
    
    (8,005
    )
    
    
    (812
    )
    
    
    (1,630
    )
    
    
    (9,562
    )Net change in operating assets and liabilities
    
    
    (2,570
    )
    
    
    2,893
    
    
    
    (865
    )
    
    
    274
    
    
    
    3,716Other changes in operating cash flows
    
    
    (150
    )
    
    
    6
    
    
    
    19
    
    
    
    178
    
    
    
    656Total cash flows from continuing operations
    
    
    (4,130
    )
    
    
    6,831
    
    
    
    (3,473
    )
    
    
    (2,530
    )
    
    
    (9,710
    )Cash flows from discontinued operating activities
    
    
    (6,363
    )
    
    
    (11,918
    )
    
    
    (522
    )
    
    
    60
    
    
    
    4,262Total cash flows from operating activities
    
    $
    (10,493
    )
    
    $
    (5,087
    )
    
    $
    (3,995
    )
    
    $
    (2,470
    )
    
    $
    (5,448
    )
 The net change in operating assets and liabilities had an unfavorable impact on
total cash flows from continuing operations during the fiscal year ended August
31, 2004, and a favorable impact during the fiscal years ended August 31, 2003
and June 30, 2002. During the fiscal year ended August 31, 2004, cash available
at the beginning of the period was used toward the reduction of accounts
payable and accrued expenses by $3.7 million, compared to an increase in
accounts payable and accrued expenses of $2.6 million in the 18




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##### Table of Contents



fiscal year ended
August 31, 2003. Accounts receivable decreased $2.4 million and $0.8 million in
the fiscal years ended August 31, 2004 and 2003, respectively. Decreases in
accounts receivable during each period result from primarily from a reduction
in revenues derived in the thirty to sixty days preceding the end of those
periods, particularly in 2004, since most of the Companys collegiate
properties began their college football seasons in September 2004 as compared
to August in 2003. The Companys total cash flows from continuing operations
were also used to fund interest expense. Interest paid, net of interest income
received, was $4.4 million and $8.3 million for fiscal years ended August 31,
2004 and 2003, respectively, with the reduction caused by the decrease in total
outstanding debt and reductions in interest rates to which the debt is subject. The net change in operating assets and liabilities had a favorable impact on
total cash flows from continuing operations in the fiscal year ended June 30,
2002 of $3.7 million. Accounts receivable decreased $9.8 million due to an
acceleration of customer payments and a reduction in the total amount of
revenue under contract as of June 30, 2002 compared to June 30, 2001. Until June 30, 2002, the Company generated a significant amount of revenue from
sublicensing National Collegiate Athletic Association (NCAA) corporate
sponsorship rights to major corporations. The Companys final contract with
the NCAA (the Host-NCAA Contract), which provided these rights to the
Company, in addition to other rights, ended on August 31, 2002. Deferred
revenue declined by $10.3 million during the fiscal year ended June 30, 2002
due to a reduction in the amount of corporate sponsor contracts in place as of
June 30, 2002 compared to the prior fiscal year end, and to a lesser extent,
the decision of certain corporate sponsors to accelerate the termination date
of their multi-year sponsorship contract with the Company from
August 31, 2002 to June 30, 2002. The number and amount of corporate sponsor
contracts in place as of June 30, 2002 compared to the prior year was directly
affected by the fact that Host-NCAA Contract ended in August 2002, and
therefore NCAA corporate sponsorships sold by Host could not extend beyond
August 2002. The result of amending the termination dates of certain sponsorship contracts
in the fiscal year ended June 30, 2002 and the decision to modify the terms of
the Host-CBS Contract in August 2002, was to accelerate
revenue (and thereby decreasing deferred income) by approximately $1.5 million,
and increasing accrued expenses (primarily guaranteed rights fees payable) by
approximately $3.7 million. Other changes in operating cash flows include the
income on Grays option to purchase the Companys investment in Tarzian of
approximately $0.3 million in the fiscal year ended June 30, 2002. The option
was exercised by Gray in December 2001. 19




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##### Table of Contents



Historical Cash Flow Information  Cash Flows from Investing Activities - The following summarizes the Companys historical cash flows from investing
activities (amounts in 000s): Year Ended
    
    Two Months Ended
    
    Year EndedJune 30,August 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Capital expenditures
    
    $
    (384
    )
    
    $
    (230
    )
    
    $
    (44
    )
    
    $
    (52
    )
    
    $
    (235
    )Investments in and acquisition of businesses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (705
    )Proceeds on dispositions of investments
    
    
    
    
    
    
    46,183
    
    
    
    
    
    
    
    
    
    
    
    16,803Other investing cash flows
    
    
    (149
    )
    
    
    (663
    )
    
    
    (22
    )
    
    
    (22
    )
    
    
    (103
    )Total cash flows from continuing operation
investing activities
    
    
    (533
    )
    
    
    45,290
    
    
    
    (66
    )
    
    
    (74
    )
    
    
    15,760Cash flows from discontinued operation
investing activities
    
    
    447
    
    
    
    (117
    )
    
    
    (37
    )
    
    
    981
    
    
    
    774Total cash flows from investing activities
    
    $
    (86
    )
    
    $
    45,173
    
    
    $
    (103
    )
    
    $
    907
    
    
    $
    16,534
 In the fiscal year ended August 31, 2004, the Company received aggregate
payments on the Companys note receivable from the purchaser of Datasouth, a
discontinued business segment, of approximately $0.4 million. In the fiscal year ended August 31, 2003, the Company sold its investment in
Rawlings common stock to an unrelated company for cash proceeds of
approximately $6.8 million, and sold its investments in Gray common stocks and
warrants to purchase additional shares of Gray common stocks to parties
affiliated with the Companys Chairman and to Gray for aggregate cash proceeds
of approximately $39.4 million. In the fiscal year ended June 30, 2002, the Company sold investments in Gray
series A and series B preferred stock to a company affiliated with the
Companys Chairman for cash proceeds of approximately $6.8 million, and sold
its investment in Tarzian common stock to Gray under the terms of an option
agreement between the Company and Gray, for cash proceeds of $10 million. Also
in the fiscal year ended June 30, 2002, aggregate payments of approximately
$0.9 million were received on the Companys note from the purchaser of
Datasouth. Historical Cash Flow Information  Cash Flows from Financing Activities - The following summarizes the Companys historical cash flows from financing
activities (amounts in 000s): Year Ended
    
    Two Months Ended
    
    Year EndedJune 30,August 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001
    
    2002Net borrowings (repayments) on notes
payable and revolving line of credit
    
    $
    
    
    
    $
    175
    
    
    $
    3,850
    
    
    $
    (650
    )
    
    $
    5,600Net repayments on long-term debt
    
    
    
    
    
    
    (38,000
    )
    
    
    
    
    
    
    (1,050
    )
    
    
    (20,793
    )Cash advances made by stockholder
    
    
    4,550Issuance of preferred stock
    
    
    2,000
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    2,400Other financing cash flows
    
    
    (41
    )
    
    
    (1,138
    )
    
    
    (8
    )
    
    
    (425
    )
    
    
    (277
    )Total cash flows from financing activities
    
    $
    6,509
    
    
    $
    (35,963
    )
    
    $
    3,842
    
    
    $
    (2,125
    )
    
    $
    (13,070
    )
 In the fiscal year ended August 31, 2003, the Company reduced its long-term
debt as a result of proceeds on the sales of its investment Rawlings common
stock, Gray common stocks and warrants to purchase additional shares of Gray
common stocks. In the fiscal year ended June 30, 2002, the Company reduced its
long-term debt as a result of proceeds received on the sales or other
dispositions of investment assets, including the Companys investments in
Tarzian and Gray preferred stock, in addition to proceeds received from the
purchasers of Datasouth. Proceeds on the issuance of the Companys preferred
stock to and cash advances from the Companys Chairman of the board and
companies affiliated 20




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##### Table of Contents



with the Companys Chairman were used to fund working
capital needs in the fiscal years ended August 31, 2004 and 2003, and were used
to reduce long-term debt in the fiscal year ended June 30, 2002. Other
financing cash flows primarily include cash used for debt issue costs, less proceeds from the
exercise of stock options and from other issuances of common stock for cash.
There were no discontinued operation financing activities in any of the fiscal
periods presented above. CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS The following summarizes the Companys contractual obligations as of August 31,
2004 (amounts in 000s): Payments Due by Period as of August 31, 2004Less than
    
    More than 1
    
    More than 3
    
    More thanContractual Obligations
    
    Total
    
    1 Year
    
    to 3 Years
    
    to 5 Years
    
    5 YearsLong-term debt obligations
    
    $
    65,215
    
    
    $
    590
    
    
    $
    64,625
    
    
    $
    
    
    
    $Capital lease obligations
    
    
    234
    
    
    
    78
    
    
    
    78
    
    
    
    78Operating lease obligations
    
    
    6,137
    
    
    
    1,821
    
    
    
    2,024
    
    
    
    1,308
    
    
    
    984Purchase obligations
    
    
    83,183
    
    
    
    16,550
    
    
    
    28,123
    
    
    
    13,872
    
    
    
    24,638Total
    
    $
    154,769
    
    
    $
    19,039
    
    
    $
    94,850
    
    
    $
    15,258
    
    
    $
    25,622
 Operating lease obligations are presented net of future receipts on contracted
sublease arrangements totaling approximately $1.1 million as of August 31,
2004. Purchase obligations primarily consist of future guaranteed rights fee
commitments to associations or institutions under contractual arrangements of
typically one to five years, which expire at varying times through 2015. The Company is a party to an interest rate swap agreement described in Note 10
to the Consolidated Financial Statements. The estimated cost of terminating the
swap agreement, if the Company elected to do so, was approximately $0.6 million
as of August 31, 2004, including accrued interest through that date. Dividends on Series D Preferred Stock and Series F Preferred Stock are payable
annually at an annual rate of $90 per share in cash or in shares of the
Companys common stock, at the holders option, except that, until the second
anniversary of the date of issuance, the Company has the option to pay such
dividends in cash or in shares of the Companys common stock. For purposes of
determining the number of shares of common stock to be issued as payment of a
dividend, the common stock is valued at the average market closing price for
the twenty trading days immediately preceding each dividend payment date. All
dividends accruing through June 30, 2003 on issued shares of the Companys
preferred stock have been paid, including Series D Preferred Stock dividends
payable to the Companys Chairman through June 30, 2003, having an aggregate
value at that time of approximately $0.5 million, paid to the Chairman in
January 2004 in the form of 148,713 shares of the Companys common stock,
following the Companys stockholders approval of the issuance of such shares.
Dividends on Series D Preferred Stock payable through June 30, 2004 in shares
of the Companys common stock under the terms of such issuance, have not been
declared by the board of directors. Under the Companys Articles of
Incorporation, if dividends on any class of its preferred stock are in arrears
in an amount equal to 150% of an annual dividend, the holders of such preferred
stock shall be entitled to vote for and elect two additional directors of the
Company. Such rights would thereby be afforded the holders of Series D
Preferred Stock if dividends accrued through June 30, 2004 are not paid by
December 31, 2006. 21




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##### Table of Contents



Dividends on Series E Preferred Stock are payable annually at an annual rate of
$90 per share in cash or in shares of the Companys common stock at the
holders option, except that the initial dividend on Series E Preferred Stock
is not payable until July 2005 on dividends accruing through June 30, 2005, or
upon a conversion of shares of Series E Preferred Stock to shares of the
Companys common stock, whichever is sooner. The amount of dividends accruing
through August 31, 2004 on the outstanding shares of Series E Preferred Stock
potentially payable in cash in the fiscal year ending August 31, 2005 is
approximately $0.9 million, including $0.5 million in connection with shares of
Series E Preferred Stock issued to the Companys Chairman. RESULTS OF CONTINUING OPERATIONS  FISCAL YEAR ENDED AUGUST 31, 2004
COMPARED TO FISCAL YEAR ENDED AUGUST 31, 2003 Results Derived from Operating Businesses - Operating results for the fiscal years ended August 31, 2004 and 2003 are summarized as follows
(amounts in $000s): Year EndedAugust 31,2004
    
    2003RevenuesCollegiate Marketing and Production Services
    
    $
    47,106
    
    
    $
    55,354Association Management Services
    
    
    8,673
    
    
    
    8,775$
    55,779
    
    
    $
    64,129Operating Costs and ExpensesDirect operating costs of services rendered
    
    $
    35,699
    
    
    $
    42,603Selling, general and administrative
    
    
    18,220
    
    
    
    20,397Amortization and impairment of acquisition intangibles
    
    
    4,554
    
    
    
    22,141$
    58,473
    
    
    $
    85,141Income (Loss) from OperationsCollegiate Marketing and Production Services
    
    $
    977
    
    
    $
    930Association Management Services
    
    
    2,009
    
    
    
    1,553Amortization and impairment of acquisition intangibles
    
    
    (4,554
    )
    
    
    (22,141
    )Unallocated general and administrative costs
    
    
    (1,126
    )
    
    
    (1,354
    )$
    (2,694
    )
    
    $
    (21,012
    )
 Total revenues and operating results for the Collegiate Marketing and
Production Services segment were impacted in the fiscal year ended August 31,
2004 by the termination of three university contractual
relationships at the end of the previous fiscal year. Such contracts generated
revenues of approximately $5.3 million during the fiscal year ended August 31,
2003 and generated operating profit of approximately $0.5 million during that
period. The change in total revenues of this segment was also affected by
certain printing, publishing and broadcasting projects and activities which
occurred in the prior year period but not in the current fiscal year. Total
revenues derived from printing, publishing, broadcasting and other integrated
media activities, net of the elimination of intercompany revenues, were
approximately $0.6 million less for the fiscal year ended August 31, 2004 than
the same period of the prior year. Additionally, revenues derived from NCAA
publications and related activities during the fiscal year ended August 31,
2004 were approximately $1.2 million less than the same period of the prior
fiscal year. Direct operating costs of services rendered decreased for the fiscal year ended
August 31, 2004 from the same period in the prior year due to (a) the
termination of certain contractual relationships as discussed previously, which
substantially contributed to a reduction in total 22




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##### Table of Contents



guaranteed rights fee and
profit split expenses of approximately $2.1 million; (b) the elimination of
approximately $1.5 million of other direct costs associated with the three
terminated university contracts; and (c) the reduction of approximately $0.7
million in production expenses associated with the printing, publishing and
broadcasting operations due to lower volume during the current year in
comparison with the prior fiscal year. Selling, general and administrative costs decreased for the fiscal year ended
August 31, 2004 compared to the same period in the prior fiscal year due a
general reduction in corporate overhead spending, including a decline in
employee compensation costs to approximately $12.1 million from approximately
$12.6 million and a decline in rent expense from $1.9 million to $1.4 million.
Administrative expenses of the Association Management Services segment declined
by $0.3 million on relatively consistent total revenues due primarily to
reductions in employee compensation costs, thereby contributing to an increase
in operating profit generated by the segment in comparison with the prior year. Amortization and impairment of acquisition intangibles in the fiscal year ended
August 31, 2004 included a goodwill impairment charge of $3.3 million based on
managements consideration of historical operating results and reevaluation of
the forecasted operating results and business plans for one of the Companys
business units. In the fiscal year ended August 31, 2003, amortization and
impairment of acquisition intangibles included a goodwill impairment charge of
approximately $21.0 million based on managements consideration of historical
operating results and reevaluation of the forecasted operating results and
business plans for each of the Companys business units. Results Derived from Investments and Derivative Instruments - Equity in losses of affiliated companies of approximately $0.2 million for the
fiscal year ended August 31, 2003 was derived from the Companys proportionate
share of the net losses reported by Gray and iHigh. The Companys sale of its
investment in Gray common stocks in August 2003 resulted in a gain to the
Company of approximately $17.2 million. As a result of Grays issuance of
common stock in October and November 2002 for average net proceeds to Gray of
approximately $7.72 per share, and since the Companys carrying value of its
investment in Gray common stocks prior to Grays issuance exceeded $7.72 per
share, the Company reported a non-cash loss of approximately $2.3 million on
Grays issuance of shares in the fiscal year ended August 31, 2003. In the fiscal year ended August 31, 2003, an investment valuation charge of
approximately $4.2 million was reported by the Company to reduce a non-trade
receivable from iHigh and the carrying value of the investment in iHigh to
zero. During the fiscal year ended August 31, 2003, the Company recorded
an investment valuation charge of approximately $1.0 million for the unrealized
loss on its investment in Rawlings. The amount of the charge was determined
based on the actual proceeds derived from the Companys sale of its investment
in Rawlings common stock in December 2002. The net change in the value of certain derivative instruments was approximately
$1.3 million for the fiscal year ended August 31, 2004 due to an increase in
the value of an interest rate swap agreement, and
approximately $(1.0) million for the fiscal year ended August 31, 2003 due to a
decline in the value of warrants for Gray common stock held by the Company
prior to the Companys sale of the warrants in April 2003, net of an increase
in the value of interest rate swap agreements as the agreements reached, in one
case, and approached, in the other case, the dates on which the agreements
terminate. The remaining interest rate swap agreement terminates on December
31, 2004. 23




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##### Table of Contents



Interest Expense and Debt Related Costs - Interest expense decreased to approximately $4.4 million for the fiscal year
ended August 31, 2004 from approximately $8.2 million for the same period in
the prior year, as a result of a reduction in long-term debt and declines in
variable interest rates to which a significant amount of the debt is subject. Debt issue cost amortization was approximately $1.2 million and $2.4 million
for the fiscal years ended August 31, 2004 and 2003, respectively. During the
fiscal year ended August 31, 2004, the Company issued approximately 805,000
shares of restricted common stock to the Chairman to compensate him for his
personal guarantee, then valued at approximately $0.9 million. During the
fiscal year ended August 31, 2003, the Company issued approximately 221,000
shares of restricted common stock to the Chairman to compensate him for his
personal guarantee, then valued at approximately $1.3 million. Amortization of
the value of all shares issued to the Chairman, of approximately $0.9 million
and $1.4 million, is included in debt issue cost amortization for the fiscal
years ended August 31, 2004 and 2003, respectively. Income Taxes - As of August 31, 2004, the Company had a net operating loss carryforward for
tax purposes of approximately $54 million to reduce Federal taxable income in
the future, and other tax credit carryforwards totaling approximately $0.6
million to reduce regular Federal income tax liabilities in the future. As of
August 31, 2004, the Company increased its valuation allowance for net deferred
tax assets by $4.2 million to $23.7 million, which, consistent with August 31,
2003, provides a full valuation allowance on the Companys net deferred tax
assets. In the prior fiscal year, the valuation allowance was increased by $5.2
million, which reduced the carrying amount of deferred taxes in the balance
sheet to zero. The principal differences between the federal statutory tax
rate of 34% and the effective tax rate are nondeductible goodwill impairment
charges, state income taxes and, the increase in the amount of the valuation
allowance. 24




