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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 1934    
|     |  | for the fiscal year ended June 30, 2002                                                 
|     |  |                                                                                         
|[  ] |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|     |  | for the transition period from _______________ to _______________                       

Commission File Number 0-9385

BULL RUN CORPORATION

(Exact name of registrant as
specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2458679                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|4370 Peachtree Road, N.E., Atlanta, GA   |  | 30319     
|(Address of principal executive offices) |  | (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 in response to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

The aggregate market value of the voting and non-voting common equity held
by non-affiliates as of September 30, 2002 was $17,742,118 based on the closing
price thereof on The Nasdaq Stock Market.

The number of shares outstanding of the registrants Common Stock, par
value $.01 per share, as of September 30, 2002, was 38,006,384.

DOCUMENTS INCORPORATED BY REFERENCE

|          |  |                    
|--------- |  | -------------------
|Documents |  | Form 10-K Reference
|None      |  | not applicable     





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BULL RUN CORPORATION

FORM 10-K INDEX

PART I

|         |  |                                                                                       |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                       |  | Page
|         |  |                                                                                       |  |     
|Item 1.  |  | Business                                                                              |  |      | 3  | 
|Item 2.  |  | Properties                                                                            |  |      | 9  | 
|Item 3.  |  | Legal Proceedings                                                                     |  |      | 9  | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  |      | 9  | 
|         |  |                                                                                       |  |      |    | 
|PART II 
|         |  |                                                                                       |  |      |    | 
|Item 5.  |  | Market for Registrants Common Equity and Related Stockholder
Matters                 |  |      | 10 | 
|Item 6.  |  | Selected Financial Data                                                               |  |      | 11 | 
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |      | 13 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |      | 31 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                           |  |      | 32 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure  |  |      | 62 | 
|         |  |                                                                                       |  |      |    | 
|PART III
|         |  |                                                                                       |  |      |    | 
|Item 10. |  | Directors and Executive Officers of the Registrant                                    |  |      | 62 | 
|Item 11. |  | Executive Compensation                                                                |  |      | 63 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  |      | 67 | 
|Item 13. |  | Certain Relationships and Related Transactions                                        |  |      | 69 | 
|Item 14. |  | Controls and Procedures                                                               |  |      | 70 | 
|         |  |                                                                                       |  |      |    | 
|PART IV 
|         |  |                                                                                       |  |      |    | 
|Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  |      | 71 | 

2



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PART I

Item 1. Business

General

Bull Run Corporation (the Company or Bull Run), a Georgia
corporation based in Atlanta, is a sports, affinity marketing and
management company through its primary operating subsidiary, Host
Communications, Inc. (Host), acquired in December 1999. Hosts
Collegiate Marketing and Production Services business segment provides
sports marketing and production services primarily to a number of
collegiate conferences and universities and the National Collegiate
Athletic Association (the NCAA). Hosts Affinity Events business
segment produces and manages individual events and several events series,
including NBA Hoop-It-Up® (the National Basketball Associations
official 3-on-3 basketball tour) and the Got Milk? 3v3 Soccer Shootout
(Major League Soccers official 3-on-3 soccer tour). Hosts Affinity
Management Services business segment provides associations, such as the
National Tour Association and Quest (the J.D. Edwards users group
association), with services ranging from member communication,
recruitment and retention, to conference planning, Internet web site
management, marketing, sales representation and administration.

Effective December 17, 1999, the Company acquired (the Host-USA
Acquisition) the stock of Host, Universal Sports America, Inc. (USA)
and Capital Sports Properties, Inc. (Capital) not then owned, directly
or indirectly, by the Company. In January 2000, Hosts executive
management team assumed executive management responsibilities for USA,
and many administrative and operating functions of the two companies were
combined. Effective July 1, 2000, USA was merged into Host. Capital was
solely an investor in Host and has no operating business.

The Company also has significant investments in other sports, media
and marketing companies, including Gray Television, Inc. (Gray,
formerly known as Gray Communications Systems, Inc.), the owner and
operator of 13 television stations, four newspapers and other media and
communications businesses; Rawlings Sporting Goods Company, Inc.
(Rawlings), a supplier of team sports equipment; and iHigh, Inc.
(iHigh), an Internet and marketing company focused on high school
students. The Company has provided consulting services to Gray in
connection with Grays acquisitions and dispositions.

As of June 30, 2002, the Company owned approximately 12.9% of the
outstanding common stock of Gray (representing 26.1% of the voting
rights), in addition to non-voting preferred stock and warrants to
purchase additional Gray common stock; 10.1% of the outstanding common
stock of Rawlings; and 35.1% of the outstanding common stock of iHigh.

On September 25, 2002, the Company changed its fiscal year end from
June 30 to a new fiscal year end of August 31.

For financial information for each of our business segments
described below, see Note 18 of the Notes to Consolidated Financial
Statements appearing in Item 8 Financial Statements and Supplemental
Data.