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##### Table of Contents



RESULTS OF CONTINUING OPERATIONS  FISCAL YEAR ENDED AUGUST 31, 2003
COMPARED TO FISCAL YEAR ENDED JUNE 30, 2002 Results Derived from Operating Businesses - Operating results for the fiscal year ended August 31, 2003 and the fiscal year ended June 30,
2002 are summarized as follows (amounts in $000s): Year EndedAugust 31,
    
    June 30,2003
    
    2002RevenuesCollegiate Marketing and Production Services
    
    $
    55,354
    
    
    $
    79,099Association Management Services
    
    
    8,775
    
    
    
    14,714$
    64,129
    
    
    $
    93,813Operating Costs and ExpensesDirect operating costs of services rendered
    
    $
    42,603
    
    
    $
    75,567Selling, general and administrative
    
    
    20,397
    
    
    
    24,065Amortization and impairment of acquisition intangibles
    
    
    22,141
    
    
    
    7,707$
    85,141
    
    
    $
    107,339Income (Loss) from OperationsCollegiate Marketing and Production Services
    
    $
    930
    
    
    $
    (4,944
    )Association Management Services
    
    
    1,553
    
    
    
    1,275Amortization and impairment of acquisition intangibles
    
    
    (22,141
    )
    
    
    (7,707
    )Unallocated general and administrative costs
    
    
    (1,354
    )
    
    
    (2,150
    )$
    (21,012
    )
    
    $
    (13,526
    )
 Total revenues and operating results for the Collegiate Marketing and
Production Services segment were significantly affected by the termination of
the Companys contracts with NCAA corporate sponsors as of or prior to June 30,
2002. Likewise, total direct operating costs of services rendered for the
Collegiate Marketing and Production Services segment were substantially less,
due to the elimination of very significant guaranteed rights fee obligations
required of the Company under the Host-NCAA Contract in order to acquire NCAA
corporate marketing rights. The Company generated approximately $28 million in
revenue from sublicensing NCAA corporate marketing rights in the fiscal year
ended June 30, 2002, and none in the fiscal year ended August 31, 2003. Total revenues for the Association Management Services segment were also less
than in the fiscal year ended June 30, 2002 due to the termination of certain
contracts prior to the fiscal year ended August 31, 2003, which also resulted
in a decrease in the Companys direct operating costs. Direct operating costs of services rendered were significantly lower in the
fiscal year ended August 31, 2003 compared to the fiscal year ended June 30,
2002 due to (a) the aforementioned elimination of guaranteed rights fee expense
associated with the Host-NCAA Contract, which amounted to approximately $22.8
million in the fiscal year ended June 30, 2002; plus (b) net decreases of
approximately $7.5 million in other rights fees and profit split expenses
associated with other contracts within the Collegiate Marketing and Production
Services segment and the Association Management Services segment . Selling, general and administrative costs were significantly lower in the
fiscal year ended August 31, 2003 compared to the fiscal year ended June 30,
2002 due to a reduction in the Companys workforce and a reduction in travel
costs. Prior to the fiscal year ended August 31, 2003, the Company reduced its
workforce by eliminating certain positions, 25




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##### Table of Contents



reorganizing certain responsibilities and terminating certain projects that were not currently or
expected to generate an adequate operating profit. Total employee compensation costs included in
selling, general and administrative expense were approximately $12.6 million
for the fiscal year ended August 31, 2003 compared to approximately $14.6
million for the fiscal year ended June 30, 2002. Travel costs were
substantially reduced through efforts to operate more efficiently and control
travel spending. As a result, total travel expense included in selling,
general and administrative expense were approximately $0.7 million for the
fiscal year ended August 31, 2003 compared to approximately $0.9 million for
the fiscal year ended June 30, 2002. The increase in the amount of amortization and impairment of acquisition
intangibles in the fiscal year ended August 31, 2003 was due to the
previously-discussed impairment charge taken as of August 31, 2003. As a
result of the changes made to the Host-CBS Contract, the Company recorded an
impairment charge of $6.6 million at June 30, 2002 pertaining to the customer
relationship intangible asset, since such modifications significantly altered
the contractual nature of the Companys underlying relationship with the NCAA. Results Derived from Investments and Derivative Instruments - Equity in losses of affiliated companies, totaling approximately $0.2 million
for the fiscal years ended August 31, 2003 and approximately $2.9 million for
the fiscal year ended June 30, 2002 was derived from the Companys
proportionate share of the net earnings or losses reported by iHigh, and until
the Companys sale of its investment in August 2003, Gray. As previously
discussed, in the fiscal year ended August 31, 2003, the Company recognized a
gain on the sale of its investment in Gray common stocks of approximately $17.2
million, and reported a non-cash loss of approximately $2.3 million on Grays
issuance of shares. In the fiscal year ended June 30, 2002, the Company sold
its investment in Sarkes Tarzian, Inc., a media company, to Gray for $10
million, resulting in no gain or loss, and sold its remaining investments in
Gray preferred stocks to parties affiliated with the Companys Chairman for
approximately $6.8 million, resulting in a gain of approximately $3.1 million. As previously discussed, in the fiscal year ended August 31, 2003, the Company
reported an investment valuation charge of approximately $4.2 million
pertaining to its investment in iHigh and approximately $1.0 million in
connection with its prior investment in Rawlings. In the fiscal year ended June
30, 2002, the Company reported an investment valuation charge of approximately
$2.8 million in connection with an investment previously made by Host which
was, as of June 30, 2002, considered to have no value. The net change in the value of certain derivative instruments, currently
consisting of an interest rate swap agreement, and previously consisting of a
second interest rate swap agreement and warrants to purchase Gray common stocks
and, was approximately $(1.0) million for the fiscal year ended August 31, 2003
and $(3.3) million for the fiscal year ended June 30, 2002. The value of the
derivative instruments declined in each fiscal year as a result of a decline in
the value of the warrants during both periods, net of an increase in the value
of the interest rate swap agreements during the fiscal year ended August 31,
2003, and combined with a decrease in the value of the interest swap agreements
during the fiscal year ended June 30, 2002. Interest Expense and Debt Related Costs - Interest expense of approximately $8.2 million for the fiscal year ended August
31, 2003 was less than interest expense reported for the fiscal year ended June
30, 2002 of approximately $9.7 million, as a result of the reduction in
long-term debt and declines in variable interest rates on which a significant
amount of the debt was subject. 26




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##### Table of Contents



Debt issue cost amortization was approximately $2.4 million and $2.8 million
for the fiscal years ended August 31, 2003 and June 30, 2002, respectively.
During the fiscal year ended June 30, 2002, the Company issued approximately
106,000 shares of restricted common stock to the Companys Chairman to
compensate him for his personal guarantee, then valued at approximately $0.8
million, compared to 221,000 shares then valued at $1.3 million for the fiscal
year ended August 31, 2003, as previously discussed. Amortization of the value
of all shares issued to the Chairman of approximately $1.6 million for the fiscal year ended
June 30, 2002 and $1.4 million for the fiscal year ended August 31, 2003 is
included in debt issue cost amortization. Income Taxes - As previously discussed, the Company increased its valuation allowance for net
deferred tax assets as of August 31, 2003, reporting a tax provision of $5.2
million. The principal differences between the federal statutory tax rate of
34% and the effective tax rate are nondeductible goodwill impairment charges,
state income taxes and, the increase in the amount of the valuation allowance. RESULTS OF CONTINUING OPERATIONS  TWO MONTHS ENDED AUGUST 31, 2002 COMPARED TO
TWO MONTHS ENDED AUGUST 31, 2001 Results Derived from Operating Businesses - Operating results for the two months ended August 31,2002 and 2001 are summarized as follows (amounts in $000s): Two Months EndedAugust 31,2002
    
    2001(unaudited)RevenuesCollegiate Marketing and Production Services
    
    $
    3,307
    
    
    $
    5,838Association Management Services
    
    
    1,284
    
    
    
    2,015$
    4,591
    
    
    $
    7,853Operating Costs and ExpensesDirect operating costs of services rendered
    
    $
    2,854
    
    
    $
    5,233Selling, general and administrative
    
    
    3,766
    
    
    
    4,199Amortization of acquisition intangibles
    
    
    183
    
    
    
    150$
    6,803
    
    
    $
    9,582Income (Loss) from OperationsCollegiate Marketing and Production Services
    
    $
    (1,941
    )
    
    $
    (1,182
    )Association Management Services
    
    
    152
    
    
    
    47Amortization of acquisition intangibles
    
    
    (183
    )
    
    
    (150
    )Unallocated general and administrative costs
    
    
    (240
    )
    
    
    (444
    )$
    (2,212
    )
    
    $
    (1,729
    )
 Total revenues and operating results for the Collegiate Marketing and
Production Services segment were impacted in the two months ended August 31,
2002 by the previously-discussed termination of the Companys contracts with
NCAA corporate sponsors as of or prior to June 30, 2002. In the two months
ended August 31, 2001, the Company recognized revenues of approximately $2.5
million and $2.0 million in guaranteed rights fee expense in connection with
NCAA corporate sponsorships and the Host-NCAA Contract. No such revenue or
expense was recognized in the two months ended August 31, 2002. Total revenues
for the Association Management Services segment declined due to the termination
of certain contracts in 2001, which also caused a similar decline in the
Companys direct operating costs. The termination of these contracts resulted
in a nominal increase in 27




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##### Table of Contents



operating profit derived from the Association
Management Services segment for the periods presented. The decline in direct operating costs rendered for the two months ended August
31, 2002 from the amount reported for the same period in the prior year was due
to (a) the elimination of the guaranteed rights fee expense associated with the
Host-NCAA Contract, less (b) increases in other rights fees and profit split
expenses of approximately $0.2 million, less (c) increases in the direct costs
of publishing and printing and compensation costs charged as direct expenses. Selling, general and administrative costs declined for the two months ended
August 31, 2002 from the same period in the prior fiscal year due to a
reduction in the Companys workforce and a decrease in travel costs. During the
fiscal year ended June 30, 2002, the Company reduced its workforce by
eliminating certain positions, reorganizing certain responsibilities and
terminating certain projects that were not currently or expected to generate an
adequate operating profit. Total employee compensation costs included in
selling, general and administrative expense were approximately $2.6 million for
the two months ended August 31, 2002 compared to approximately $2.8 million for
the same period in the prior year. Results Derived from Investments and Derivative Instruments - Equity in losses of affiliated companies, totaling approximately $0.1 million
for the two months ended August 31, 2002 and approximately $0.6 million for the
two months ended August 31, 2001 was derived
from the Companys proportionate share of the net earnings or losses reported
by Gray, iHigh, and until December 31, 2001, Rawlings. Subsequent to December
31, 2001, the Company accounted for its investment in Rawlings as an
available-for-sale marketable security until the investment was sold in
December 2002. Interest and dividend income of approximately $0.7 million for the two months
ended August 31, 2002 was primarily attributable to interest earned on income
tax refunds received by the Company in August 2002 pertaining to amended
federal income tax returns. Interest and dividend income of approximately $0.1
million for the two months ended August 31, 2001 was primarily attributable to
dividends earned on the Companys investment in shares of Gray series A and
series B preferred stock, all of which were sold in September 2001. The net change in the value of certain derivative instruments, consisting of
warrants to purchase Gray common stocks and interest rate swap agreements, was
approximately $(0.4) million and $(0.6) million for the two months ended August
31, 2002 and 2001, respectively. The value of the derivative instruments
declined during these periods as a result of declines in the values of the
interest rate swap agreements. Other income for the two months ended August 31, 2001 consisted primarily of
income from an option agreement with Gray whereby Gray had the right to acquire
the Companys investment in Tarzian. Interest Expense and Debt Related Costs - Interest expense decreased to approximately $1.5 million for the two months
ended August 31, 2002 compared to approximately $1.7 million for the same
period in the prior year, as a result of a reduction in long-term debt and
declines in variable interest rates to which a significant amount of the debt
is subject. Debt issue cost amortization was approximately $0.3 million and $0.4 million
for the two months ended August 31, 2002 and 2001, respectively. 28




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##### Table of Contents



Income Taxes - The principal differences between the federal statutory tax rate of 34% and the
effective tax rate are state income taxes and, for the two months ended August
31, 2002, an increase in the amount of the valuation allowance. RESULTS OF DISCONTINUED OPERATIONS Results derived from the Companys discontinued operations for each of the
fiscal years ended August 31, 2004, August 31, 2003 and June 30, 2002, and the
two months ended August 31, 2002 and August 31, 2001 are summarized as follows
(amounts in 000s): Year Ended
    
    Two Months Ended
    
    Year EndedAugust 31,
    
    August 31,
    
    June 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)RevenuesAffinity Events
    
    $
    10,843
    
    
    $
    14,052
    
    
    $
    4,899
    
    
    $
    4,921
    
    
    $
    19,248Consulting
    
    
    
    
    
    
    5,664
    
    
    
    
    
    
    
    3
    
    
    
    11$
    10,843
    
    
    $
    19,716
    
    
    $
    4,899
    
    
    $
    4,924
    
    
    $
    19,259Costs and ExpensesAffinity Events:Direct operating costs of services rendered
    
    $
    9,020
    
    
    $
    12,467
    
    
    $
    4,411
    
    
    $
    2,849
    
    
    $
    12,964Selling, general and administrative
    
    
    9,297
    
    
    
    5,481
    
    
    
    1,877
    
    
    
    1,955
    
    
    
    8,708Amortization and impairment of acquisition
intangibles
    
    
    
    
    
    
    9,615
    
    
    
    20
    
    
    
    21
    
    
    
    117$
    18,317
    
    
    $
    27,563
    
    
    $
    6,308
    
    
    $
    4,825
    
    
    $
    21,789Income (Loss) from Discontinued OperationsAffinity Events
    
    $
    (7,474
    )
    
    $
    (3,896
    )
    
    $
    (1,389
    )
    
    $
    117
    
    
    $
    (2,424
    )Consulting
    
    
    
    
    
    
    5,664
    
    
    
    
    
    
    
    3
    
    
    
    11Amortization and impairment of acquisition
intangibles
    
    
    
    
    
    
    (9,615
    )
    
    
    (20
    )
    
    
    (21
    )
    
    
    (117
    )Datasouth
    
    
    
    
    
    
    (1,695
    )Income tax benefit (provision)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    250$
    (7,474
    )
    
    $
    (9,542
    )
    
    $
    (1,409
    )
    
    $
    62
    
    
    $
    (2,280
    )
 Total revenues and direct operating costs for the Affinity Events business
segment were lower in the fiscal year ended August 31, 2004 than in earlier
fiscal years due to the reduction in the number of Hoop-It-Up events held
during the tour year to 15 events in the most recent fiscal year compared to 40
or more in prior years. As a result of the change, total revenues from
Hoop-It-Up were approximately $4.0 million less in the fiscal year ended August
31, 2004 compared to the fiscal year ended August 31, 2003 and total direct
operating costs incurred for Hoop-It-Up were approximately $3.1 million less in
the fiscal year ended August 31, 2004 compared to the fiscal year ended August
31, 2003. Total revenues were lower in the fiscal year ended August 31, 2003 than in the
fiscal year ended June 30, 2002 due to the elimination of certain
non-profitable tours and events prior to the fiscal year ended August 31, 2003,
and a reduction in national sponsorship sales and team entry fees for the
Companys basketball and soccer event tours. In the two months ended August 31, 2002, the Company terminated its basketball
tour in Europe, closing its Paris, France office, and combined the management
of all of the Companys Affinity Events soccer and basketball tours in Dallas,
Texas, thereby resulting in 29




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##### Table of Contents



the closing of the Companys Denver, Colorado
office. As a result, the Company incurred approximately $0.7 million during
the period for restructuring costs associated with employee severance and lease
obligations. General and administrative costs for the fiscal year ended August 31, 2004
include approximately $2.7 million in restructuring charges associated with the
termination of the Affinity Events business. Such charges include the costs of
remaining lease obligations for the Companys Dallas and New York City offices,
which have been vacated, net of contracted and estimated future sublease
income; the remaining costs for multi-year consulting agreements under which
the Company no longer expects to benefit; severance costs for terminated
employees; and other costs of terminating operations and offering the business
for sale. The charges have been reduced by the estimated amount of proceeds to
be ultimately derived from the sale of assets of the Affinity Events segment.
To the extent that terms of the Companys sublease arrangements on its vacant
facilities differ from the amounts estimated, and to the extent the Company
receives proceeds on a sale or sales of the assets associated with the Affinity Events
business in amounts different from those estimated, such amounts would be
reported as income or loss from discontinued operations in future periods. In the fiscal year ended August 31, 2003, amortization and impairment of
acquisition intangibles included an impairment charge attributable to Affinity
Events acquisition intangibles, of approximately $9.5 million (of which,
approximately $2.5 million was attributable to goodwill, $6.5 million to
trademarks and $0.5 million to customer relationships) based on managements
consideration of historical operating results and reevaluation of the
forecasted operating results and business plans for each of the Companys
business units. During the fiscal year ended August 31, 2003, the Company recognized as income
a $5 million consulting fee from Gray for services performed in connection with
Grays acquisition of Stations Holding Company, Inc. (Stations), which was
consummated in October 2002. Also in October 2002, Gray completed a public
offering of its common stock, and in November 2002, Gray issued additional
shares of its common stock. These issuances of common stock by Gray resulted in
a reduction of the Companys equity investment in Grays outstanding common
stock from 12.9% to 4.0% (representing 18.0% of the voting rights). In August
2003, the Company sold its investment in Gray common stocks. As a result of
these transactions by Gray, and ultimately as a result of the Companys
disposition of its ownership position in Gray, the Company recognized
previously deferred consulting fee income of $5 million in the fiscal year
ended August 31, 2003 attributable to Grays acquisition of Stations, plus
approximately $0.7 million of previously deferred consulting fee income. The Company sold the operations of Datasouth in September 2000 for cash and a
subordinated note receivable issued by the purchaser. Accordingly, the
operating results and net assets associated with Datasouths computer printer
manufacturing business have been reported as discontinued operations in the
accompanying financial statements for all periods presented. As of August 31,
2004, the carrying amount of the subordinated note receivable, net of reserve,
was approximately $1.2 million. An impairment charge of approximately $1.7
million was reported as a loss from discontinued operations was taken by the
Company at August 31, 2003 to reduce the carrying amount of the subordinated
note receivable to the estimated net realizable value as of that date. To the
extent actual proceeds on the note differ from carrying amount of the note
receivable, such differences will be reported as income or loss from
discontinued operations in future periods. 30