Collegiate Marketing and Production Services Segment

NCAA Group Host has had a relationship with the NCAA since 1975.
Beginning as an agreement to administer radio rights and form a national
NCAA Radio Network for the mens Final Four®, the services rendered by
Host expanded to publishing, Internet and corporate marketing
representation, including the exclusive licensing of various NCAA
trademarks.

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In 1984, Host and the NCAA initiated the NCAA Corporate Partner
Program. Under this Program, the Company partnered with an exclusive
group of corporations to link their target markets to, and implement
promotions around, NCAA championships through a variety of advertising
and promotional opportunities. Hosts contract with the NCAA (the
Host-NCAA Contract) ended on August 31, 2002. Under an agreement
signed July 1, 2001 and effective September 1, 2002, Host agreed to
continue its services on behalf of the NCAA as a sublicensee to CBS
Sports. The agreement with CBS Sports (the Host-CBS Contract) provided
Host certain marketing, licensing and media rights, including the
administration of the NCAA Corporate Partner Program. In August 2002,
CBS Sports and Host discussed the parties desire to modify their
relationship. In September 2002, CBS Sports and Host restructured their
relationship and a new agreement was executed. The new agreement
modified the rights provided to Host under the initial agreement and,
except for an annual rights fee ranging from $300,000 to $350,000 payable
by Host to CBS Sports, eliminated a $575 million guaranteed rights fee
commitment payable by Host to CBS Sports over the original 11-year term
of their agreement. Under the new agreement, Host will: (a) have the
exclusive rights to produce, distribute and sell game programs and
publications in connection with 87 NCAA championships; (b) engage in
merchandise licensing utilizing registered marks of the NCAA and its
championships; (c) coordinate, promote and operate the Hoop City
festival interactive events at the Mens and Womens Final Four Division
I basketball championships; and (d) assist with sales and administration
of the NCAA Corporate Partner Program to the extent deemed necessary by
CBS Sports. The agreement is for a four-year term, with the final two
years at CBS Sports sole discretion.

Collegiate Sports The Company, through Host, provides sports and
marketing services for a number of NCAA Division I universities and
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; construction and management of Internet web
sites; and (g) coaches endorsements and pay-per-view telecasts.
Universities with which the Company has agreements are Florida State,
Kentucky, Michigan, Mississippi State, Notre Dame, Purdue, South
Carolina, Southern Methodist, Tennessee and Texas. The Company currently
has marketing agreements with the Metro Atlantic Athletic, Horizon,
Southeastern and Southern Conferences. The Company also has marketing
rights to the Southwestern Bell Red River Shootout featuring the
University of Texas and University of Oklahomas annual football rivalry,
and the Lone Star Showdown football game featuring Texas and Texas A&M
University.

The Company publishes Dave Campbells Texas Football Magazine and
has marketing rights to two interstate high school football all-star
games, the Oil Bowl game featuring high school all-stars from Texas
playing those from Oklahoma, and the Shriners California versus Texas
all-star game. In addition, the Company has the rights to an annual
series of football games that features six prominent Texas high school
teams. The Company also partners with the Texas Radio Network and Fox
SportsNet to broadcast and televise key high school championship events.

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, including more than 60 NCAA
championship programs in 21 sports and specialty publications, such as
the official NCAA Basketball Championship Guide. The Company also
provides high quality printing services for corporations and non-profit

4



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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. The Company administers
all contracts with all networks and stations that originate NCAA
championship radio broadcasts. The Company administers the regional
radio networks of 11 NCAA Division I universities and three conferences.
The Companys digital recording studios handle network quality
soundtracks for radio, television and multi-image presentations.

The Company has collaborated with NCAA On-line and iHigh on
www.finalfour.net, the official site for the NCAA Division I Mens and
Womens Basketball Championships, and the College World Series official
site. Other web sites developed and managed by Host include those for
Quest (the J.D. Edwards software user group association), the
International SPA Association and the National Tour Association.

Affinity Events Segment

The Companys Affinity Events division produces and manages large
participatory sporting events throughout the United States and
internationally. In connection with these events, the Company provides
professional marketing and management services to corporations looking to
supplement their own sales and promotional activities with sports-based
events that target specific participating audiences and demographics.
NBA Hoop-It-Up®, held in approximately 40 U.S. cities and approximately
7 cities in Canada each year, is the official 3-on-3 basketball
tournament of the National Basketball Association and NBC Sports. NBA
Hoop-It-Ups Germany extension, the TD-1 Basketball Challenge held in 7
cities in 2002, was managed by the Companys Paris, France office in
collaboration with NBA Europe. In August 2002, the Company closed the
Paris office and discontinued the European tour.

Beginning in September 2000 with the acquisition of Summit Sports &
Events, Inc. (Summit), the Company began operating a participatory
soccer tour. The Got Milk? 3v3 Soccer Shootout, Major League Soccers
official 3-on-3 soccer tour, is held in approximately 75 U.S. cities, and
includes a series of national championship matches held at Disney World
in Orlando, Florida. On June 30, 2000, Summit was merged into Host.

The Company creates and executes events for corporate clients,
including the SBC Cotton Bowl Fanfest and the Sony TechPit mobile
marketing unit, which travels to NASCARs Winston Cup races.

The Company capitalizes on developing and implementing customized
event marketing platforms for corporations looking to reach certain
affinity groups. For example, the Company helped create and managed the
Tampax Total You Tour for the Procter & Gamble brand, which traveled to
college campus sites and other urban locations to effectively reach the
brands core target audience, African-American females, ages 18 - 24.
This tour was awarded a Silver Anvil by the Public Relations Society of
America for having the best multicultural public relations program in
1999.

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Affinity Management Services Segment

The Affinity Management Services segment, doing business as Affinity
Management International, provides a full range of management services to
a number of associations, including the National Tour Association (which
has been a client since 1974), Quest (the J.D. Edwards software user
group association), the National Athletic Trainers 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.

Consulting Segment

The Company has provided consulting services to Gray from time to
time in connection with Grays acquisitions, dispositions and acquisition
financing. Consulting services have included transaction search,
analysis, due diligence, negotiation and closing. Fees have generally
been 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.

Investment in Affiliated Companies

The Company currently owns approximately 12.9% of the total
outstanding common stock (representing approximately 26.1% of the voting
power) of Gray. The Company also owns warrants to purchase additional
shares of Gray common stock. Parties affiliated with the Company,
including officers and directors of the Company and companies of which
they are principal stockholders and/or executive officers, currently own
approximately an additional 12.9% of Gray common stock (representing
approximately an additional 26.1% of the voting power in Gray).

Gray is a communications company headquartered in Atlanta, Georgia,
which currently operates:

(a)  three NBC-affiliated television stations  WEAU-TVin Eau
Claire-La Crosse, Wisconsin; WJHG-TVin Panama City, Florida; and
WITN-TV, in the Greenville-Washington-New Bern, North Carolina market;

(b)  ten CBS-affiliated television stations  WCTV-TVin
Tallahassee, Florida; WVLT-TVin Knoxville, Tennessee; WKYT-TVin
Lexington, Kentucky; WYMT-TVin Hazard, Kentucky; WRDW-TVin Augusta,
Georgia; KOLN-TVin Lincoln, Nebraska; KGIN-TVin Grand Island, Nebraska;
KWTX-TVin Waco, Texas; KBTX-TV, a satellite station of KWTX-TVlocated
in Bryan, Texas; and KXII-TVin the Sherman, Texas / Ada, Oklahoma
market.

(c)  four daily newspapers, The Albany Heraldin Albany, Georgia; The
Rockdale Citizen and The Newton Citizenin Conyers, Georgia; the Gwinnett
Daily Postin Lawrenceville, Georgia; and The Goshen Newsin Goshen,
Indiana;

(d)  Lynqx Communications, a satellite transmission and production
services business based in the southeastern United States; and

(e)  GrayLink, a communications and paging business in the Southeast.

In June 2002, Gray announced that it had entered into a pending
merger transaction with Stations Holding Company, Inc. by which Gray will
acquire 15 additional television stations for cash consideration of
approximately $502.5 million. Also, in September 2002, Gray announced
that it had entered into an agreement to purchase KOLO-TV in Reno, Nevada
in a separate transaction for $41.5 million. Upon completion of these two
transactions, Gray will

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own a total of 29 television stations serving 25 markets. The
stations will include 15 CBS affiliates, 7 NBC affiliates and 7 ABC
affiliates. The combined station group will have 22 stations ranked #1
in both viewing audience and local news audience within their respective
markets. The combined group will reach approximately 5% of total U.S. TV
households. In addition, with 15 CBS affiliated stations, Gray will be
the largest independent owner of CBS affiliates in the country. The
combined station group will have a significant presence in the Southeast,
Southwest, Midwest and Great Lakes regions of the United States. These
transactions are currently expected to close by December 2002. Gray
previously reported its intention to finance a portion of the costs of
these transactions by issuing a combination of equity and debt
securities. As part of this financing effort, in September 2002 Gray
completed the follow-on sale of an additional $100 million of
its 9 1/4%
Senior Subordinated Notes due 2011. In September 2002, Gray announced
its intention to commence a public offering of 27,500,000 shares of its
common stock, plus up to 4,125,000 shares to cover over-allotments, if
any. The net proceeds of this offering would be used to finance the
pending and/or future acquisitions, refinance debt, and/or for general
corporate purposes.

J. Mack Robinson, the Companys Chairman of the Board, Hilton H.
Howell, Jr., the Companys Vice President, Secretary and a director, and
Robert S. Prather, Jr., the Companys President and Chief Executive
Officer and a director, are members of Grays board of directors. Mr.
Robinson is also Chairman and the Chief Executive Officer of Gray, Mr.
Prather is also President and Chief Operating Officer of Gray and Mr.
Howell is Vice Chairman of Gray.