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##### Table of Contents



INTEREST RATE AND MARKET RATE RISK The Company is exposed to changes in interest rates due to the Companys
financing of its acquisitions, investments and operations. Interest rate risk
is present with both fixed and floating rate debt. The Company uses interest
rate swap agreements to manage its debt profile. Interest rate swap agreements
generally involve exchanges of underlying face (notional) amounts of designated
hedges. The Company continually evaluates the credit quality of counterparties
to interest rate swap agreements and does not believe there is a significant
risk of nonperformance by any of the counterparties to the agreements. Based on the Companys debt profile as of each fiscal year end, a 1% increase
in market interest rates would increase interest expense and decrease the
income before income taxes (or alternatively, increase interest expense and
increase the loss before income taxes) by approximately $0.3 million and $0.5
million for the fiscal years ended August 31, 2004 and 2003, respectively; $0.1
million for each of the two months ended August 31, 2002 and 2001; and $0.5
million for the fiscal year ended June 30, 2002. These amounts were determined
by calculating the effect of the hypothetical interest rate on the Companys
floating rate debt, after giving effect to the Companys interest rate swap
agreements. These amounts do not include the effects of certain potential
results of increased interest rates, such as a reduced level of overall
economic activity or other actions management may take to mitigate the risk.
Furthermore, this sensitivity analysis does not assume changes in the Companys
financial structure that could occur if interest rates were higher. FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report,
the words believes, expects, anticipates, estimates and similar words
and expressions are generally intended to identify forward-looking statements.
Statements that describe the Companys future strategic plans, goals or
objectives are also forward-looking statements. Readers of this Report are
cautioned that any forward-looking statements, including those regarding the
intent, belief or current expectations of the Company or management, are not
guarantees of future performance, results or events, and involve risks and
uncertainties. The forward-looking statements included in this report are made
only as of the date hereof. The Company undertakes no obligation to update
such forward-looking statements to reflect subsequent events or circumstances.
Actual results and events may differ materially from those in the
forward-looking statements as a result of various factors including, but not
limited to the following: (i) the Companys leverage and/or operating results
may adversely affect its ability to obtain new financing or extend its current
bank credit agreement beyond the November 30, 2005 maturity date under terms
acceptable to the Company and its bank lenders, thereby impairing the Companys
ability to withstand economic downturns or competitive pressures; (ii) the
delisting of the Companys common stock from the Nasdaq SmallCap Market may
hinder the Companys ability to raise new capital through the issuance of
equity securities; (iii) significant segments of the Companys business are
seasonal; (iv) the Companys business depends on short term contracts and the
inability to renew or extend these contracts could adversely affect its
business; (v) the Company may lose money on some of its contracts, because it
guarantees certain payments thereunder; and (vi) war or acts of terrorism or a
domestic economic downturn or recession could materially adversely impact
corporate discretionary spending, such as sponsorships and advertising sold by
the Company. 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk See Interest Rate and Market Rate Risk in Item 7 of this Form 10-K. 31




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data Consolidated Financial Statements of Bull Run Corporation: PageReport of Independent Registered Accounting Firm
    
    
    33Consolidated Balance Sheets as of August 31, 2004 and 2003
    
    
    34Consolidated Statements of Operations for the years ended August 31, 2004
and 2003, two months ended August 31, 2002 and 2001 (unaudited), and
the year ended June 30, 2002
    
    
    35Consolidated Statements of Redeemable Preferred Stock and Stockholders
Deficit for the years ended August 31, 2004 and 2003, the two months
ended August 31, 2002 and 2001 (unaudited), and the year ended
June 30, 2002
    
    
    36Consolidated Statements of Cash Flows for the years ended August 31, 2004
and 2003, two months ended August 31, 2002 and 2001 (unaudited), and
the year ended June 30, 2002
    
    
    37Notes to Consolidated Financial Statements
    
    
    38Selected Quarterly Financial Data (Unaudited)
    
    
    62
 32




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM BOARD OF DIRECTORS AND STOCKHOLDERS OF BULL RUN CORPORATION: In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, redeemable preferred stock and
stockholders deficit and cash flows present fairly, in all material respects,
the financial position of Bull Run Corporation at August 31, 2004 and 2003, and
the results of its operations and its cash flows for the years ended August 31,
2004 and 2003, the two months ended August 31, 2002 and the year ended June 30,
2002 in conformity with accounting principles generally accepted in the United
States of America. 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 of these
statements in accordance with auditing 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion. As discussed in Note 2, approximately $59 million of the Companys outstanding
debt matures in November 2005. PRICEWATERHOUSECOOPERS LLP Louisville, Kentucky
November 19, 2004 33




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##### Table of Contents



BULL RUN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands) August 31,2004
    
    2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    450
    
    
    $
    4,520Accounts receivable, net of allowance of $309 and $465
as of August 31, 2004 and 2003, respectively
    
    
    5,219
    
    
    
    7,611Inventories
    
    
    663
    
    
    
    377Prepaid costs and expenses
    
    
    1,757
    
    
    
    1,270Total current assets
    
    
    8,089
    
    
    
    13,778Property and equipment, net
    
    
    3,184
    
    
    
    3,845Goodwill
    
    
    40,364
    
    
    
    43,664Customer relationships and trademarks
    
    
    8,308
    
    
    
    9,562Other assets
    
    
    997
    
    
    
    777Net noncurrent assets of discontinued segment
    
    
    
    
    
    
    2,186$
    60,942
    
    
    $
    73,812LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    590
    
    
    $
    590Accounts payable
    
    
    5,866
    
    
    
    9,609Deferred revenue
    
    
    4,819
    
    
    
    5,307Accrued fees payable to related party
    
    
    1,721Advances from stockholder
    
    
    4,550Accrued and other liabilities
    
    
    9,215
    
    
    
    8,831Net current liabilities of discontinued segment
    
    
    474
    
    
    
    1,475Total current liabilities
    
    
    27,235
    
    
    
    25,812Long-term debt
    
    
    64,625
    
    
    
    72,641Other liabilities, excluding redeemable preferred stock
    
    
    497
    
    
    
    2,361Net noncurrent liabilities of discontinued segment
    
    
    840Redeemable preferred stock:Series D preferred stock, $.01 par value (authorized 100 shares;
issued and outstanding 12.5 shares; $12,497 liquidation value)
    
    
    12,497Series E preferred stock, $.01 par value (authorized 25 shares;
issued and outstanding 9.8 shares; $9,799 liquidation value)
    
    
    9,799Series F preferred stock, $.01 par value (authorized 25 shares;
issued and outstanding 2.0 shares; $2,000 liquidation value)
    
    
    2,000Total liabilities
    
    
    117,493
    
    
    
    100,814Commitments and contingenciesStockholders deficit:Series D preferred stock, $.01 par value (issued and outstanding
14.3 shares; $14,280 liquidation value)
    
    
    
    
    
    
    14,280Common
stock, $.01 par value (authorized 100,000 shares; issued
5,386 and 4,324 shares as of August 31, 2004 and 2003, respectively)
    
    
    54
    
    
    
    43Additional paid-in capital
    
    
    81,706
    
    
    
    80,138Accumulated deficit
    
    
    (138,311
    )
    
    
    (121,463
    )Total stockholders deficit
    
    
    (56,551
    )
    
    
    (27,002
    )$
    60,942
    
    
    $
    73,812
 The accompanying notes are an integral part of these consolidated financial statements. 34




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##### Table of Contents



BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data) Year Ended
    
    Two Months Ended
    
    Year EndedAugust 31,
    
    August 31,
    
    June 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Revenue from services rendered
    
    $
    55,779
    
    
    $
    64,129
    
    
    $
    4,591
    
    
    $
    7,853
    
    
    $
    93,813Operating costs and expenses:Direct operating costs of services rendered
    
    
    35,699
    
    
    
    42,603
    
    
    
    2,854
    
    
    
    5,233
    
    
    
    75,567Selling, general and administrative
    
    
    18,220
    
    
    
    20,397
    
    
    
    3,766
    
    
    
    4,199
    
    
    
    24,065Amortization and impairment of acquisition intangibles
    
    
    4,554
    
    
    
    22,141
    
    
    
    183
    
    
    
    150
    
    
    
    7,70758,473
    
    
    
    85,141
    
    
    
    6,803
    
    
    
    9,582
    
    
    
    107,339Operating loss
    
    
    (2,694
    )
    
    
    (21,012
    )
    
    
    (2,212
    )
    
    
    (1,729
    )
    
    
    (13,526
    )Other income (expense):Equity in losses of affiliated companies
    
    
    
    
    
    
    (204
    )
    
    
    (110
    )
    
    
    (554
    )
    
    
    (2,912
    )Loss on issuance of shares by affiliate
    
    
    
    
    
    
    (2,339
    )Gain on disposition of investments
    
    
    
    
    
    
    17,150
    
    
    
    
    
    
    
    
    
    
    
    3,064Reduction in valuation of investment in affiliates
    
    
    
    
    
    
    (5,189
    )
    
    
    
    
    
    
    (250
    )
    
    
    (2,822
    )Net change in value of certain derivative instruments
    
    
    1,294
    
    
    
    (1,035
    )
    
    
    (423
    )
    
    
    (632
    )
    
    
    (3,345
    )Interest and dividend income
    
    
    6
    
    
    
    12
    
    
    
    652
    
    
    
    99
    
    
    
    151Interest expense
    
    
    (4,422
    )
    
    
    (8,179
    )
    
    
    (1,505
    )
    
    
    (1,729
    )
    
    
    (9,713
    )Debt issue cost amortization
    
    
    (1,171
    )
    
    
    (2,367
    )
    
    
    (269
    )
    
    
    (434
    )
    
    
    (2,830
    )Other income (expense)
    
    
    (150
    )
    
    
    (59
    )
    
    
    (79
    )
    
    
    116
    
    
    
    350Loss from continuing operations before income
taxes and cumulative effect
    
    
    (7,137
    )
    
    
    (23,222
    )
    
    
    (3,946
    )
    
    
    (5,113
    )
    
    
    (31,583
    )Income tax (provision) benefit
    
    
    
    
    
    
    (5,222
    )
    
    
    
    
    
    
    1,623
    
    
    
    1,925Loss from continuing operations before
cumulative effect, net of tax
    
    
    (7,137
    )
    
    
    (28,444
    )
    
    
    (3,946
    )
    
    
    (3,490
    )
    
    
    (29,658
    )Cumulative effect of accounting change, net of tax
benefit of $1,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,620
    )Loss from continuing operations
    
    
    (7,137
    )
    
    
    (28,444
    )
    
    
    (3,946
    )
    
    
    (3,490
    )
    
    
    (32,278
    )Loss from discontinued operations, net of tax
    
    
    (7,474
    )
    
    
    (9,542
    )
    
    
    (1,409
    )
    
    
    62
    
    
    
    (2,280
    )Net loss
    
    
    (14,611
    )
    
    
    (37,986
    )
    
    
    (5,355
    )
    
    
    (3,428
    )
    
    
    (34,558
    )Preferred dividends
    
    
    (2,237
    )
    
    
    (1,149
    )
    
    
    (93
    )
    
    
    (45
    )
    
    
    (396
    )Net loss available to common stockholders
    
    $
    (16,848
    )
    
    $
    (39,135
    )
    
    $
    (5,448
    )
    
    $
    (3,473
    )
    
    $
    (34,954
    )Loss per share available to common stockholders, basic and diluted:Loss from continuing operations before cumulative
effect adjustment
    
    $
    (2.01
    )
    
    $
    (7.42
    )
    
    $
    (1.07
    )
    
    $
    (0.98
    )
    
    $
    (8.24
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.72
    )Loss from discontinued operations
    
    
    (1.60
    )
    
    
    (2.40
    )
    
    
    (0.37
    )
    
    
    0.02
    
    
    
    (0.62
    )$
    (3.61
    )
    
    $
    (9.82
    )
    
    $
    (1.44
    )
    
    $
    (0.96
    )
    
    $
    (9.58
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    4,668
    
    
    
    3,987
    
    
    
    3,793
    
    
    
    3,599
    
    
    
    3,649
 The accompanying notes are an integral part of these consolidated financial statements. 35




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BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS DEFICIT
(Amounts in thousands) Redeemable Preferred
    
    Preferred
    
    Common StockStock
    
    Stock
    
    Shares
    
    AmountAs of July 1, 2001
    
    $
    
    
    
    $
    2,178
    
    
    
    3,653
    
    
    $
    37Exchange of Series A preferred stock
and warrants for Series B preferred stock
    
    
    3,000
    
    
    
    (2,178
    )Issuance of Series B preferred stock
    
    
    2,400Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    152
    
    
    
    1Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    0As of June 30, 2002
    
    $
    5,400
    
    
    $
    0
    
    
    
    3,811
    
    
    $
    38Issuance of Series C preferred stock
    
    
    
    
    
    
    4,097Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    0As of August 31, 2002
    
    $
    5,400
    
    
    $
    4,097
    
    
    
    3,855
    
    
    $
    38Cancellation of treasury stock
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (1
    )Exchange of Series B and C preferred stock and
subordinated notes for Series D preferred
stock
    
    
    (5,400
    )
    
    
    7,183Issuance of Series D preferred stock
    
    
    
    
    
    
    3,000Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    463
    
    
    
    5Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    1As of August 31, 2003
    
    $
    0
    
    
    $
    14,280
    
    
    
    4,324
    
    
    $
    43Exchange of subordinated notes and Series D
preferred stock for Series E preferred
stock
    
    
    
    
    
    
    8,016Issuance of Series F preferred stock
    
    
    
    
    
    
    2,000Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    1,062
    
    
    
    11Reclassify preferred stock to redeemable
preferred stock
    
    
    24,296
    
    
    
    (24,296
    )As of August 31, 2004
    
    $
    24,296
    
    
    $
    0
    
    
    
    5,386
    
    
    $
    54
 Other
    
    Retained
    
    TotalAdditional
    
    
    
    
    
    Comprehensive
    
    Earnings
    
    StockholdersPaid-In
    
    Treasury
    
    Accumulated
    
    (Accumulated
    
    EquityCapital
    
    Stock
    
    Loss
    
    Deficit)
    
    (Deficit)As of July 1, 2001
    
    $
    78,708
    
    
    $
    (1,393
    )
    
    $
    
    
    
    $
    (41,926
    )
    
    $
    37,604Exchange of Series A preferred stock
and warrants for Series B preferred stock
    
    
    (822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Issuance of common stock
    
    
    1,102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,103Exercise of stock options
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (2,080
    )
    
    
    
    
    
    
    (2,080
    )Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    
    (396
    )Net loss, restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,558
    )
    
    
    (34,558
    )As of June 30, 2002
    
    $
    79,041
    
    
    $
    (1,393
    )
    
    $
    (2,080
    )
    
    $
    (76,880
    )
    
    $
    (1,274
    )Issuance of Series C preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,097Issuance of common stock
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    407Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    30Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93
    )
    
    
    (93
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,355
    )
    
    
    (5,355
    )As of August 31, 2002
    
    $
    79,448
    
    
    $
    (1,393
    )
    
    $
    (2,050
    )
    
    $
    (82,328
    )
    
    $
    (2,188
    )Cancellation of treasury stock
    
    
    (1,392
    )
    
    
    1,393
    
    
    
    
    
    
    
    
    
    
    
    0Exchange of Series B and C preferred stock and
subordinated notes for Series D preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,183Issuance of Series D preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Issuance of common stock
    
    
    2,257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,262Exercise of stock options
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207Tax effect of nonqualified stock options
    
    
    (381
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (381
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    2,050
    
    
    
    
    
    
    
    2,050Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,149
    )
    
    
    (1,149
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,986
    )
    
    
    (37,986
    )As of August 31, 2003
    
    $
    80,138
    
    
    $
    0
    
    
    $
    0
    
    
    $
    (121,463
    )
    
    $
    (27,002
    )Exchange of subordinated notes and Series D
preferred stock for Series E preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,016Issuance of Series F preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000Issuance of common stock
    
    
    1,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,579Reclassify preferred stock to redeemable
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,296
    )Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,237
    )
    
    
    (2,237
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,611
    )
    
    
    (14,611
    )As of August 31, 2004
    
    $
    81,706
    
    
    $
    0
    
    
    $
    0
    
    
    $
    (138,311
    )
    
    $
    (56,551
    )
 The accompanying notes are an integral part of these consolidated financial statements. 36




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##### Table of Contents



BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands) Year Ended
    
    Two Months Ended
    
    Year
Ended
June 30,August 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Cash flows from operating activities:Net loss
    
    $
    (14,611
    )
    
    $
    (37,986
    )
    
    $
    (5,355
    )
    
    $
    (3,428
    )
    
    $
    (34,558
    )Loss (income) from discontinued operations
    
    
    7,474
    
    
    
    9,542
    
    
    
    1,409
    
    
    
    (62
    )
    
    
    2,280Adjustments to reconcile net loss to net cash used in
continuing operations:Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,620Provision for bad debts
    
    
    75
    
    
    
    300
    
    
    
    85
    
    
    
    61
    
    
    
    630Depreciation, amortization and intangibles impairment
    
    
    6,871
    
    
    
    35,326
    
    
    
    764
    
    
    
    873
    
    
    
    12,270Equity in (earnings) losses of affiliated companies
    
    
    
    
    
    
    204
    
    
    
    110
    
    
    
    554
    
    
    
    2,912Loss on issuance of shares by affiliate
    
    
    
    
    
    
    2,339Dividends received from affiliated company
    
    
    
    
    
    
    162
    
    
    
    41Other expense (income) derived from investment in
affiliates, net
    
    
    
    
    
    
    (11,906
    )
    
    
    
    
    
    
    250
    
    
    
    (120
    )Net change in value of derivative instruments
    
    
    (1,294
    )
    
    
    1,035
    
    
    
    423
    
    
    
    632
    
    
    