From November 1997 through January 1998, the Company accumulated
approximately 10.1% of Rawlings common stock in the open market.
Pursuant to a standstill agreement with Rawlings, which terminates in
July 2003, the Company is restricted from acquiring additional shares of
Rawlings common stock or participating in corporate events relating to
Rawlings, including proxy contests and tender offers, subject to
specified exceptions. Rawlings, headquartered near St. Louis, Missouri,
is a leading supplier of team sports equipment in North America and,
through its licensee, of baseball equipment and uniforms in Japan.
Rawlings operates manufacturing facilities throughout the United States
and in Costa Rica, as well as warehouse/distribution centers in the
United States and Canada.

At the time of the Host-USA Acquisition, Host owned shares of iHigh
common stock and as of June 30, 2002, the Company, through Host, owned
approximately 35.1% of the outstanding common stock of iHigh.

As of June 30, 2002, the Companys investment in Gray represented
approximately 16% of the Companys total assets; the investment in
Rawlings represented approximately 3% of the Companys total assets; and
the investment in iHigh represented approximately 1% of the Companys
total assets.

Sales and Marketing

The Company provides sponsorship opportunities to a variety of
corporate clients, typically ranging from one to five years in length.
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. The Company intends to
continue to seek long-term sponsorship agreements.

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 through its managers responsible for business
development and through personal contacts by members of the Companys
senior management. When a new

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account is established, the Company immediately assigns a sales
executive to the client to ensure that the clients needs are met and to
seek out further opportunities to expand the relationship. Generally,
account managers are assigned several different clients, which may be
comprised of a number of businesses or divisions, departments or groups
within the same business. In addition, the personnel that staff the
Companys offices on university campuses and at athletic conference
locations are responsible for soliciting local sponsors and advertisers.

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 in certain of
its business segments, 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
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.

The Companys Affinity Events business is seasonal, in that the
majority of the revenue and operating profit is derived during the period
beginning in March and ending in September, since much of the revenue
derived in this segment is currently generated during the NBA Hoop-It-Up
3-on-3 basketball tour.

Employees

The Company has approximately 400 employees, of whom, approximately
250 are employed by Host at its Lexington, Kentucky facilities and
approximately 50 are employed by Host at its Dallas, Texas facility. 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.

Discontinued Segment  Datasouth

The Company formerly marketed and sold heavy-duty dot matrix and
thermal printers under the Datasouth name. The Company decided to
discontinue its Datasouth business segment as a result of the strategic
decision to focus on the sports and affinity marketing and management
businesses following the Host-USA Acquisition. The Company consummated a
sale of Datasouths business on September 29, 2000. For additional
information with respect to this business segment, including financial
reporting as a discontinued operation, see Managements Discussion and
Analysis  Results of Discontinued Operations and Note 4 to the
Companys Consolidated Financial Statements.

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Item 2. Properties

The Companys executive offices are located in Atlanta, Georgia in
approximately 2,000 square feet of office space leased from Delta Life
Insurance Company, an affiliate of J. Mack Robinson, the Companys
Chairman of the Board. The lease expires in December 2002, subject to
several renewal options on the part of the Company.

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 50,500 square feet of office
space under three leases in Lexington expiring beginning in January 2003;
approximately 48,600 square feet of office space under lease in Dallas,
Texas through December 2005, of which, approximately 28,600 is subleased
through December 2005; and approximately 4,300 square feet of office
space under lease in New York City through August 2010. 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

On February 12, 1999, Sarkes Tarzian, Inc. (Tarzian) filed a
complaint in the United States District Court for the Southern District
of Indiana against the Company and U.S. Trust Company of Florida Savings
Bank as Personal Representative of the Estate of Mary Tarzian (the
Estate). On May 3, 1999, the action was dismissed without prejudice
against the Company, leaving the Estate as the sole defendant. The suit
involves the Companys acquisition of 301,119 shares of Tarzian common
stock, $4.00 par value, from the Estate for $10 million on January 28,
1999. Tarzian claims that it had a binding and enforceable contract to
purchase the Tarzian shares from the Estate prior to the Companys
purchase of such shares, and requests judgment providing that the
contract be enforced. The Company contends that a binding contract
between Tarzian and the Estate did not exist prior to the Companys
purchase of the Tarzian shares from the Estate. The Company does not
believe that a judgment in favor of Tarzian in this litigation would have
a materially adverse effect on the Company, because, among other reasons,
the Companys purchase agreement with the Estate provides that if a court
of competent jurisdiction awards title to the shares to a person or
entity other than the Company, the purchase agreement will be rescinded
and the Estate will be required to pay the Company the full $10 million
purchase price, plus interest. In December 2001, the Company sold its
interest in Tarzian to Gray for $10 million.