    3,345Deferred income taxes
    
    
    
    
    
    
    5,222
    
    
    
    
    
    
    
    (1,623
    )
    
    
    (2,175
    )Change in operating assets and liabilities:Accounts receivable
    
    
    2,317
    
    
    
    485
    
    
    
    2,413
    
    
    
    (4,042
    )
    
    
    9,839Inventories
    
    
    (286
    )
    
    
    622
    
    
    
    (366
    )
    
    
    (179
    )
    
    
    (223
    )Prepaid costs and expenses
    
    
    (611
    )
    
    
    (10
    )
    
    
    15
    
    
    
    (1,570
    )
    
    
    382Accounts payable and accrued expenses
    
    
    (3,770
    )
    
    
    2,588
    
    
    
    (2,360
    )
    
    
    6,141
    
    
    
    (5,636
    )Other long-term liabilities
    
    
    (295
    )
    
    
    (1,092
    )
    
    
    (652
    )
    
    
    (137
    )
    
    
    (1,276
    )Net cash provided by (used in) continuing operations
    
    
    (4,130
    )
    
    
    6,831
    
    
    
    (3,473
    )
    
    
    (2,530
    )
    
    
    (9,710
    )Net cash provided by (used in) discontinued operations
    
    
    (6,363
    )
    
    
    (11,918
    )
    
    
    (522
    )
    
    
    60
    
    
    
    4,262Net cash used in operating activities
    
    
    (10,493
    )
    
    
    (5,087
    )
    
    
    (3,995
    )
    
    
    (2,470
    )
    
    
    (5,448
    )Cash flows from investing activities:Capital expenditures
    
    
    (384
    )
    
    
    (230
    )
    
    
    (44
    )
    
    
    (52
    )
    
    
    (235
    )Investment in affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (705
    )Proceeds on dispositions of investments
    
    
    
    
    
    
    46,183
    
    
    
    
    
    
    
    
    
    
    
    16,803Other investing activities
    
    
    (149
    )
    
    
    (663
    )
    
    
    (22
    )
    
    
    (22
    )
    
    
    (103
    )Net cash provided by (used in) continuing operation
investing activities
    
    
    (533
    )
    
    
    45,290
    
    
    
    (66
    )
    
    
    (74
    )
    
    
    15,760Net cash provided by (used in) discontinued operation
investing activities
    

    
    447
    
    
    
    (117
    )
    
    
    (37
    )
    
    
    981
    
    
    
    774Net cash provided by (used in) investing activities
    
    
    (86
    )
    
    
    45,173
    
    
    
    (103
    )
    
    
    907
    
    
    
    16,534Cash flows from financing activities:Borrowings from notes payable and revolving line of credit
    
    
    
    
    
    
    5,175
    
    
    
    4,000
    
    
    
    1,350
    
    
    
    22,950Cash advances made by stockholder
    
    
    4,550Repayments on notes payable and revolving line of credit
    
    
    
    
    
    
    (5,000
    )
    
    
    (150
    )
    
    
    (2,000
    )
    
    
    (17,350
    )Repayments on long-term debt
    
    
    
    
    
    
    (38,000
    )
    
    
    
    
    
    
    (1,050
    )
    
    
    (20,793
    )Debt issue costs
    
    
    (41
    )
    
    
    (1,345
    )
    
    
    (8
    )
    
    
    (460
    )
    
    
    (680
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350Exercise of stock options
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    35
    
    
    
    53Issuance of preferred stock
    
    
    2,000
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    2,400Net cash provided by (used in) continuing operation
financing activities
    
    
    6,509
    
    
    
    (35,963
    )
    
    
    3,842
    
    
    
    (2,125
    )
    
    
    (13,070
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (4,070
    )
    
    
    4,123
    
    
    
    (256
    )
    
    
    (3,688
    )
    
    
    (1,984
    )Cash and cash equivalents, beginning of period
    
    
    4,520
    
    
    
    397
    
    
    
    653
    
    
    
    2,637
    
    
    
    2,637Cash and cash equivalents, end of period
    
    $
    450
    
    
    $
    4,520
    
    
    $
    397
    
    
    $
    (1,051
    )
    
    $
    653
 The accompanying notes are an integral part of these consolidated financial statements. 37




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##### Table of Contents



BULL RUN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Bull Run Corporation (Bull Run, and collectively with its subsidiaries, the
Company), based in Atlanta, Georgia, is a sports and affinity marketing,
printing and publishing, and association management company through its sole
operating business, Host Communications, Inc. (Host), acquired in December
1999 (the Host-USA Acquisition). Hosts Collegiate Marketing and Production
Services business segment provides sports marketing and production services to
a number of collegiate conferences and universities, and on behalf of the
National Collegiate Athletic Association (NCAA). Hosts Association
Management Services business segment provides various associations with
services such as member communication, recruitment and retention, conference
planning, Internet web site management, marketing and administration. The Company previously held significant investments in Gray Television, Inc.
(Gray), an owner and operator of television stations and newspapers whose
executive officers are also executive officers of the Company, and Rawlings
Sporting Goods Company, Inc. (Rawlings), a supplier of team sports equipment.
The Companys investments in Gray and Rawlings were sold during the fiscal
year ended August 31, 2003. The Company currently holds an investment in
iHigh, Inc. (iHigh), a company that provides marketing services and programs
in connection with high school sports and activities. In August 2004, the Company announced its intent to suspend and sell its
Affinity Events business segment due to the segments historical operating
losses and the Companys intention to focus on its Collegiate Marketing and
Production Services segment and its Association Management segment. As a
result, the Affinity Events segment has been reflected in the Companys
financial statements as a discontinued operation. In January 2004, the Company determined that that it would not be engaged in
providing consulting services to Gray or any other party in the future.
Previously, the Company periodically provided consulting services to Gray in
connection with Grays acquisitions and dispositions. As a result, the
Consulting segment has likewise been reflected in the Companys financial
statements as a discontinued operation. Effective August 31, 2002, the Company changed its fiscal year end from June 30
to August 31. All amounts appearing in the consolidated financial statements
and these notes to the consolidated financial statements for the two months
ended August 31, 2001 are unaudited. Unless otherwise indicated, amounts provided in these notes to the consolidated
financial statements pertain to continuing operations. 2. LIQUIDITY As of August 31, 2004, the Companys negative working capital was $19,146. The
Company has reported substantial losses and has consumed substantial cash in
its operations. The Company has funded its liquidity needs through the sale of
investments, the issuance of preferred stock and other cash advances made by
the Companys majority stockholder and Chairman of the board. Based upon (a)
the Companys forecasted operating 38




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##### Table of Contents



cash flows and capital expenditures for its
fiscal year ending August 31, 2005; (b) $3,000 of cash proceeds received from
new debt financing; (c) $1,500 of cash proceeds received from the issuance of a
subordinated note payable to a company controlled by the Chairman; and (d) a
commitment from the Chairman to invest cash of up to $3,000 prior to the
November 30, 2005 maturity date of the Companys bank credit
agreement (from which, $1,500 is expected to be used to repay the subordinated
note), management believes the Company has sufficient liquidity through at
least the November 30, 2005 maturity date of its bank credit agreement. As further discussed in Note 10, the Company had $55,932 of debt outstanding as
of August 31, 2004 under its bank credit agreement, and increased the amount of
outstanding debt to $58,932 in October 2004. As further discussed in Note 10,
the Companys Chairman has guaranteed repayment of up to $55.932 of the
outstanding bank debt. Amounts outstanding under the credit agreement are due
on November 30, 2005. The Companys ability to continue this or similar
financing beyond the November 30, 2005 maturity date is significantly dependent
on the continued support of the Companys Chairman and, in part, on the
Companys future operating results. There can be no assurances with respect to
either the Companys future operating results or the continued support of its
Chairman. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial
statements include the accounts of Bull Run and its wholly owned subsidiaries,
after elimination of intercompany accounts and transactions. Use of Estimates The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates. Reclassifications Certain amounts in the prior period financial statements
pertaining to the discontinued operations discussed in Note 4 have been
reclassified for comparative purposes. Revenue Recognition and Rights Fee Expenses Revenue from services is
recognized as the services are rendered. Corporate sponsor license fee revenue
that is not related to specific events is recognized ratably over the term of
the sponsorship. In certain circumstances, the Company enters into contractual
arrangements with associations or institutions it represents in various
capacities which involve payment of guaranteed rights fees. Guaranteed rights
fee expense that is not related to specific events is recognized ratably over
the term specified in the contract. The Companys contractual arrangements
with associations or institutions may also involve net profit sharing
arrangements (profit splits) based on the net profit associated with services
rendered under the contract. Profit split expense is accrued over the contract
period, based on estimates, and is adjusted at the end of the contract term in
order to reflect the actual profit split. Barter Transactions The Company provides advertising and licensing rights to
certain customers or sublicensees in exchange for services. The estimated fair
value of the services to be received is recognized as accounts receivable and
deferred revenue. As these services are used, an amount is charged to
operating expense. Advertising revenue is recognized as the advertising is
used by the customer and license fee revenue is recognized ratably over the
term of the sublicense agreement. For the fiscal years ended August 31, 2004
and 39




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2003, net revenues and operating expenses included barter transactions of
approximately $2,900 and $3,000, respectively. For the fiscal years ended June
30, 2002, net revenues included barter transactions of approximately $2,700 and
operating expenses included barter transactions of approximately $3,100.
Barter transactions for the two-month periods ended August 31, 2002 and 2001
were negligible. Cash and Cash Equivalents Cash equivalents are composed of all highly liquid
investments with an original maturity of three months or less. Accounts Receivable and Credit Risk Accounts receivable include customer
billings on invoices issued by the Company, and to a lesser extent, unbilled
receivables for contracted services billed after the service is rendered or the
revenue is earned. In certain situations, the Company may invoice certain
customers 30 to 60 days in advance. Accounts receivable pertaining to advance
billings are also included as deferred revenue until such time as the revenue
is earned. The Company performs ongoing credit evaluations of its customers
financial condition and generally requires no collateral from its customers.
An allowance for doubtful accounts is established based on historical losses
and an assessment of specific accounts on which collection is in question based
on factors such as account collection experience, changes in a customers
financial condition, or economic conditions. Once an account is considered
uncollectible or otherwise settled with a customer, the uncollectible amount is
charged against the allowance for doubtful accounts. Until June 30, 2002, the Company generated a significant amount of revenue from
sublicensing National Collegiate Athletic Association (NCAA) corporate
sponsorship rights to major corporations. The Companys final contract with
the NCAA (the Host-NCAA Contract), which provided these rights to the
Company, in addition to other rights, ended on August 31, 2002. The Company
became a party to an agreement with CBS Sports (the Host-CBS Contract) which
commenced on September 1, 2002. Although the Host-CBS Contract continues to
provide for publishing and certain other rights, it does not provide for the
sublicensing of NCAA corporate sponsorship rights; therefore, the Company no
longer derived revenues from the sale of NCAA corporate sponsorship rights
subsequent to June 30, 2002. The Host-CBS Contract also substantially
eliminated the obligation to pay a significant guaranteed rights fee associated
with the procurement of corporate sponsorship rights. As a result, the
differences between the Host-CBS Contract and the predecessor Host-NCAA
Contract resulted in a significant reduction in total revenues and direct
operating costs of services rendered, and a reduction in accounts receivable
and accrued expenses after June 30, 2002. For the fiscal year ended June 30,
2002, approximately 25% of the Companys revenues from continuing operations
arose from sublicensing NCAA corporate sponsor rights. Inventories Inventories, stated at cost, consist primarily of materials and
supplies associated with the Companys printing operations. Property and Equipment Property and equipment is stated at cost less
depreciation computed on the straight-line method over the estimated useful
life of the asset, generally from three to ten years. Leasehold improvements
and equipment held under capital leases are amortized over the lesser of the
lease term or the estimated useful life of the asset. Depreciation expense for
continuing operations was $891 and $1,048 for the fiscal years ended August 31,
2004 and 2003, respectively; $214 and $226 for the two months ended August 31,
2002 and 2001, respectively; and $1,299 for the fiscal year ended June 30,
2002. Depreciation expense for discontinued operations was $198 and $145 for
the fiscal years ended August 31, 2004 and 2003, respectively, $35 and $30 for
the two months ended August 31, 2002 and 2001, respectively, and $219 for the
fiscal year ended June 30, 2002. 40




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##### Table of Contents



Investment in Affiliated Companies The Company accounts for its investment in
iHigh by the equity method. The Company accounted for its investment in Gray
by the equity method until the sale of the investment in August 2003. The
Company accounted for its investment in Rawlings by the equity method until
December 2001, at which time the Companys representatives on Rawlings board
of directors resigned from their positions, causing the Company to begin
accounting for its investment in Rawlings as an available-for-sale marketable
security until such investment was sold in December 2002. The Company
accounted for its investment in Sarkes Tarzian, Inc. (Tarzian) by the cost
method until the sale of the investment in December 2001. The Company recognizes a gain or loss on the issuance of shares by an investee
company resulting in dilution of the Companys interest in the investee. The
gain or loss is determined based on the difference between (a) the Companys
post-issuance allocable share of the
investees underlying equity, as compared to the Companys allocable share of
the investees underlying equity immediately prior to the issuance, and (b) a
pro rata reduction of the unamortized difference between the Companys carrying
value of the investment and the Companys allocable share of the investees
underlying equity immediately prior to the issuance. Deferred taxes are
provided on recognized gains or losses, subject to a determination of deferred
tax valuation allowances. Goodwill and Other Long-Lived Assets Prior to the Companys adoption of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142) effective July 1, 2001, goodwill and certain
purchased intangible assets (i.e., trademarks) were amortized over 20 years.
SFAS 142 eliminated the requirement to amortize goodwill, but requires the
Company to periodically assess the carrying value of goodwill associated with
each of the four distinct business units that comprise two business segments
within continuing operations to determine if an impairment in value has
occurred. The original amount of goodwill was allocated under SFAS 142 to the
original five business units comprising three business segments based on a
discounted cash flow analysis by business unit as of the acquisition date.
Impairment tests completed as of December 31, 2002 and 2001 concluded that the
carrying amount of goodwill for each acquired business unit did not exceed its
net realizable value based on the Companys estimate of expected future cash
flows to be generated by each of the business units. However, as further
discussed in Note 8, the Company updated its assessment during each of the
fiscal years ended August 31, 2004 and 2003, and concluded that based on a
valuation model incorporating expected future cash flows in consideration of
historical cash flows and results to date, an impairment charge was necessary
for each of those fiscal years. In addition to its effect on business units
included in the Companys continuing operations, the impairment charge reported
for the fiscal year ended August 31, 2003 also resulted in a reduction to zero
of all of the goodwill and acquisition intangibles associated with a
discontinued business segment. If the Company concludes in the future that the
adjusted carrying value of goodwill, for any of the four business units
comprising the Companys continuing operations, exceeds its respective net
realizable value, the Company would expense such excess and decrease goodwill
as reported in the consolidated balance sheet. Other purchased intangibles, including customer relationships, are amortized
primarily over a 16-year average life. The use of a 16-year average life for
customer relationships acquired in the Host-USA Acquisition, amortized on a
straight-line method, is not materially different from using the estimated life
of each individual relationship using a systematic allocation method. As
further discussed in Note 8, the Company determined that an impairment charge
was necessary to reduce the carrying amount of certain customer relationship
intangible assets in the fiscal year ended June 30, 2002 as a result of a
significant change in the contractual nature of the Companys underlying
relationship with the NCAA. The 41




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impairment analysis performed as of August 31,
2003 indicated the need for an additional impairment charge. If the Company
concludes in the future that significant changes occur in its customer
relationships, additional impairment charges may be necessary. Income Taxes Deferred income tax liabilities or assets at the end of each
period are determined using the tax rate expected to be in effect when the
taxes are actually paid or recovered. A valuation allowance is recognized on
certain deferred tax assets if it is more likely than not that some or all of
these deferred tax assets will not be realized. Stock-Based Compensation Except for stock options granted to former Host and
USA option holders in connection with the Host-USA Acquisition, the Company
grants stock options for a fixed number of shares to employees with an exercise
price equal to the fair value of the shares at the date of grant. In
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
no compensation expense is recognized for such grants. Pro forma net loss and loss per share required by FASB Statement No. 123,
Accounting for Stock-Based Compensation (FAS 123) have been determined as
if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair values for these options were estimated at the time of
grant using a Black-Scholes option pricing model assuming a weighted average
risk-free interest rate of 5.16%, dividend yield of 0.0%, a weighted average
volatility factor of .476, and a weighted average expected life for the options
of 7.1 years. Had compensation cost been measured based on the fair value
based accounting of FAS 123, the net loss available to common stockholders
would have been as follows: $(14,978), or $(3.21) per share (basic and
diluted), for the fiscal year ended August 31, 2004; $(39,703), or $(9.96) per
share (basic and diluted), for the fiscal year ended August 31, 2003; $(5,552),
or $(1.46) per share (basic and diluted), for the two months ended August 31,
2002; and $(34,944), or $(9.59) per share (basic and diluted), for the fiscal
year ended June 30, 2002. Derivative Instruments and Hedging Activities The Company recognizes all
derivatives, which include the value of interest rate swap agreements and,
previously, the value of the Companys warrants to purchase Gray common stocks
(which were sold by the Company to Gray in April 2003), on the balance sheet at
fair value in accordance with Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities. Changes
in the estimated fair value of derivatives that do not meet the specific
criteria in SFAS 133 for hedge accounting are included in the earnings (losses)
reported for the period of the change. None of the Companys derivative
instruments have been determined to qualify for hedge accounting treatment.
Management estimates the fair value of interest rate swap agreements based on
estimated market values provided by the counterparties to the swap agreements.
Net appreciation (depreciation) in the value of the Companys derivatives was
$1,294 and $(1,035) for the fiscal years ended August 31, 2004 and 2003,
respectively; $(423) and $(632) for the two months ended August 31, 2002 and
2001, respectively; and $(3,345) for the fiscal year ended June 30, 2002. Earnings (Loss) Per Share Basic earnings per share excludes any dilutive
effects of stock options. In periods where they are anti-dilutive, dilutive
effects of stock options are excluded from the calculation of dilutive earnings
(loss) per share. Earnings (loss) per share and share amounts for periods
prior to May 2003 have been retroactively adjusted to consider the effects of
the Companys 1-for-10 reverse stock split on May 18, 2003. Implementation of Other New Accounting Principles In May 2003, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 150 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities 42