On January 8, 2002, the Company filed a complaint in the State Court
of Fulton County, Georgia, against Ernst & Young LLP, claiming negligent
misrepresentation. The Company claims that it placed significant
reliance on Ernst & Youngs audit reports on the audited financial
statements of Universal Sports America, Inc. issued prior to the Host-USA
Acquisition in December 1999, and that those financial statements
contained material errors. The State Court of Fulton County has ruled
that the matter is subject to binding arbitration.

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 June 30, 2002.

9



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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 (the Common Stock),
trades on The Nasdaq Stock Market under the symbol BULL. The following table
sets forth for each period indicated the high and low sale prices for the
Common Stock as reported by The Nasdaq Stock Market. Such prices reflect
interdealer prices without adjustments for retail markups, markdowns or
commissions.

|                                |  |      |      |     |  |   |      | 
|------------------------------- |  | ---- | ---- | --- |  | - | ---- | 
|                                |  | High |      | Low
|                                |  |      |      |    
|Fiscal Year Ended June 30, 2001 |  |      |      |     |  |   |      | 
|First Quarter                   |  | $    | 3.13 |     |  | $ | 2.00 | 
|Second Quarter                  |  |      | 2.50 |     |  |   | 1.25 | 
|Third Quarter                   |  |      | 2.34 |     |  |   | 1.13 | 
|Fourth Quarter                  |  |      | 1.70 |     |  |   | 1.00 | 
|                                |  |      |      |     |  |   |      | 
|Fiscal Year Ended June 30, 2002 |  |      |      |     |  |   |      | 
|First Quarter                   |  | $    | 1.51 |     |  | $ | .78  | 
|Second Quarter                  |  |      | 1.29 |     |  |   | .47  | 
|Third Quarter                   |  |      | 1.25 |     |  |   | .53  | 
|Fourth Quarter                  |  |      | 1.04 |     |  |   | .58  | 

Holders

As of September 20, 2002, there were 2,370 holders of record of 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
the Common Stock.

Equity Plan Compensation Information

|                                                           |  |                            |           |                      |  |                                      |      |  |  |  |         | 
|---------------------------------------------------------- |  | -------------------------- | --------- | -------------------- |  | ------------------------------------ | ---- |  |  |  | ------- | 
|As of June 30, 2002:                                       |  | (a)                        |           | (b)                  |  | (c)                                 
|                                                           |  | Number of securities       |           | Weighted-average     |  | Number of securities remaining      
|                                                           |  | to be issued upon exercise |           | exercise price of    |  | available for future issuance under 
|                                                           |  | of outstanding options,    |           | outstanding options, |  | equity compensation plans (excluding
|Plan Category                                              |  | warrants and rights        |           | warrants and rights  |  | securities reflected in column (a)) 
|                                                           |  |                            |           |                      |  |                                     
|Equity compensation plans
approved by security holders     |  |                            | 5,459,443 |                      |  | $                                    | 1.18 |  |  |  | 680,205 | 
|                                                           |  |                            |           |                      |  |                                      |      |  |  |  |         | 
|Equity compensation plans not
approved by security holders |  |                            |          |                      |  |                                      |      |  |  |  |        | 
|                                                           |  |                            |           |                      |  |                                      |      |  |  |  |         | 
|Total                                                      |  |                            | 5,459,443 |                      |  | $                                    | 1.18 |  |  |  | 680,205 | 
|                                                           |  |                            |           |                      |  |                                      |      |  |  |  |         | 

10



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##### 



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 June 30, 2002, 2001 and 2000, as of and for the six months ended
June 30, 1999, as of December 31, 1998 and 1997 and for each of the years ended
December 31, 1998 and 1997 are derived from the audited consolidated financial
statements of the Company. The selected consolidated financial data as of and
for the six months ended June 30, 1998 are derived from unaudited condensed
consolidated financial statements of the Company.

SELECTED FINANCIAL DATA
(Dollar and share amounts in thousands, except per share amounts)

OPERATING RESULTS:

|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |      |  
|--------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | - | ------------------- | ------- | -------- | - | ------------ | ------ | ---- | - | ------- | ------ | - | - | ---------------- | --- | ---------- |  |  |  |  | - | ----------- | --- | - | - | ------ | --- |  |  |  |  |  | - | ------ | ---- | -
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   | Six Months Ended |     | Year Ended
|                                                                                                                            |                               |   | Year Ended June 30, |         | June 30, |   | December 31,
|                                                                                                                            |                               |   |                     |         |          |   |             
|                                                                                                                            |                               |   | 2002                |         | 2001     |   | 2000         |        | 1999 |   |         |        |   |   | 1998             |     | 1998       |  |  |  |  |   | 1997       
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |            
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   | (unaudited) |     |   |   |        |     |  |  |  |  |  |   |       
|Total revenue                                                                                                               |                               | $ | 113,072             |         |          | $ | 120,337      |        |      | $ | 72,000  |        |   | $ | 609              |     |            |  |  |  |  | $ | 652         |     |   | $ | 1,618  |     |  |  |  |  |  | $ | 681    |     
|Direct operating costs                                                                                                      |                               |   | (88,531             | )       |          |   | (81,421      | )      |      |   | (49,437 | )      |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Selling, general and administrative                                                                                         |                               |   | (32,773             | )       |          |   | (38,527      | )      |      |   | (21,891 | )      |   |   | (693             | )   |            |  |  |  |  |   | (691        | )   |   |   | (1,312 | )   |  |  |  |  |  |   | (1,039 | )   
|Amortization of acquisition intangibles                                                                                     |                               |   | (7,824              | )       |          |   | (4,267       | )      |      |   | (2,602  | )      |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|                                                                                                                            | Income (loss) from operations |   |                     | (16,056 | )        |   |              | (3,878 | )    |   |         | (1,930 | ) |   |                  | (84 | )          |  |  |  |  |   |             | (39 | ) |   |        | 306 |  |  |  |  |  |   |        | (358 | )
|Equity in earnings (losses) of
affiliated companies                                                                         |                               |   | (1,962              | )       |          |   | (4,235       | )      |      |   | (2,533  | )      |   |   | (910             | )   |            |  |  |  |  |   | (61         | )   |   |   | 6,337  |     |  |  |  |  |  |   | (428   | )   
|Correction of purchase price allocation                                                                                     |                               |   |                     |         |          |   |              |        |      |   | (11,330 | )      |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Other income (expense) derived from
investments in affiliates, net                                                          |                               |   | 242                 |         |          |   | (6,796       | )      |      |   | (2,360  | )      |   |   |                  |     |            |  |  |  |  |   |             |     |   |   | 1,680  |     |  |  |  |  |  |   |        |     
|Net change in value of derivatives                                                                                          |                               |   | (3,345              | )       |          |   | 2,988        |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Interest expense and other, net                                                                                             |                               |   | (12,042             | )       |          |   | (11,891      | )      |      |   | (7,909  | )      |   |   | (1,858           | )   |            |  |  |  |  |   | (1,547      | )   |   |   | (3,162 | )   |  |  |  |  |  |   | (1,614 | )   
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Income (loss) from continuing
operations before income taxes,
extraordinary item and cumulative
effect of accounting change |                               |   | (33,163             | )       |          |   | (23,812      | )      |      |   | (26,062 | )      |   |   | (2,852           | )   |            |  |  |  |  |   | (1,647      | )   |   |   | 5,161  |     |  |  |  |  |  |   | (2,400 | )   
|Income tax benefit (provision)                                                                                              |                               |   | 7,257               |         |          |   | 6,228        |        |      |   | 5,077   |        |   |   | 911              |     |            |  |  |  |  |   | 509         |     |   |   | (2,094 | )   |  |  |  |  |  |   | 966    |     
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Income (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting change               |                               |   | (25,906             | )       |          |   | (17,584      | )      |      |   | (20,985 | )      |   |   | (1,941           | )   |            |  |  |  |  |   | (1,138      | )   |   |   | 3,067  |     |  |  |  |  |  |   | (1,434 | )   
|Extraordinary loss, net of tax                                                                                              |                               |   | (627                | )       |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Cumulative effect of accounting
change, net of tax                                                                          |                               |   | (2,620              | )       |          |   | (1,120       | )      |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Income (loss) from continuing
operations                                                                                    |                               |   | (29,153             | )       |          |   | (18,704      | )      |      |   | (20,985 | )      |   |   | (1,941           | )   |            |  |  |  |  |   | (1,138      | )   |   |   | 3,067  |     |  |  |  |  |  |   | (1,434 | )   
|Income (loss) from discontinued
operations, net of tax                                                                      |                               |   |                     |         |          |   |              |        |      |   | (6,839  | )      |   |   | (266             | )   |            |  |  |  |  |   | (92         | )   |   |   | 81     |     |  |  |  |  |  |   | (234   | )   
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Net income (loss)                                                                                                           |                               |   | (29,153             | )       |          |   | (18,704      | )      |      |   | (27,824 | )      |   |   | (2,207           | )   |            |  |  |  |  |   | (1,230      | )   |   |   | 3,148  |     |  |  |  |  |  |   | (1,668 | )   
|Preferred dividends                                                                                                         |                               |   | (396                | )       |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     
|Net income (loss) available to
common stockholders                                                                          |                               | $ | (29,549             | )       |          | $ | (18,704      | )      |      | $ | (27,824 | )      |   | $ | (2,207           | )   |            |  |  |  |  | $ | (1,230      | )   |   | $ | 3,148  |     |  |  |  |  |  | $ | (1,668 | )   
|                                                                                                                            |                               |   |                     |         |          |   |              |        |      |   |         |        |   |   |                  |     |            |  |  |  |  |   |             |     |   |   |        |     |  |  |  |  |  |   |        |     

See Notes to the Selected Financial Data on the following page.