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and Equity (SFAS 150). SFAS 150
establishes standards for classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. SFAS 150 was
effective for the Company as of September 1, 2003 and did not have any impact
on the Companys consolidated financial statements until August 31, 2004, by
which date the Companys Chairman and his affiliates had increased their
ownership of the Companys outstanding common stock to more than 50%. As a
result, the Company reclassified, in accordance with SFAS 150, the carrying
amount of all of the preferred stock issued and outstanding from stockholders
deficit to a component of total liabilities as discussed in Note 12. In any
case, management does not believe that any of the preferred stock issued to the
Chairman or his affiliates or any other party will be redeemed in the
foreseeable future. 4. DISCONTINUED OPERATIONS The Company discontinued its Consulting and its Affinity Events business
segments during the fiscal year ended August 31, 2004. In January 2004, the
Company determined that it would not be engaged in consulting services to Gray
or any other party in the future. In August 2004, the Company announced its
decision to suspend the Affinity Events business, and declared its intent to
offer the business unit for sale. The Company has reached an agreement to sell
the assets associated with the basketball and soccer tours operated within the
Affinity Events business segment. The transaction is expected to close within
the next 30 days. Accordingly, the
operating results and net assets associated with the Consulting and the
Affinity Events business segments as of and for the fiscal year ended August
31, 2004 and all prior periods presented herein have been reflected as
discontinued operations in the accompanying consolidated financial statements.
As a result of the suspension of its Affinity Events business, the Company
incurred $2,729 in nonrecurring costs charged to discontinued operations,
including employee severance costs of $256, the present value of future lease
obligations, net of estimated sublease income, to be incurred through 2010 of
$1,811, and the present value of consulting agreement commitments through 2010
of $1,315 for arrangements under which no future benefits are expected to be
derived, less $875 for estimated proceeds to be derived from the sale of
Affinity Events assets. As of August 31, 2004, $2,587 is accrued as a
liability for restructuring obligations associated with discontinued
operations. Potential income to be derived from subleasing vacated office space has been
estimated to be approximately $750 over the remaining lives of the leases. The
estimated proceeds to be derived from the sale of Affinity Events assets do not
include amounts payable to the Company in the future which are anticipated to
be subordinated to the purchasers bank financing. Actual amounts ultimately
realized on the sale and any other unanticipated income or expenses, including
income from the future subleases of vacated office space, could differ
materially from amounts assumed in arriving at the loss on termination of the
business. To the extent actual proceeds or other amounts differ from the
estimates that are reflected as of August 31, 2004, or as managements
estimates are revised, the variance will be reported in discontinued operations
in future periods. Likewise, the results of any remaining Events operations
occurring subsequent to August 31, 2004 will be reported in discontinued
operations in future periods. Proceeds derived from the sale of the Affinity
Events assets are expected to be used to repay two subordinated notes totaling
$590 and liabilities associated with the prior operations of the business. The Company provided consulting services to Gray from time to time in
connection with Grays acquisitions (including acquisition financing) and
dispositions. In the fiscal year ended August 31, 2003, the Company recognized
a $5,000 fee for services provided in connection with an acquisition by Gray.
As a result of the Companys equity investment in Gray, a 43




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portion of all
consulting fees previously charged to Gray was deferred (such portion equal to
the Companys ownership % of Grays outstanding common stock). Upon the
Companys sale of its investment in Grays common stock in the August 2003, the
Company recognized as consulting fee income all previously deferred income.
There was no consulting fee revenue in the fiscal year ended August 31, 2004 or
the two months ended August 31, 2002, and such revenue in the fiscal year ended
June 30, 2002 consisted solely of previously deferred amounts amortized to
income as the Companys ownership % of Grays outstanding common stock
declined. The Company consummated the sale of Datasouths computer printer manufacturing
operation on September 29, 2000. Accordingly, the operating results and net
assets associated with Datasouths computer printer manufacturing business have
been reported as discontinued operations in the accompanying financial
statements. Certain of the proceeds to be realized on the sale of Datasouths
assets are deferred under a subordinated note agreement with the purchaser that
was amended during the fiscal year ended August 31, 2004 which provides for
gradually reducing discounts on the amount due to the Company which are earned
by the purchaser as payments are made through the notes maturity in December
2006. As of August 31, 2004, the amount due to the Company was $2,490;
however the Company recorded a $1,695 reserve on the note receivable in the
fiscal year ended August 31, 2003 as an adjustment of the loss on the sale of
Datasouth for the estimated amount that would ultimately be uncollectible
and/or discounted. To the extent actual proceeds on the note differ from
managements current estimate of the proceeds to be ultimately received, such
differences will be reported as discontinued operations in future periods. There are no material contingent liabilities related to discontinued
operations, such as product or environmental liabilities or litigation, which
remain with the Company after the termination and/or disposal of its
discontinued operations. Assets and liabilities of the discontinued operations have been reflected in
the consolidated balance sheets as current or noncurrent based on the original
classification of the accounts, except that current liabilities are presented
net of current assets and noncurrent liabilities are presented net of
noncurrent assets. 44




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The following is a summary of assets and liabilities of discontinued
operations: August 31,2004
    
    2003Current liabilities:Accounts payable and accrued expenses
    
    $
    1,429
    
    
    $
    3,037Restructuring obligations
    
    
    513Deferred revenue
    
    
    831
    
    
    
    1,236Current assets:Accounts receivable, net
    
    
    (2,163
    )
    
    
    (2,460
    )Inventories
    
    
    (6
    )
    
    
    (32
    )Prepaid costs and expenses
    
    
    (130
    )
    
    
    (306
    )Net current liabilities of discontinued segment
    
    $
    474
    
    
    $
    1,475Noncurrent liabilities:Restructuring obligations
    
    $
    2,112
    
    
    $Noncurrent assets:Note receivable, net
    
    
    (1,245
    )
    
    
    (1,695
    )Property and equipment, net
    
    
    (12
    )
    
    
    (464
    )Other assets
    
    
    (15
    )
    
    
    (27
    )Net
noncurrent liabilities (assets) of discontinued segment
    
    $
    840
    
    
    $
    (2,186
    )
 The following summarizes revenues and operating results from discontinued
operations: Year Ended
    
    Two Months Ended
    
    Year EndedJune 30,August 31,
    
    August 31,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)RevenuesAffinity Events
    
    $
    10,843
    
    
    $
    14,052
    
    
    $
    4,899
    
    
    $
    4,921
    
    
    $
    19,248Consulting
    
    
    
    
    
    
    5,664
    
    
    
    
    
    
    
    3
    
    
    
    11$
    10,843
    
    
    $
    19,716
    
    
    $
    4,899
    
    
    $
    4,924
    
    
    $
    19,259Costs and ExpensesAffinity Events:Direct operating costs of services rendered
    
    $
    9,020
    
    
    $
    12,467
    
    
    $
    4,411
    
    
    $
    2,849
    
    
    $
    12,964Selling, general and administrative
    
    
    9,297
    
    
    
    5,481
    
    
    
    1,877
    
    
    
    1,955
    
    
    
    8,708Amortization and impairment of acquisition
intangibles
    
    
    
    
    
    
    9,615
    
    
    
    20
    
    
    
    21
    
    
    
    117$
    18,317
    
    
    $
    27,563
    
    
    $
    6,308
    
    
    $
    4,825
    
    
    $
    21,789Income (Loss) from Discontinued OperationsAffinity Events
    
    $
    (7,474
    )
    
    $
    (3,896
    )
    
    $
    (1,389
    )
    
    $
    117
    
    
    $
    (2,424
    )Consulting
    
    
    
    
    
    
    5,664
    
    
    
    
    
    
    
    3
    
    
    
    11Amortization and impairment of acquisition
intangibles
    
    
    
    
    
    
    (9,615
    )
    
    
    (20
    )
    
    
    (21
    )
    
    
    (117
    )Datasouth
    
    
    
    
    
    
    (1,695
    )Income tax benefit (provision)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    250$
    (7,474
    )
    
    $
    (9,542
    )
    
    $
    (1,409
    )
    
    $
    62
    
    
    $
    (2,280
    )
 45




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5. SUPPLEMENTAL CASH FLOW DISCLOSURES Year Ended
    
    Two Months EndedAugust 31,
    
    August 31,
    
    Year EndedJune 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Interest paid
    
    $
    4,365
    
    
    $
    8,271
    
    
    $
    1,151
    
    
    $
    1,693
    
    
    $
    10,143Income taxes paid (recovered), net
    
    
    21
    
    
    
    61
    
    
    
    (3,627
    )
    
    
    (99
    )
    
    
    (472
    )Noncash investing and financing activities:Issuance of common stock in payment
of preferred stock dividends
    
    
    503
    
    
    
    571
    
    
    
    407Exchange of subordinated debt for shares
of preferred stock
    
    
    8,016
    
    
    
    1,783
    
    
    
    4,097Issuance of common stock in connection
with debt issuance costs
    
    
    925
    
    
    
    1,349
    
    
    
    
    
    
    
    
    
    
    
    753Issuance of common stock to a retirement
plan and as a component of directors fees
    
    
    150
    
    
    
    297
 6. INVESTMENT IN AFFILIATED COMPANIES Equity in earnings (losses) of affiliated companies consists of the following: Year Ended
    
    Two Months EndedAugust 31,
    
    August 31,
    
    Year EndedJune 30,Affiliate
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Gray
    
    $
    546
    
    
    $
    83
    
    
    $
    (177
    )
    
    $
    (1,364
    )Rawlings
    
    
    
    
    
    
    
    
    
    
    (263
    )
    
    
    (474
    )iHigh
    
    
    (750
    )
    
    
    (193
    )
    
    
    (114
    )
    
    
    (1,074
    )Total
    
    $
    (204
    )
    
    $
    (110
    )
    
    $
    (554
    )
    
    $
    (2,912
    )
 Investment in Gray and Gain on Issuance of Common Shares Prior to the sale in
August 2003 of all Gray common stocks owned by the Company, the Company owned
approximately 4.0% of Grays outstanding common stock. In addition, the
Company previously owned warrants to purchase additional shares of Grays
common stocks until the sale of such warrants in April 2003. Certain executive
officers of the Company are also executive officers of Gray. Approximately
half of the Gray common stocks owned by the Company were sold to Gray, and the
remainder of the shares were sold to the Companys Chairman of the board and
family entities. Total proceeds on the sale of common stock, net of expenses
of the sale, were $34,297. The warrants were sold back to Gray for total
proceeds of $5,121. Proceeds of $31,233 from the sales of Gray common stocks
and warrants were used to reduce outstanding long-term debt. All of these
transactions were approved by independent members of the Companys board of
directors or a special committee appointed by the board made up of independent
directors. Through a rights-sharing agreement with Gray, the Company participates jointly
with Gray in the marketing, selling and broadcasting of certain collegiate
sporting events and in related programming, production and other associated
activities. The agreement commenced April 1, 2000 and terminates after five
years. As a result of the rights-sharing agreement, Gray may be called upon
for payment of a share of certain guaranteed rights fees. During the fiscal
year
ended August 31, 2004, Gray had paid $1,502 under this provision, and as of
August 31, 2004, the Company has accrued fees payable to Gray of $1,721. 46




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In October 2002, Gray completed a public offering of 30,000 shares of its
common stock for net proceeds of approximately $231,000, and in November 2002,
Gray issued 4,500 additional shares for additional proceeds of approximately
$35,000. Such cumulative proceeds were used in part by Gray to finance an
October 2002 acquisition of a company that owns television stations, and
finance an acquisition of an additional television station in December 2002.
As a result of these transactions by Gray, the Companys ownership of Grays
outstanding common stock was reduced from 12.9% to 4.0%, representing a decline
in the Companys voting power in Gray from 26.1% to 18.0%. Since Grays net
proceeds per share of issued common stock was an amount which was less than the
Companys carrying value per share of Gray common stocks owned prior to such
transactions, a loss of $2,339 on the issuance of shares by Gray was reported
by the Company in the fiscal year ended August 31, 2003. Certain executive
officers of Gray and certain directors of Gray are also executive officers and
directors of the Company; therefore the Company continued to account for its
investment in Gray under the equity method subsequent to the issuance of shares
by Gray, despite the dilution of the Companys voting power to less than 20%,
since the Company continued to have significant influence in Gray. In the fiscal year ended June 30, 2002, the Company recognized the cumulative
effect of an accounting change of $2,620, net of tax, as its proportionate
share of a cumulative effect adjustment recognized by Gray in January 2002 as a
result of Grays adoption of SFAS 142, and Grays associated reduction in
previously unamortized goodwill and purchased intangibles. In September 2001, the Company sold its remaining shares of Gray series A and
series B preferred stock for the redemption value of $6,803 to certain
companies of which the Companys Chairman of the board is an executive officer
and/or principal stockholder, resulting in a gain to the Company of $3,064.
Total dividend income on Gray series A and series B preferred stock recognized
by the Company was $127 in the fiscal year ended June 30, 2002. Investment in Tarzian In January 1999, the Company acquired shares of the
outstanding common stock of Tarzian for $10,000, and subsequently sold such
shares to Gray in December 2001. The Tarzian shares represented 33.5% of the
total outstanding common stock of Tarzian, both in terms of the number of
shares of common stock outstanding and in terms of voting rights, but such
investment represented 73% of the equity of Tarzian for purposes of dividends,
as well as distributions in the event of any liquidation, dissolution or other
termination of Tarzian. Tarzian filed suit in the United States District Court
for the Southern District of Indiana against the seller, claiming that Tarzian
had a binding and enforceable contract with the seller to purchase the shares.
In February 2003, the Court entered judgment on a jury verdict in favor of
Tarzian for breach of contract and awarded Tarzian $4.0 million in damages.
The matter continues to be contested by both parties to the lawsuit. In March
2003, Tarzian filed suit in the United States District Court for the Northern
District of Georgia against Gray and the Company for tortious interference with
contract and conversion. The lawsuit seeks damages in an amount equal to the
liquidation value of the interest in Tarzian that the stock represents, which
Tarzian claims to be as much as $75 million, as well as attorneys fees,
expenses and punitive damages. The lawsuit also seeks an order requiring Gray
and the Company to turn over the shares to Tarzian and relinquish all claims to
the stock. The Companys stock purchase agreement with the seller would permit
the Company to make a claim against the seller in the event that title to the
shares is ultimately awarded to Tarzian. There is no assurance that the Estate
would have sufficient assets to honor any or all of such claims. The Company
believes it has meritorious defenses and intends to vigorously defend the
lawsuit. Tarzian owns and operates two television stations and four radio
stations: WRCB-TV Channel 3 in Chattanooga, Tennessee, an NBC affiliate;
KTVN-TV Channel 2 in Reno, Nevada, a CBS 47




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affiliate; WGCL-AM and WTTS-FM in
Bloomington, Indiana; and WAJI-FM and WLDE-FM in Fort Wayne, Indiana. In March 1999, the Company executed an option agreement with Gray, whereby Gray
had the option of acquiring the Tarzian investment from the Company for
$10,000, plus related costs. In addition, Gray agreed to pay the Company a
finders fee of $1,000. In connection with this option agreement, the Company
also received from Gray warrants to acquire 100 shares of Grays common stock
at $13.625 per share. After multiple extensions of this option, Gray exercised
the option in December 2001 and acquired the Companys investment for cash
proceeds of $10,000. In April 2003, the Company sold the warrant to Gray
(refer to Investment in Gray and Gain on Issuance of Shares above for a
discussion of the sale of the warrant). The Company used the proceeds on the
sale of the Tarzian shares to reduce its outstanding long-term debt. The Company recognized option and finders fee income from Gray of $349 for the
fiscal year ended June 30, 2002. Previously deferred income of $398 was
recognized as income in the fiscal year ended August 31, 2003 upon the
Companys sale of all of its investment in Gray common stocks in August 2003. Investment in Rawlings The Company sold its investment in Rawlings common
stock in December 2002 for cash of $6,764, which was used to reduce the
Companys outstanding long-term debt. A loss on the Rawlings investment of
$1,032 that had been previously reported as Other comprehensive accumulated
loss (a component of the Companys stockholders deficit) was expensed in the
fiscal year ended August 31, 2003, and reported as an investment valuation
adjustment in the Companys results of operations. Investment in iHigh In connection with the Host-USA Acquisition, the Company
acquired 39.4% (currently, approximately 35.1%) of the then outstanding common
stock of iHigh. The Companys non-trade receivable due from iHigh of
approximately $3.4 million was fully reserved as of August 31, 2003, because
the Company did not believe the receivable would be recovered in the
foreseeable future. In the fiscal year ended August 31, 2003, a $4,211
investment valuation charge was reported by the Company to reduce the non-trade
receivable and the carrying value of the investment in iHigh to zero. Due to aggregate cumulative net losses reported by iHigh during the period in
which the Company has had its investment, there are no aggregate undistributed
earnings of investments accounted for by the equity method as of August 31,
2004. 7. PROPERTY AND EQUIPMENT The Companys property and equipment of continuing operations consist of the
following: August 31,2004
    
    2003Land
    
    $
    448
    
    
    $
    448Building
    
    
    962
    
    
    
    962Leasehold and building improvements
    
    
    555
    
    
    
    561Machinery and equipment
    
    
    1,404
    
    
    
    1,586Office furniture and equipment
    
    
    2,755
    
    
    
    2,7366,124
    
    
    
    6,293Accumulated depreciation and amortization
    
    
    2,940
    
    
    
    2,448$
    3,184
    
    
    $
    3,845
 48




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Machinery and equipment includes an asset leased under a capital lease in
August 2004, having a cost of $240 and accumulated amortization of $6 as of
August 31, 2004. 8. GOODWILL AND OTHER ACQUISITION INTANGIBLE ASSETS The net change in the carrying amount of goodwill by reportable business
segment is as follows: Collegiate
    
    
    
    
    
    
    
    
    
    DiscontinuedMarketing and
    
    Affinity
    
    
    
    
    
    Operation -Production
    
    Management
    
    
    
    
    
    AffinityServices
    
    Services
    
    Total
    
    EventsAs of July 1, 2001
    
    $
    58,232
    
    
    $
    6,475
    
    
    $
    64,707
    
    
    $
    2,450As of June 30, 2002
    
    
    58,232
    
    
    
    6,475
    
    
    
    64,707
    
    
    
    2,450As of August 31, 2002
    
    
    58,232
    
    
    
    6,475
    
    
    
    64,707
    
    
    
    2,450Impairment charge
    
    
    (21,043
    )
    
    
    
    
    
    
    (21,043
    )
    
    
    (2,450
    )As of August 31, 2003
    
    
    37,189
    
    
    
    6,475
    
    
    
    43,664
    
    
    
    0Impairment charge
    
    
    (3,300
    )
    
    
    
    
    
    
    (3,300
    )As of August 31, 2004
    
    $
    33,889
    
    
    $
    6,475
    
    
    $
    40,364
    
    
    $
    0
 The net change in the carrying amount of customer relationships and trademarks
by reportable business segment is as follows: Collegiate
    
    
    
    
    
    
    
    
    
    DiscontinuedMarketing and
    
    Affinity
    
    
    
    
    
    Operation -Production
    
    Management
    
    
    
    
    
    AffinityServices
    
    Services
    
    Total
    
    EventsAs of July 1, 2001
    
    $
    15,989
    
    
    $
    2,561
    
    
    $
    18,550
    
    
    $
    6,476Amortization
    
    
    (984
    )
    
    
    (141
    )
    
    
    (1,125
    )
    
    
    (117
    )Impairment charge
    
    
    (6,582
    )
    
    
    
    
    
    
    (6,582
    )As of June 30, 2002
    
    
    8,423
    
    
    
    2,420
    
    
    
    10,843
    
    
    
    6,359Amortization
    
    
    (160
    )
    
    
    (23
    )
    
    
    (183
    )
    
    
    (20
    )As of August 31, 2002
    
    
    8,263
    
    
    
    2,397
    
    
    
    10,660
    
    
    
    6,339Adjustments
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    826Amortization
    
    
    (957
    )
    
    
    (141
    )
    
    
    (1,098
    )
    
    
    (118
    )Impairment charge
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    (7,047
    )As of August 31, 2003
    
    
    7,306
    
    
    
    2,256
    
    
    
    9,562
    
    
    
    0Amortization
    
    
    (1,113
    )
    
    
    (141
    )
    
    
    (1,254
    )As of August 31, 2004
    
    $
    6,193
    
    
    $
    2,115
    
    
    $
    8,308
    
    
    $
    0
 As of August 31, 2004, customer relationships constitute $6,525 and trademarks
represent $1,783 of the $8,308 carrying amount presented above, and as of
August 31, 2003, customer relationships constitute $7,624 and trademarks
represent $1,938 of the $9,562 carrying amount. A goodwill impairment charge of $3,300 was recognized during the fiscal year
ended August 31, 2004, upon managements consideration of current fiscal year
operating results and the forecasted operating results and business plans for
one of the Companys business units. A goodwill impairment charge to
continuing operating results of $21,043 and an 49




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impairment charge to
discontinued operations of $9,497 was recognized in the fiscal year ended
August 31, 2003 based on managements consideration of historical operating
results and reevaluation of the forecasted operating results and business plans
for each of the Companys business units. As a result of the differences between the Host-CBS Contract and the
predecessor Host-NCAA Contract, the Company accelerated approximately $6,582 of
amortization expense at June 30, 2002, pertaining to the customer relationship
intangible assets, since such differences significantly altered the contractual
nature of the Companys underlying relationship with the NCAA. The Company currently estimates that annual amortization expense of customer
relationship and trademarks for the fiscal year ending August 31, 2005 will
total approximately $718 per year until fully amortized in December 2015. Accumulated amortization of acquisition intangibles and impairment charges were
$39,381 and $34,827 as of August 31, 2004 and 2003, respectively, including
$29,689 and $26,389 associated with goodwill as of each of the respective
dates. 9. ACCRUED AND OTHER LIABILITIES Accrued and other liabilities of continuing operations consist of the
following: 2004
    
    2003Guaranteed rights fees and profit splits
    
    $
    2,160
    
    
    $
    2,793Preferred dividends
    
    
    2,393
    
    
    
    659Contract loss reserve
    
    
    
    
    
    
    690Interest
    
    
    798
    
    
    
    746Compensation and related costs
    
    
    415
    
    
    
    603Other accrued liabilities
    
    
    3,449
    
    
    
    3,340$
    9,215
    
    
    $
    8,831
 Other accrued liabilities as of August 31, 2004 includes an obligation under a
capital lease of $234 pertaining to equipment placed in service in August 2004. 10. LONG-TERM DEBT AND NOTES PAYABLE Long-term debt and notes payable consist of the following: August 31,2004
    
    2003Term Loans
    
    $
    35,932
    
    
    $
    35,932Revolver
    
    
    20,000
    
    
    
    20,000Subordinated Notes
    
    
    9,283
    
    
    
    17,29965,215
    
    
    
    73,231Less current portion
    
    
    590
    
    
    
    590$
    64,625
    
    
    $
    72,641
 As amended in October 2004, the Companys bank credit agreement provides for
(a) two term loans (the Term Loans) for borrowings totaling $35,932 and (b)
two revolving loan 50




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##### Table of Contents



commitments (the Revolvers) for aggregate maximum
borrowings of $23,000. All amounts outstanding bear interest at either (a) the
banks prime rate or (b) the London Interbank Offered Rate (LIBOR)
plus 2.75%, payable monthly. Under the October 2004 amendment, the Company was
provided a new $3,000 revolving loan commitment (the Revolver B included as a
component of the Revolvers), which was funded in full in October 2004, thereby
increasing the bank indebtedness to $58,932. As amended, the agreement has a
maturity date of November 30, 2005, at which time all amounts outstanding
become due and payable. The amended agreement does not require any payments of
principal prior to maturity, nor does it provide for any additional borrowing
capacity beyond the Revolver B. The Company anticipates that it will continue
to utilize fully the availability under the Revolvers throughout the remaining
term of the credit agreement. In September 2004, a company under the Chairmans control provided the Company
$1,500 of cash which was used for working capital purposes in exchange for a
subordinated note bearing interest at 6% per annum, maturing on December 31,
2004. Under the terms of the amended credit agreement, up to an aggregate of
$10,000 in funding for working capital purposes, if necessary, may be sourced
from the issuance of equity securities, including shares of the Companys
preferred stock, or by the issuance of subordinated debt. During the fiscal
year ended August 31, 2004, the Company received $6,550 from the Companys
Chairman, of which $2,000 was invested in newly-issued shares of the Companys
preferred stock. The remaining investment of $4,550 is presented in the
consolidated balance sheet as Advances from stockholder. Management believes
that it is the Chairmans intention to convert these advances to subordinated
debt or equity securities during the fiscal year ending August 31, 2005. In
connection with the credit agreement amendment, the Chairman committed to the
Company an additional aggregate cash investment of up to $3,000 as and when
needed at any time and from time to time on or prior to the maturity date,
provided that up to $1,500 of such cash investments may be used to repay the
$1,500 subordinated note issued by his affiliated company. Management
anticipates that the Chairman will provide at least $1,500 of his committed
cash investment prior to the maturity date of the $1,500 subordinated note. As a result of the amendment to the maturity date of the bank credit agreement
to November 30, 2005, the total amount outstanding under the agreement is
presented in the consolidated balance sheet as long-term debt as of August 31,
2004. As of August 31, 2004, principally all borrowings under the bank credit
agreement were subject to the banks LIBOR rate-based rate of 4.11%. The bank credit agreement, as amended, contains certain financial covenants,
including the maintenance of minimum interest coverage ratios determined
quarterly. Long-term debt is collateralized by all of the Companys assets.
In addition, the Companys Chairman personally guarantees up to $56,500 of the
debt outstanding under the bank credit agreement, and if the Company is unable
to meet payment obligations under the agreement, it is likely that the bank
lenders would call the guarantee, thereby requiring the Chairman to repay the
amount of the loan to the banks. The Chairmans guarantee is collateralized by
certain personal holdings of marketable securities pledged to the Companys
bank lenders. Under the terms of his guarantee, the Chairman has the option to
purchase the entire loan from the banks, and thereby becoming the holder of the
debt currently payable to the banks and the related lien on the Companys
assets. The Chairman is compensated by the Company for his guarantee in the
form of newly issued shares of the Companys common stock, valued at an annual
rate of 1.625% of the guarantee amount. The guarantee amount will reduce in
the future if principal payments are made to the bank lenders on the
outstanding term loans, and may increase if additional bank financing is made
available to the Company. During the fiscal years ended August 31, 2004 and
2003, and the fiscal year 51




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ended June 30, 2002, the Chairman was compensated by
the Company for his personal guarantee in the form of 805, 221 and 106
restricted shares of the Companys common stock then valued at $925, $1,349 and
$753, respectively. In November 2004, the Chairman was compensated in the form
of 675 restricted shares then valued at $247. There was no compensation paid
to the Chairman in any form in the two months ended August 31, 2002. In connection with the Host-USA Acquisition, the Company issued 8% subordinated
notes, representing long-term debt of $8,693 and $16,709 as of August 31, 2004
and 2003, respectively.
During the fiscal year ended August 31, 2004, holders of 8% subordinated notes
representing an aggregate face value of approximately $8,016 exchanged their
notes for shares of Series E Preferred Stock. Interest is payable quarterly in
cash on all but a $3,019 subordinated note payable to the Companys Chairman,
on which interest is payable at maturity in the form of cash or shares of the
Companys common stock, at the Companys option. The notes all have a maturity
date of January 17, 2006. In May 2003, a director of the Company and his
spouse each agreed to exchange 8% subordinated notes held by them, having an
aggregate face value of $1,783, to shares of the Companys convertible series D
preferred stock. In connection with the acquisition of certain business
operations, the Company also issued two 9% subordinated notes in September
2000, representing long-term debt of $590 as of each of August 31, 2004 and
2003. These notes have a maturity date of December 31, 2004, and are therefore
classified as the current portion of long-term debt. Payment of interest and
principal on all subordinated notes is subordinate to the Companys bank credit
agreement. The amended bank agreement provides for the terms under which these
notes may be paid by the maturity date. In July 2003, the Company issued to a company under the Chairmans control, a
9% subordinated note for $5,000, the proceeds from which were used for a
principal payment paid on the Term Loans. In August 2003, this note was paid
in full with a portion of the proceeds received upon the sale of the Companys
shares of Gray common stocks. In July 2002, the Company issued to the Chairman two 9% subordinated notes
totaling $4,000, the proceeds from which were used by the Company for working
capital purposes. In August 2002, these notes and the accrued interest thereon
were exchanged for shares of the Companys series C preferred stock, and
subsequently, in May 2003, exchanged for shares of the Companys series D
preferred stock having an aggregate face amount of $4,097. Aggregate maturities of the Companys long-term debt as of August 31, 2004 are
$590 and $64,625 in the fiscal years ending August 31, 2005 and 2006,
respectively, and none thereafter. The Company is a party to an interest rate swap agreement terminating on
December 31, 2004, which involves the exchange of interest at a fixed rate of
6.71% for interest at a variable rate, determined quarterly, equal to the
90-day LIBOR rate, without an exchange of the $25,000 notional amount upon
which the payments are based. The Company was a party to a second interest
rate swap agreement terminating on December 31, 2002, which involved the
exchange of interest at a fixed rate of 6.08% for interest at a variable rate,
determined quarterly, equal to the 90-day LIBOR rate, without an exchange of
the $20,000 notional amount upon which the payments are based. The differential
paid or received as interest rates change is settled quarterly and is accrued
and recognized as an adjustment of interest expense related to the debt. 52




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11. INCOME TAXES The Companys income tax benefit (provision) attributable to continuing
operations consists of the following: Year Ended
    
    Two Months EndedAugust 31,
    
    August 31,
    
    Year EndedJune 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Current
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $Deferred
    
    
    
    
    
    
    (5,222
    )
    
    
    
    
    
    
    1,623
    
    
    
    1,925$
    0
    
    
    $
    (5,222
    )
    
    $
    0
    
    
    $
    1,623
    
    
    $
    1,925
 The principal differences between the federal statutory tax rate and the
effective tax rate applicable to continuing operations are as follows: Year Ended
    
    Two Months EndedAugust 31,
    
    August 31,
    
    Year EndedJune 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Federal statutory tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Non-deductible goodwill
amortization and impairment
    
    
    (15.7
    )
    
    
    (30.8
    )State income taxes, net of federal
tax benefit
    
    
    2.5
    
    
    
    0.6
    
    
    
    5.6
    
    
    
    1.9
    
    
    
    1.9Change in valuation allowance
    
    
    (20.0
    )
    
    
    (26.0
    )
    
    
    (34.5
    )
    
    
    
    
    
    
    (28.1
    )Other, net
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    (5.1
    )
    
    
    (4.2
    )
    
    
    (1.7
    )Effective tax rate
    
    
    0.0
    %
    
    
    (22.5
    )%
    
    
    0.0
    %
    
    
    31.7
    %
    
    
    6.1
    %
 The loss from discontinued operations for the two months ended August 31, 2001,
and the year ended June 30, 2002, are presented net of a tax benefit of $(37)
and $250, respectively. There was not tax benefit or provision associated with
the results of discontinued operations for the fiscal years ended August 31,
2004 or 2003, or the two months ended August 31, 2002. As of August 31, 2004, the Company has a net operating loss carryforward for
tax purposes of approximately $54,000 expiring beginning in 2018 to reduce
Federal taxable income in the future. The Company also has an Alternative
Minimum Tax credit carryforward of $490 and a business credit carryforward of
$116 as of August 31, 2004, to reduce regular Federal tax liabilities in the
future. In the fiscal year ended June 30, 2002, the Company established a valuation
allowance of $9,575 and increased it to $11,425 in the two months ended August
31, 2002, because it was estimated that the Company may not ultimately realize
all of the tax benefits from the net operating loss carryforward prior to its
expiration. As of August 31, 2003 the Company increased the valuation
allowance for net deferred tax assets to $19,498, thereby reducing the carrying
amount of deferred taxes in the balance sheet to zero. The valuation allowance
increased to $23,709 in the fiscal year ended August 31, 2004, resulting in no
change in the carrying amount of deferred taxes on the consolidated balance
sheet. If and when the Company generates taxable income in the future and
benefits primarily from net operating loss carryforwards for federal tax
purposes that expire beginning in 2018, some or all of the deferred tax asset
may be reinstated on the balance sheet, and the Company would report income tax
benefits in the period that such reinstatement occurs. 53




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##### Table of Contents



Deferred tax liabilities (assets) are comprised of the following: August 31,2004
    
    2003Property and equipment
    
    $
    2,278
    
    
    $
    1,710Acquisition intangible assets
    
    
    2,825
    
    
    
    3,586Gross deferred tax liabilities
    
    
    5,103
    
    
    
    5,296Allowance for doubtful accounts
    
    
    (150
    )
    
    
    (174
    )Investment in and advances to affiliates
    
    
    (395
    )
    
    
    (699
    )Valuation of derivative financial instruments
    
    
    (140
    )
    
    
    (640
    )Reserves against nonoperating receivables
    
    
    (1,720
    )
    
    
    (1,862
    )Accrued expenses
    
    
    (1,114
    )
    
    
    (203
    )Nonqualified stock options outstanding
    
    
    (779
    )
    
    
    (1,399
    )Net operating loss carryforward
    
    
    (23,908
    )
    
    
    (19,211
    )Alternative Minimum Tax credit carryforward
    
    
    (490
    )
    
    
    (490
    )Business credit carryforward
    
    
    (116
    )
    
    
    (116
    )Gross deferred tax assets
    
    
    (28,812
    )
    
    
    (24,794
    )Less: valuation allowance
    
    
    23,709
    
    
    
    19,498Deferred tax
assets net of valuation allowance
    
    
    (5,103
    )
    
    
    (5,296
    )Total deferred tax liability (asset), net
    
    $
    0
    
    
    $
    0
 12. PREFERRED STOCK ISSUANCE AND EXCHANGE As of August 31, 2004, 12.497 shares of the Companys series D convertible
preferred stock (Series D Preferred Stock) were outstanding, having an
aggregate face value of $12,497, all of which are currently convertible at the
holders option into an aggregate 1,250 shares of the Companys common stock.
In the two months ended August 31, 2002, 9% subordinated notes issued to the
Companys Chairman, along with accrued interest and fees thereon, were
exchanged for 4.1 newly-issued shares of the Companys series C convertible
preferred stock (Series C Preferred Stock) having an aggregate face amount of
$4,097. In the fiscal year ended August 31, 2003, the Companys Chairman and
companies affiliated with the Chairman invested cash totaling an additional
$3,000 for 3 shares of Series C Preferred Stock. Also in the fiscal year ended
August 31, 2003, each of the holders of Series C Preferred Stock elected to
exchange the aggregate total of 7.1 shares of Series C Preferred Stock for the
same number of shares of Series D Preferred Stock. The other outstanding
shares of Series D Preferred Stock were issued in exchange for outstanding
shares of redeemable series B convertible preferred stock (the Series B
Preferred Stock) during the fiscal year ended August 31, 2003, as discussed
below. Each holder of the Series D Preferred Stock is entitled to receive
dividends at an annual rate of $90.00 per share in cash or in shares of the
Companys common stock at the holders option, except that, until the second
anniversary of the date of issuance, the Company has the option to pay such
dividends in cash or in shares of the Companys common stock. The liquidation
and redemption price of the Series D Preferred Stock is $1,000 per share, and
dividends are cumulative. The Company has the option to redeem the Series D
Preferred Stock at any time. As of August 31, 2004, 9.799 shares of the Companys series E convertible
preferred stock (Series E Preferred Stock) were outstanding, having an
aggregate face value of $9,799, all of which were issued in the fiscal year
ended August 31, 2004. Each share of the Series E Preferred Stock is
convertible at the holders option into 0.14286 shares of the Companys common
stock beginning one year following the date of issuance of the Series E
Preferred Stock (initially, October 2004). Each holder of the Series E
Preferred Stock is entitled to 54