11



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##### 



SELECTED FINANCIAL DATA, continued

EARNINGS (LOSS) PER SHARE:

|                                              |                                                                                                               |  |                     |       |          |  |              |       |      |  |        |       |      |  |                  |       |            |  |             |       |   |  |        |      |  |  |        |       |  
|--------------------------------------------- | ------------------------------------------------------------------------------------------------------------- |  | ------------------- | ----- | -------- |  | ------------ | ----- | ---- |  | ------ | ----- | ---- |  | ---------------- | ----- | ---------- |  | ----------- | ----- | - |  | ------ | ---- |  |  | ------ | ----- | -
|                                              |                                                                                                               |  |                     |       |          |  |              |       |      |  |        |       |      |  | Six Months Ended |       | Year Ended
|                                              |                                                                                                               |  | Year Ended June 30, |       | June 30, |  | December 31,
|                                              |                                                                                                               |  |                     |       |          |  |             
|                                              |                                                                                                               |  | 2002                |       | 2001     |  | 2000         |       | 1999 |  | 1998   |       | 1998 |  | 1997            
|                                              |                                                                                                               |  |                     |       |          |  |              |       |      |  |        |       |      |  |                 
|                                              |                                                                                                               |  |                     |       |          |  |              |       |      |  |        |       |      |  |                  |       |            |  | (unaudited) |       |   |  |        |      |  |  |       
|Earnings (loss) per share  Basic:            |                                                                                                               |  |                     |       |          |  |              |       |      |  |        |       |      |  |                  |       |            |  |             |       |   |  |        |      |  |  |        |      
|                                              | Income (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting change |  | $                   | (0.72 | )        |  | $            | (0.50 | )    |  | $      | (0.72 | )    |  | $                | (0.09 | )          |  | $           | (0.05 | ) |  | $      | 0.14 |  |  | $      | (0.07 | )
|                                              | Income (loss) from continuing
operations                                                                      |  | $                   | (0.81 | )        |  | $            | (0.53 | )    |  | $      | (0.72 | )    |  | $                | (0.09 | )          |  | $           | (0.05 | ) |  | $      | 0.14 |  |  | $      | (0.07 | )
|                                              | Income (loss) from discontinued
operations, net of tax                                                        |  | $                   | 0.00  |          |  | $            | 0.00  |      |  | $      | (0.24 | )    |  | $                | (0.01 | )          |  | $           | (0.01 | ) |  | $      | 0.00 |  |  | $      | (0.01 | )
|                                              | Net income (loss)                                                                                             |  | $                   | (0.81 | )        |  | $            | (0.53 | )    |  | $      | (0.96 | )    |  | $                | (0.10 | )          |  | $           | (0.06 | ) |  | $      | 0.14 |  |  | $      | (0.08 | )
|Weighted average shares
outstanding  Basic   |                                                                                                               |  | 36,485              |       |          |  | 35,307       |       |      |  | 29,044 |       |      |  | 22,330           |       |            |  | 22,098      |       |   |  | 22,189 |      |  |  | 21,302 |      
|                                             
|Earnings (loss) per share  Diluted:          |                                                                                                               |  |                     |       |          |  |              |       |      |  |        |       |      |  |                  |       |            |  |             |       |   |  |        |      |  |  |        |      
|                                              | Income (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting change |  | $                   | (0.72 | )        |  | $            | (0.50 | )    |  | $      | (0.72 | )    |  | $                | (0.09 | )          |  | $           | (0.05 | ) |  | $      | 0.14 |  |  | $      | (0.07 | )
|                                              | Income (loss) from continuing
operations                                                                      |  | $                   | (0.81 | )        |  | $            | (0.53 | )    |  | $      | (0.72 | )    |  | $                | (0.09 | )          |  | $           | (0.05 | ) |  | $      | 0.14 |  |  | $      | (0.07 | )
|                                              | Income (loss) from discontinued
operations, net of tax                                                        |  | $                   | 0.00  |          |  | $            | 0.00  |      |  | $      | (0.24 | )    |  | $                | (0.01 | )          |  | $           | (0.01 | ) |  | $      | 0.00 |  |  | $      | (0.01 | )
|                                              | Net income (loss)                                                                                             |  | $                   | (0.81 | )        |  | $            | (0.53 | )    |  | $      | (0.96 | )    |  | $                | (0.10 | )          |  | $           | (0.06 | ) |  | $      | 0.14 |  |  | $      | (0.08 | )
|Weighted average shares
outstanding  Diluted |                                                                                                               |  | 36,485              |       |          |  | 35,307       |       |      |  | 29,044 |       |      |  | 22,330           |       |            |  | 22,098      |       |   |  | 23,182 |      |  |  | 21,302 |      