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receive dividends at an annual rate of $90.00
per share in cash or in shares of the Companys common stock at the holders
option, except that, no dividend is payable prior to June 30, 2005, or upon
conversion to common stock, if earlier. The liquidation and redemption price
of the Series E
Preferred Stock is $1,000 per share. The Company has the option to redeem the
Series E Preferred Stock at any time. During the fiscal year ended August 31,
2004, subordinated note holders elected to exchange an aggregate $8,016 of
subordinated debt for an aggregate 8.016 shares of Series E Preferred Stock,
including subordinated notes having an aggregate face amount of $5,257 acquired
by the Companys Chairman immediately prior to the exchange. Also during the
fiscal year ended August 31, 2004, 1.783 shares of Series D Preferred Stock
issued to a former director of the Company and his spouse (both of whom were
formerly holders of subordinated notes and parties to an exchange of their
subordinated notes for the shares of Series D Preferred Stock in the fiscal
year ended August 31, 2003) were exchanged for the same number of shares of
Series E Preferred Stock. In October 2004, certain holders of Series E
Preferred Stock, including the former director and his spouse, elected to
convert an aggregate 2.1 shares of Series E Preferred Stock to an aggregate 302
shares of the Companys common stock, in accordance with terms of the Series E
Preferred Stock. As of August 31, 2004, 2.0 shares of the Companys series F convertible
preferred stock (Series F Preferred Stock) were outstanding, having an
aggregate face value of $2,000, all of which were issued in the fiscal year
ended August 31, 2004. Each share of the Series F Preferred Stock is
convertible at the holders option into 0.78125 shares of the Companys common
stock beginning in November 2006. The holder of Series F Preferred Stock is
entitled to receive dividends at an annual rate of $90.00 per share in cash or
in shares of the Companys common stock at the holders option, except that,
until the second anniversary of the date of issuance, the Company has the
option to pay such dividends in cash or in shares of the Companys common
stock. The liquidation and redemption price of the Series F Preferred Stock is
$1,000 per share. The Company has the option to redeem the Series F Preferred
Stock at any time. In the fiscal year ended August 31, 2004, the Companys Articles of
Incorporation were amended to effectively cancel all authorized but unissued
shares of the Companys series A, series B and series C preferred stocks.
There were no shares of such preferred stocks outstanding at that time. In the
fiscal year ended June 30, 2002, the Company issued 2.4 shares of Series B
Preferred Stock for cash of $2,400 to a company under the Chairman control.
In addition, all holders of the Companys series A preferred stock (the Series
A Preferred Stock), which are also affiliates of the Chairman, elected to
exchange their aggregate total of 3 shares of Series A Preferred Stock and the
detachable warrants for the same number of shares of Series B Preferred Stock.
In the fiscal year ended August 31, 2003, the holders of Series B Preferred
Stock elected to exchange their aggregate total of 5.4 shares of Series B
Preferred Stock for the same number of shares of the Companys Series D
Preferred Stock. As of August 31, 2004, all shares of Series D Preferred Stock and Series F
Preferred Stock, and certain shares of Series E Preferred Stock are held by
either the Companys Chairman or his affiliates. All shares of preferred stock
issued by the Company are redeemable by the Company at solely the Companys
option. Since the Chairmans beneficial ownership of the Companys common
stock increased to more than 50% during the fiscal year ended August 31,
2004, all issued and outstanding preferred stock is required to be classified
as liabilities in the consolidated balance sheet as of August 31, 2004 in
accordance with SFAS 150. As of August 31, 2003, the Chairman did not have
beneficial ownership of more than 50% of the Companys common stock, and
therefore all outstanding shares of preferred stock were classified as a
component of the Companys stockholders deficit. As of August 31, 2004,
88.4% of the aggregate carrying amount of all preferred stock was held 55




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by the
Chairman or one of his affiliates. Management does not believe that any of the
preferred stock issued to the Chairman or his affiliates or any other party
will be redeemed in the foreseeable future. All shares of preferred stock rank, as to payment of dividends and as to
distribution of assets upon liquidation or dissolution of the Company, on a
parity with all other currently issued preferred stock and any preferred stock
issued by the Company in the future, and senior to the Companys currently
issued common stock and common stock issued in the future. 13. STOCK OPTIONS The Companys 1994 Long Term Incentive Plan (the 1994 Plan) reserves 720
shares of Company common stock for issuance of stock options, restricted stock
awards and stock appreciation rights. Certain options granted under the 1994
Plan are fully vested at the date of grant, and others vest over three to five
year periods. Options granted under the 1994 Plan have terms ranging from five
to ten years. In connection with the Host-USA Acquisition, options for an
aggregate of approximately 282 exercisable shares were granted to former
holders of options for Host and USA shares, at exercise prices ranging from
$3.40 to $40.60 per share. As of August 31, 2004 and 2003, there were
approximately 215 and 180 shares available for future option grants under the
1994 Plan, respectively. The Companys Non-Employee Directors 1994 Stock Option Plan (the 1994
Directors Plan) reserves 35 shares of the Companys common stock for issuance
of stock options. Options under the 1994 Directors Plan are fully vested when
granted. Shares available for future option grants under the 1994 Directors
Plan were 10.5 and 12 as of August 31, 2004 and 2003, respectively. Information with respect to the Companys stock option plans follows: Option
    
    Option
    
    Exercisable
    
    OptionShares
    
    Price Range
    
    Shares
    
    Price RangeOutstanding as of July 1, 2001
    
    
    482
    
    
    $
    3.44 - $43.75Grants
    
    
    118
    
    
    $
    9.30 - $10.50Exercised
    
    
    (6
    )
    
    $
    8.75Forfeited
    
    
    (48
    )
    
    $
    8.75 - $42.50Outstanding as of June 30, 2002
    
    
    546
    
    
    $
    3.44 - $43.75
    
    
    
    377
    
    
    $
    3.44 - $43.75Forfeited
    
    
    (26
    )
    
    $
    10.50 - $42.50Outstanding as of August 31, 2002
    
    
    520
    
    
    $
    3.44 - $43.75
    
    
    
    388
    
    
    $
    3.44 - $43.75Grants
    
    
    12
    
    
    $
    5.70 - $5.80Exercised
    
    
    (60
    )
    
    $
    3.44Forfeited
    
    
    (118
    )
    
    $
    3.44 - $20.63Outstanding as of August 31, 2003
    
    
    354
    
    
    $
    3.44 - $43.75
    
    
    
    277
    
    
    $
    3.44 - $43.75Grants
    
    
    2
    
    
    $
    1.16Forfeited
    
    
    (35
    )
    
    $
    5.80 - $40.60Outstanding as of August 31, 2004
    
    
    321
    
    
    
    
    
    
    
    321
    
    
    $
    1.16 - $43.75
 The weighted average per share fair value of options granted was $.86 and $3.70
for the fiscal years ended August 31, 2004 and 2003, respectively, and $6.19
for the fiscal year ended June 30, 2002. 56




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As of August 31, 2004, the number of outstanding shares under option, weighted
average option exercise price and weighted average remaining option contractual
life was as follows: 7 exercisable shares at $13.44 per share,
expiring in 0.2 years; 8 exercisable shares at $24.38 per share, expiring in
1.6 years; 1 exercisable share at $23.75 per share, expiring in 2.6 years; 1
exercisable share at $43.75 per share, expiring in 3.7 years; 6 exercisable
shares at $37.29 per share expiring in 4.5 years; 61 exercisable shares at
$8.41 per share expiring in 2.1 years; 12 exercisable shares at $40.60 per
share expiring in 2.0 years; 132 exercisable shares at $14.76 per share
expiring in 4.8 years; 86 exercisable shares at $10.48 per share expiring in
5.9 years; 5 exercisable shares at $5.77 per share expiring in 3.3 years; and 2
exercisable shares at $1.16 per share expiring in 9.3 years. 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Companys interest rate swap agreement, having a notional
amount of $25,000, is included as a component of Other liabilities in the
consolidated balance sheet (see Derivative Instruments and Hedging Activities
in Note 3. A second interest rate swap agreement, having a notional amount of
$20,000 expired in December 2002. The fair value, which equals the estimated
amount to be paid on terminating the swap agreements, if the Company had
elected to do so, was $(631) and $(1,705) as of August 31, 2004 and 2003,
respectively. All other financial instruments, including cash, cash equivalents, receivables,
payables, fixed rate subordinated debt and variable rate bank debt are
estimated to have a fair value which approximates carrying value in the
financial statements. 15. RETIREMENT PLANS The Company has a 401(k) defined contribution benefit plan, whereby employees
of the Company may contribute a portion of their gross pay to the plans subject
to limitations set forth by the Internal Revenue Service. The Company may make
matching and/or discretionary contributions to the employees accounts in
amounts based on criteria set forth in the plan agreements. Total Company
contributions to the plan was $97 and $335 for the fiscal years ended August
31, 2004 and 2003, respectively, including shares of the Companys common stock
then valued at an aggregate of $120 and $273, respectively; $59 and $150 for
the two months ended August 31, 2002 and 2001, respectively; and $517 for the
fiscal year ended June 30, 2002. 16. COMMITMENTS AND CONTINGENCIES The following summarizes the Companys contractual obligations as of August 31,
2004 (amounts in 000s): Payments Due by Period as of August 31, 2004Less than
    
    More than 1
    
    More than 3
    
    More thanContractual Obligations
    
    Total
    
    1 Year
    
    to 3 Years
    
    to 5 Years
    
    5 YearsLong-term debt obligations
    
    $
    65,215
    
    
    $
    590
    
    
    $
    64,625
    
    
    $
    
    
    
    $Capital lease obligations
    
    
    234
    
    
    
    78
    
    
    
    78
    
    
    
    78Operating lease obligations
    
    
    6,137
    
    
    
    1,821
    
    
    
    2,024
    
    
    
    1,308
    
    
    
    984Purchase obligations
    
    
    83,183
    
    
    
    16,550
    
    
    
    28,123
    
    
    
    13,872
    
    
    
    24,638Total
    
    $
    154,769
    
    
    $
    19,039
    
    
    $
    94,850
    
    
    $
    15,258
    
    
    $
    25,622
 57




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##### Table of Contents



Bull Runs executive offices are leased from a company affiliated with a
principal stockholder and director of the Company under a month-to-month
operating lease. Host has various operating leases for facilities and
equipment expiring in 2006 through 2010. Operating lease obligations are
presented net of future receipts on contracted sublease arrangements totaling
$1,060 as of August 31, 2004. The Companys total rental expense, including rental expense associated with
discontinued operations, was $2,267 and $2,414 for the fiscal years ended
August 31, 2004 and 2003, respectively; $484 and $404 for the two months ended
August 31, 2002 and 2001, respectively; and $2,617 for the fiscal year ended
June 30, 2002. The minimum annual rental commitments included in the table
above under these and other operating leases, net of subleases, with an
original lease term exceeding one year are $1,821, $1,294, $730, $669 and $639
for the fiscal years ending August 31, 2005 through 2009, respectively, and
$984 thereafter. Purchase obligations primarily consist of future guaranteed rights fee
commitments to associations or institutions under contractual arrangements of
typically one to five years, which expire at varying times through 2015. The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a significant effect on the
Companys consolidated financial position or results of operations. Dividends on Series D Preferred Stock and Series F Preferred Stock are payable
annually at an annual rate of $90 per share in cash or in shares of the
Companys common stock, at the holders option, except that, until the second
anniversary of the date of issuance, the Company has the option to pay such
dividends in cash or in shares of the Companys common stock. For purposes of
determining the number of shares of common stock to be issued as payment of a
dividend, the common stock is valued at the average market closing price for
the twenty trading days immediately preceding each dividend payment date. All
dividends accruing through June 30, 2003 on issued shares of the Companys
preferred stock have been paid, including Series D Preferred Stock dividends
payable to the Companys Chairman through June 30, 2003, having an aggregate
value at that time of approximately $0.5 million, paid to the Chairman in
January 2004 in the form of 148,713 shares of the Companys common stock,
following the Companys stockholders approval of the issuance of such shares.
Dividends on Series D Preferred Stock payable through June 30, 2004 in shares
of the Companys common stock under the terms of such issuance, have not been
declared by the board of directors. Under the Companys Articles of
Incorporation, if dividends on any class of its preferred stock are in arrears
in an amount equal to 150% of an annual dividend, the holders of such preferred
stock shall be entitled to vote for and elect two additional directors of the
Company. Such rights would thereby be afforded the holders of Series D
Preferred Stock if dividends accrued through June 30, 2004 are not paid by
December 31, 2006. Dividends on Series E Preferred Stock are payable annually at an annual rate of
$90 per share in cash or in shares of the Companys common stock at the
holders option, except that the initial dividend on Series E Preferred Stock
is not payable until July 2005 on dividends accruing through June 30, 2005, or
upon a conversion of shares of Series E Preferred Stock to shares of the
Companys common stock, whichever is sooner. The amount of cumulative
dividends accruing through August 31, 2004 on the outstanding shares of Series
E Preferred Stock potentially payable in cash in the fiscal year ending August
31, 2005 is $939, including $493 in connection with shares of Series E
Preferred Stock issued to the Companys Chairman. 58




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##### Table of Contents



As discussed more fully in Note 6, in February 1999, Tarzian filed suit against
the party from which the Company acquired its investment in Tarzian, claiming
that Tarzian had a binding and enforceable contract to purchase the Tarzian
shares, and in March 2003, Tarzian filed suit against Gray and the Company for
tortious interference with contract and conversion. 17. EARNINGS (LOSS) PER SHARE The following table sets forth the computation of basic and diluted earnings
(loss) per share: Year Ended
    
    Two Months Ended
    
    Year EndedAugust 31,
    
    August 31,
    
    June 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Loss from continuing operations before
cumulative effect of accounting change
    
    $
    (7,137
    )
    
    $
    (28,444
    )
    
    $
    (3,946
    )
    
    $
    (3,490
    )
    
    $
    (29,658
    )Preferred dividends
    
    
    (2,237
    )
    
    
    (1,149
    )
    
    
    (93
    )
    
    
    (45
    )
    
    
    (396
    )Loss available to common stockholders before
cumulative effect of accounting change
    
    
    (9,374
    )
    
    
    (29,593
    )
    
    
    (4,039
    )
    
    
    (3,535
    )
    
    
    (30,054
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,620
    )Loss from continuing operations
    
    
    (9,374
    )
    
    
    (29,593
    )
    
    
    (4,039
    )
    
    
    (3,535
    )
    
    
    (32,674
    )Income (loss) from discontinued operations
    
    
    (7,474
    )
    
    
    (9,542
    )
    
    
    (1,409
    )
    
    
    62
    
    
    
    (2,280
    )Net loss available to common stockholders
    
    $
    (16,848
    )
    
    $
    (39,135
    )
    
    $
    (5,448
    )
    
    $
    (3,473
    )
    
    $
    (34,954
    )Weighted average number of common shares
outstanding for basic loss per share
    
    
    4,668
    
    
    
    3,987
    
    
    
    3,793
    
    
    
    3,599
    
    
    
    3,649Effect of dilutive employee stock optionsAdjusted weighted average number of
common shares and assumed conversions
for diluted loss per share
    
    
    4,668
    
    
    
    3,987
    
    
    
    3,793
    
    
    
    3,599
    
    
    
    3,649Basic and diluted earnings (loss) per share:Loss available to common stockholders before
cumulative effect of accounting change
    
    $
    (2.01
    )
    
    $
    (7.42
    )
    
    $
    (1.07
    )
    
    $
    (0.98
    )
    
    $
    (8.24
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.72
    )Loss from continuing operations
    
    
    (2.01
    )
    
    
    (7.42
    )
    
    
    (1.07
    )
    
    
    (0.98
    )
    
    
    (8.96
    )Income (loss) from discontinued operations
    
    
    (1.60
    )
    
    
    (2.40
    )
    
    
    (0.37
    )
    
    
    0.02
    
    
    
    (0.62
    )Net loss available to common stockholders
    
    $
    (3.61
    )
    
    $
    (9.82
    )
    
    $
    (1.44
    )
    
    $
    (0.96
    )
    
    $
    (9.58
    )
 The effect of potentially dilutive employee stock options, which were not
considered above because they were anti-dilutive, was 38 shares for the fiscal
year ended August 31, 2003; 70 shares and 141 shares for the two months ended
August 31, 2002 and 2001, respectively; and 109 shares for the fiscal year
ended June 30, 2002. There were no anti-dilutive shares for the fiscal year
ended August 31, 2004. Outstanding shares of the Companys convertible preferred stock as of August
31, 2004 may ultimately be converted into an aggregate total of 4,212 shares of
the Companys common stock, subject to required preferred stock holding
periods, of which as of August 31, 2004, preferred stock having an
aggregate face value of $12,497 is eligible to be converted into an aggregate
total of 1,250 shares of common stock. 59




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##### Table of Contents



18. OTHER COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is as follows: Year Ended
    
    Two Months Ended
    
    Year EndedAugust 31,
    
    August 31,
    
    June 30,2004
    
    2003
    
    2002
    
    2001
    
    2002(unaudited)Net loss
    
    $
    (14,611
    )
    
    $
    (37,986
    )
    
    $
    (5,355
    )
    
    $
    (3,428
    )
    
    $
    (34,558
    )Other comprehensive income (loss):Change in the valuation of
available-for-sale investments
    
    
    
    
    
    
    2,050
    
    
    
    30
    
    
    
    
    
    
    
    (2,080
    )Comprehensive loss
    
    $
    (14,611
    )
    
    $
    (35,936
    )
    
    $
    (5,325
    )
    
    $
    (3,428
    )
    
    $
    (36,638
    )
 The change in valuation of available-for-sale investments resulted from the
change in accounting for the Companys investment in Rawlings from the equity
method to accounting for it as an available-for-sale marketable security. 19. SEGMENT DATA The Company has two business segments associated with its continuing operations
that provide different products or services: (a) marketing and production
services, which primarily includes services rendered in connection with college
athletics (Collegiate Marketing and Production Services); and (b) association
management services (Association Management Services, formerly called,
Affinity Management Services). Three discontinued business segments as of
August 31, 2004 include: (x) consulting services rendered to a related party
(Consulting); (y) event management and marketing services (Affinity
Events); and (z) computer printer manufacturing and related sales and services
formerly operated by wholly-owned Datasouth Computer Corporation (Datasouth). 60




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##### Table of Contents



Information for each of the Companys segments associated with continuing
operations follows: Year Ended
    
    Two Months Ended
    
    Year EndedAugust 31,
    
    August 31,
    
    June 30,2004
    
    2003
    
    2002
    
    2001
    
    2002Net revenues, continuing operations:Collegiate Marketing and
Production Services
    
    $
    47,106
    
    
    $
    55,354
    
    
    $
    3,307
    
    
    $
    5,838
    
    
    $
    79,099Association Management Services
    
    
    8,673
    
    
    
    8,775
    
    
    
    1,284
    
    
    
    2,015
    
    
    
    14,714$
    55,779
    
    
    $
    64,129
    
    
    $
    4,591
    
    
    $
    7,853
    
    
    $
    93,813Operating income (loss), continuing operations:Collegiate Marketing and
Production Services
    
    $
    977
    
    
    $
    930
    
    
    $
    (1,941
    )
    
    $
    (1,182
    )
    
    $
    (4,944
    )Association Management Services
    
    
    2,009
    
    
    
    1,553
    
    
    
    152
    
    
    
    47
    
    
    
    1,275Amortization and impairment of
acquisition intangibles
    
    
    (4,554
    )
    
    
    (22,141
    )
    
    
    (183
    )
    
    
    (150
    )
    
    
    (7,707
    )Unallocated general and
administrative costs
    
    
    (1,126
    )
    
    
    (1,354
    )
    
    
    (240
    )
    
    
    (444
    )
    
    
    (2,150
    )$
    (2,694
    )
    
    $
    (21,012
    )
    
    $
    (2,212
    )
    
    $
    (1,729
    )
    
    $
    (13,526
    )Depreciation expense, continuing operations:Collegiate Marketing and
Production Services
    
    $
    786
    
    
    $
    923
    
    
    $
    185
    
    
    $
    190
    
    
    $
    1,174Association Management Services
    
    
    97
    
    
    
    117
    
    
    
    27
    
    
    
    35
    
    
    
    118Unallocated general and
administrative costs
    
    
    8
    
    
    
    8
    
    
    
    2
    
    
    
    1
    
    
    
    7$
    891
    
    
    $
    1,048
    
    
    $
    214
    
    
    $
    226
    
    
    $
    1,299Capital expenditures, continuing operations:Collegiate Marketing and
Production Services
    
    $
    360
    
    
    $
    264
    
    
    $
    44
    
    
    $
    52
    
    
    $
    214Association Management Services
    
    
    21
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    7Unallocated general and
administrative costs
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    14$
    384
    
    
    $
    278
    
    
    $
    44
    
    
    $
    52
    
    
    $
    235
 2004
    
    2003Total assets:Collegiate Marketing and Production Services
    
    $
    11,634
    
    
    $
    12,611Association Management Services
    
    
    697
    
    
    
    827Goodwill, customer base and trademarks
    
    
    48,672
    
    
    
    53,226Net assets of discontinued segments
    
    
    
    
    
    
    711Other
    
    
    (61
    )
    
    
    6,437$
    60,942
    
    
    $
    73,812
 61




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##### Table of Contents



SUPPLEMENTARY DATA SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars and shares in thousands, except per share amounts) Quarter EndedNovember 30,
    
    February 29,
    
    May 31,
    
    August 31,2003
    
    2004
    
    2004
    
    2004Revenue from services rendered
    
    $
    19,495
    
    
    $
    16,343
    
    
    $
    12,773
    
    
    $
    7,168Operating income (loss)
    
    
    1,816
    
    
    
    933
    
    
    
    (3,843
    )
    
    
    (1,600
    )Income (loss) from continuing operations
    
    
    751
    
    
    
    (244
    )
    
    
    (4,936
    )
    
    
    (2,708
    )Income (loss) on discontinued operations
    
    
    (1,873
    )
    
    
    (1,446
    )
    
    
    (1,400
    )
    
    
    (2,755
    )Net loss
    
    
    (1,122
    )
    
    
    (1,690
    )
    
    
    (6,336
    )
    
    
    (5,463
    )Preferred dividends
    
    
    (532
    )
    
    
    (558
    )
    
    
    (568
    )
    
    
    (579
    )Net loss available to common stockholders
    
    
    (1,654
    )
    
    
    (2,248
    )
    
    
    (6,904
    )
    
    
    (6,042
    )Per share data, basic and diluted:Loss available to common stockholders
from continuing operations
    
    $
    0.05
    
    
    $
    (0.18
    )
    
    $
    (1.15
    )
    
    $
    (0.65
    )Loss from discontinued segment
    
    $
    (0.43
    )
    
    $
    (0.32
    )
    
    $
    (0.29
    )
    
    $
    (0.55
    )Net loss available to common stockholders
    
    $
    (0.38
    )
    
    $
    (0.50
    )
    
    $
    (1.44
    )
    
    $
    (1.20
    )Weighted average number of shares,
basic and diluted
    
    
    4,340
    
    
    
    4,501
    
    
    
    4,798
    
    
    
    5,034
 Quarter EndedNovember 30,
    
    February 28,
    
    May 31,
    
    August 31,2002
    
    2003
    
    2003
    
    2003Revenue from services rendered
    
    $
    24,059
    
    
    $
    17,058
    
    
    $
    14,466
    
    
    $
    8,546Operating income (loss)
    
    
    2,306
    
    
    
    (219
    )
    
    
    (180
    )
    
    
    (22,919
    )Loss from continuing operations
    
    
    (5,246
    )
    
    
    (3,501
    )
    
    
    (4,101
    )
    
    
    (15,596
    )Income (loss) on discontinued operations
    
    
    4,002
    
    
    
    (1,541
    )
    
    
    (558
    )
    
    
    (11,445
    )Net loss
    
    
    (1,244
    )
    
    
    (5,042
    )
    
    
    (4,659
    )
    
    
    (27,041
    )Preferred dividends
    
    
    (259
    )
    
    
    (281
    )
    
    
    (288
    )
    
    
    (321
    )Net loss available to common stockholders
    
    
    (1,503
    )
    
    
    (5,323
    )
    
    
    (4,947
    )
    
    
    (27,362
    )Per share data, basic and diluted:Loss available to common stockholders
from continuing operations
    
    $
    (1.44
    )
    
    $
    (0.98
    )
    
    $
    (1.11
    )
    
    $
    (3.86
    )Loss from discontinued segment
    
    $
    1.05
    
    
    $
    (0.40
    )
    
    $
    (0.14
    )
    
    $
    (2.77
    )Net loss available to common stockholders
    
    $
    (0.39
    )
    
    $
    (1.38
    )
    
    $
    (1.25
    )
    
    $
    (6.63
    )Weighted average number of shares,
basic and diluted
    
    
    3,831
    
    
    
    3,867
    
    
    
    3,971
    
    
    
    4,129
 62




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None 
 Item 9A. Controls and Procedures The Company carried out, under the supervision and with the participation of
the Companys management, including the Companys Chief Executive Officer and
the Companys Chief Financial Officer, an evaluation of the effectiveness of
the design and operation of the Companys disclosure controls and procedures
performed pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as
amended. Based on that evaluation, the Companys Chief Executive Officer and
its Chief Financial Officer concluded that, as of August 31, 2004, the
Companys disclosure controls and procedures are effective in timely alerting
them to information which is required to be included in the periodic reports
that the Company must file with the Securities and Exchange Commission. There were no changes in the Companys internal control over financial
reporting during the quarter ended August 31, 2004 identified in connection
with the evaluation thereof by the Companys management, including the Chief
Executive Officer and Chief Financial Officer, that have materially affected,
or are reasonably likely to materially affect, the Companys internal control
over financial reporting. 
 Item 9B. Other Information None 
 PART III 
 Item 10. Directors and Executive Officers of the Registrant Except for the information stated below, the information required by the item
is set forth under the caption Election of Directors  Nominees in the
Companys Proxy Statement to be filed with the Commission not later than 120
days after the end of the Companys fiscal year, which is incorporated by
reference herein. In addition to Messrs. Robinson, Prather and Howell, who are listed in the
Companys Proxy Statement to be filed with the Commission not later than 120
days after the end of the Companys fiscal year, which is incorporated by
reference herein, the Company has the following executive officer: FREDERICK J. ERICKSON, 46, has been Vice President  Finance, Treasurer and
Chief Financial Officer of the Company since 1994; Vice President of Host since
1999 and Chief Financial Officer since October 2004; and has served in the
capacity of Executive Vice President  Finance & Administration or similar
capacities with Datasouth from 1993 to 2001. 63




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##### Table of Contents



Code of Ethics Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, the Company has
adopted a Code of Ethics for the Chief Executive Officer and Chief Financial
Officer. The Code of Ethics for the Chief Executive Officer and Chief
Financial Officer is posted on the Companys website, www.bullruncorp.com,
(under the Corporate Governance caption) and is included as Exhibit 14 to the
Form 10-K. The Company intends to satisfy the disclosure requirement regarding
any amendment to, or waiver of, a provision of the Code of Ethics for the Chief
Executive Officer and Senior Financial Officer by posting such information on
its website. The Company undertakes to provide to any person a copy of this
Code of Ethics upon request to the Secretary of the Company at the Companys
principal executives offices. 
 Item 11. Executive Compensation The information required by the item is set forth under the caption Management
Compensation in the Companys Proxy Statement to be filed with the Commission
not later than 120 days after the end of the Companys fiscal year, which is
incorporated by reference herein. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by the item is set forth under the captions Principal
Stockholders and Security Ownership of Management in the Companys Proxy
Statement to be filed with the Commission not later than 120 days after the end
of the Companys fiscal year, which is incorporated by reference herein. 
 Item 13. Certain Relationships and Related Transactions The information required by the item is set forth under the captions Certain
Relationships and Related Transactions in the Companys Proxy Statement to be
filed with the Commission not later than 120 days after the end of the
Companys fiscal year, which is incorporated by reference herein. 
 Item 14. Principal Accountant Fees and Services The information required by the item is set forth under the captions
Ratification of Appointment of Auditors  Fees in the Companys Proxy
Statement to be filed with the Commission not later than 120 days after the end
of the Companys fiscal year, which is incorporated by reference herein. 64




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PART IV 
 Item 15. Exhibits and Financial Statements Schedules  (a)
    
    List of documents filed as part of this report:  (1)
    
    Financial Statements: The following consolidated financial statements of the Company and
Report of Independent Auditors are included in Item 8: Report of Independent Auditors
Consolidated Balance Sheets as of August 31, 2004 and 2003 Consolidated Statements of Operations for the years ended
August 31, 2004 and 2003, the two months ended August 31,
2002 and 2001 (unaudited), and the year ended June 30,
2002 Consolidated Statements of Redeemable Preferred Stock and
Stockholders Deficit for the years ended August 31, 2004
and 2003, the two months ended August 31, 2002, and the
year ended June 30, 2002 Consolidated Statements of Cash Flows for the years ended
August 31, 2004 and 2003, the two months ended August 31,
2002 and 2001 (unaudited), and the year ended June 30,
2002 Notes to Consolidated Financial Statements Supplementary Data, Selected Quarterly Financial Data (Unaudited)  (2)
    
    Financial statement schedule of Bull Run Corporation required
to be filed by Item 8 of this Form and by Item 15(c): Schedule II  Valuation and qualifying accounts All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted. 65




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(3)       Exhibits ExhibitNumbers
    

Description(2.1)
    
    Restated Agreement and Plan of Merger, dated as of
February 15, 1999, by and among Bull Run Corporation (formerly,
BR Holding, Inc.), BR Holding, Inc. (formerly, Bull Run
Corporation), Capital Sports Properties, Inc., Host
Communications, Inc., Universal Sports America, Inc., Capital
Merger Sub, Inc., Host Merger Sub, Inc., and USA Merger Sub,
Inc. (g)(2.2)
    
    Form of Agreement and Plan of Merger, by and among
Bull Run Corporation (formerly, BR Holding, Inc.), BR Holding,
Inc. (formerly, Bull Run Corporation) and a wholly owned
subsidiary of Bull Run Corporation (formerly, BR Holding, Inc.)
(g)(3.1)
    
    Articles of Incorporation of Bull Run Corporation (formerly, BR Holding, Inc.) (g)(3.2)
    
    Certificate of Amendment to Articles of Incorporation, filed November 9, 2001 (h)(3.3)
    
    Certificate of Amendment to Articles of Incorporation, filed February 12, 2002 (h)(3.4)
    
    Certificate of Amendment to Articles of Incorporation, filed November 8, 2002 (i)(3.5)
    
    Certificate of Amendment to Articles of Incorporation, filed May 13, 2003 (j)(3.6)
    
    Certificate of Amendment to Articles of Incorporation, filed May 30, 2003 (j)(3.7)
    
    Certificate of Amendment to Articles of Incorporation, filed October 8, 2003 (k)(3.8)
    
    Certificate of Amendment to Articles of Incorporation, filed November 26, 2003 (k)(3.9)
    
    Bylaws of Bull Run Corporation (formerly, BR Holding, Inc.) (g)(10.1)
    
    Amended and Restated 1994 Long Term Incentive Plan (g)(10.2)
    
    1987 Non-Qualified Stock Option Plan (a)(10.3)
    
    Non-Employee Directors 1994 Stock Option Plan (b)(10.4)
    
    Stock Purchase Agreement dated January 28, 1999 by and between
U.S. Trust Company of Florida Savings Bank, as Personal
Representative of the Estate of Mary Tarzian and Bull Run
Corporation (e)(10.5)
    
    Form of Stockholders Agreement, by and among Hilton H.
Howell, Jr., Douglas L. Jarvie, Robinson-Prather Partnership, W.
James Host and Charles L. Jarvie (g)(10.6)
    
    Third Amended and Restated Credit Agreement among BR Holding,
Inc., Capital Sports Properties, Inc., Host Communications, Inc.
and Datasouth Computer Corporation, as Borrowers, Bull Run
Corporation, as a Guarantor, and Wachovia Bank, National
Association, as Issuing Bank, Wachovia Capital Markets, LLC, as
Sole Lead Arranger and Wachovia Bank, National Association, as
Administrative Agent, dated October 15, 2004 (l)(14)
    
    Code of Ethics for Senior Financial Officers (k)(21)
    
    List of Subsidiaries of Registrant (x)(23.1)
    
    Consent of PricewaterhouseCoopers LLP (x)(31.1)
    
    Certifications of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (x)(31.2)
    
    Certifications of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (x)
 66




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ExhibitNumbers
    

Description(32.1)
    
    Certifications of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (x)(32.2)
    
    Certifications of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (x)
 (a)
    
    Filed as an exhibit to Form 10-K Annual Report for the year
ended December 31, 1988 and incorporated by reference herein(b)
    
    Filed as an exhibit to Registration Statement on Form S-4
(Registration No. 33-81816), effective November 3, 1994 and
incorporated by reference herein(c)
    
    Filed as an exhibit to Form 10-KSB Annual Report for the year
ended December 31, 1996 and incorporated by reference herein(d)
    
    Filed as an exhibit to Form 8-K Current Report dated as of
November 21, 1997 and incorporated by reference herein(e)
    
    Filed as an exhibit to Form 8-K Current Report dated as of
January 28, 1999 and incorporated by reference herein(f)
    
    Filed as an exhibit to Form 8-K Current Report dated as of
April 23, 1999 and incorporated by reference herein(g)
    
    Filed as an exhibit to Registration Statement on Form S-4
(Registration No. 333-84833), effective August 11, 1999 and
incorporated by reference herein(h)
    
    Filed as an exhibit to Form 10-K Annual Report for the year
ended June 30, 2002 and incorporated by reference herein(i)
    
    Filed as an exhibit to Form 10-Q Quarterly Report for the
quarterly period ended November 30, 2002 and incorporated by
reference herein(j)
    
    Filed as an exhibit to Form 10-Q Quarterly Report for the
quarterly period ended May 31, 2003 and incorporated by reference
herein(k)
    
    Filed as an exhibit to Form 10-K Annual Report for the year
ended August 31, 2003 and incorporated by reference herein(l)
    
    Filed as an exhibit to Form 8-K Current Report dated as of
October 15, 2004 and incorporated by reference herein(x)
    
    Filed herewith
 (c)
    
    Financial Statement SchedulesThe response to this section is submitted as part of Item 15(a)(1) and Item 15(a)(2).
 67




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SIGNATURES Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on November 29,
2004. BULL RUN CORPORATIONby:
    
    /s/ ROBERT S. PRATHER, JR.Robert S. Prather, Jr.
President and Chief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated. Signature
    
    Title
    
    Date/s/
ROBERT S. PRATHER, JR.
Robert S. Prather, Jr.
    
    President, Chief
Executive Officer and
Director
(Principal Executive
Officer)
    
    November 29, 2004/s/ GERALD N. AGRANOFF

Gerald N. Agranoff
    
    Director
    
    November 29, 2004/s/ JAMES W. BUSBY

James W. Busby
    
    Director
    
    November 29, 2004/s/ FREDERICK J. ERICKSON

Frederick J. Erickson
    
    Vice President-Finance and
Treasurer
(Principal Accounting
and Financial Officer)
    
    November 29, 2004/s/ HILTON H. HOWELL, JR.

Hilton H. Howell, Jr.
    
    Vice President, Secretary
and Director
    
    November 29, 2004/s/ MONTE C. JOHNSON

Monte C. Johnson
    
    Director
    
    November 29, 2004/s/ J. MACK ROBINSON

J. Mack Robinson
    
    Chairman of the Board
    
    November 29, 2004/s/ THOMAS J. STULTZ

Thomas J. Stultz
    
    Director
    
    November 29, 2004
 68




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE Our audits of the consolidated financial statements of Bull Run Corporation
referred to in our report dated November 19, 2004 appearing elsewhere in this
Form 10-K also included an audit of the financial statement schedule listed in
Item 15(a)(2). In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements. PRICEWATERHOUSECOOPERS LLP Louisville, Kentucky
November 19, 2004 69




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BULL RUN CORPORATION SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AdditionsBalance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    End ofDescription
    
    Of Period
    
    Expenses
    
    Accounts
    
    Deductions1
    
    PeriodYear Ended August 31, 2004Allowance for
doubtful accounts
    
    $
    465,000
    
    
    $
    75,000
    
    
    $
    0
    
    
    $
    231,000
    
    
    $
    309,000Year Ended August 31, 2003Allowance for
doubtful accounts
    
    $
    514,000
    
    
    $
    300,000
    
    
    $
    0
    
    
    $
    349,000
    
    
    $
    465,000Two Months Ended August 31, 2002Allowance for
doubtful accounts
    
    $
    444,000
    
    
    $
    85,000
    
    
    $
    0
    
    
    $
    15,000
    
    
    $
    514,000Year Ended June 30, 2002Allowance for
doubtful accounts
    
    $
    545,000
    
    
    $
    630,000
    
    
    $
    0
    
    
    $
    731,000
    
    
    $
    444,000
 1 Deductions represent write-offs of amounts not considered collectible. 70