FINANCIAL POSITION:

|                                   |  |                |         |                    |  |      |         |      |  |      |         |      |  |   |         |   |  |   |        |  |  |   |        | 
|---------------------------------- |  | -------------- | ------- | ------------------ |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------ |  |  | - | ------ | 
|                                   |  | As of June 30, |         | As of December 31,
|                                   |  |                |         |                   
|                                   |  | 2002           |         | 2001               |  | 2000 |         | 1999 |  | 1998 |         | 1997
|                                   |  |                |         |                    |  |      |         |      |  |      |         |     
|Working capital                    |  | $              | (26,827 | )                  |  | $    | (16,951 | )    |  | $    | 5,449   |      |  | $ | (61,595 | ) |  | $ | 4,074  |  |  | $ | 2,913  | 
|Investment in affiliated companies |  |                | 25,115  |                    |  |      | 50,399  |      |  |      | 64,782  |      |  |   | 73,994  |   |  |   | 63,361 |  |  |   | 50,284 | 
|Total assets                       |  |                | 160,999 |                    |  |      | 206,538 |      |  |      | 222,306 |      |  |   | 99,903  |   |  |   | 90,694 |  |  |   | 70,618 | 
|Long-term obligations              |  |                | 98,091  |                    |  |      | 107,693 |      |  |      | 122,794 |      |  |   |        |   |  |   | 51,848 |  |  |   | 41,998 | 
|Stockholders equity               |  |                | 4,131   |                    |  |      | 37,604  |      |  |      | 51,864  |      |  |   | 25,279  |   |  |   | 27,022 |  |  |   | 21,499 | 
|Current ratio                      |  |                | 0.5     |                    |  |      | 0.7     |      |  |      | 1.1     |      |  |   | 0.1     |   |  |   | 2.4    |  |  |   | 1.7    | 
|Book value per share               |  | $              | 0.11    |                    |  | $    | 1.05    |      |  | $    | 1.48    |      |  | $ | 1.13    |   |  | $ | 1.21   |  |  | $ | 1.01   | 

NOTES TO THE SELECTED FINANCIAL DATA

The changes from year to year are primarily a result of the following items:

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2002 - |  | Sale of investments in Gray preferred stock and Tarzian common stock
with such proceeds being applied to long-term debt; acceleration of costs
and expenses, including intangibles amortization expense, as a result of a
change in a significant contractual relationship; bank agreement modified
in October 2002 to extend maturity date to September 30, 2003; anticipated
reductions in long-term debt of up to approximately $15 million by June
30, 2003 (classified as a current liability as of June 30, 2002)                                                                                                                           
|2001 - |  | Includes first full year of operating results for subsidiaries acquired
in December 1999; $9.0 million pretax charge recognized to reduce book
value of certain equity investments; certain derivatives reported in the
balance sheet at fair value of $8.2 million as of June 30, 2001, with net
change in fair value of $3.0 million recognized as income in 2001 and the
fair value as of July 1, 2000 of $(1.1) million (net of tax) as the
cumulative effect of an accounting change; bank credit agreement modified
in July 2001 to extend the maturity date and require an aggregate of $20
million in principal payments by December 2001.
|2000 - |  | Acquisition of Host, USA and Capital in December 1999 financed with
common stock, options to acquire common stock and long-term debt. (See
Note 3 to the consolidated financial statements.)                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|1999 - |  | Investment in Tarzian, financed with short-term debt; all amounts
outstanding under long-term debt agreements were classified as current
liabilities until December 1999, when the obligations were refinanced.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|1998 - |  | Equity in the earnings attributable to Grays gain on disposal of a
television station; additional investments in Rawlings; and investment in
Total Sports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

No dividends were declared or paid during the periods presented.

12



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Item 7. Managements
Discussion and Analysis

OVERVIEW

Bull Run Corporation (Bull Run or the Company), based in Atlanta, Georgia,
is a sports and affinity marketing and management company through its primary
operating business, Host Communications, Inc. (Host), acquired in December
1999. Hosts Collegiate Marketing and Production Services business segment
provides sports marketing and production services to a number of collegiate
conferences and universities, and for and on behalf of the National Collegiate
Athletic Association (NCAA). Hosts Affinity Events business segment
produces and manages individual events and several events series, including
NBA Hoop-It-Up® (the National Basketball Associations official 3-on-3
basketball tour) and the Got Milk? 3v3 Soccer Shootout (Major League Soccers
official 3-on-3 soccer tour). Hosts Affinity Management Services business
segment provides associations such as the National Tour Association and Quest
(the J.D. Edwards users group association), with services ranging from member
communication, recruitment and retention, to conference planning, Internet web
site management, marketing and administration.

The Company also has significant investments in other sports, media and
marketing companies, including Gray Television, Inc. (Gray, formerly known as
Gray Communications Systems, Inc.), the owner and operator of 13 television
stations, four newspapers and other media and communications businesses;
Rawlings Sporting Goods Company, Inc. (Rawlings), a supplier of team sports
equipment; and iHigh, Inc. (iHigh), an Internet and marketing company focused
on high school students. The Company has provided consulting services to Gray
in connection with certain of Grays acquisitions and dispositions.

As of June 30, 2002, the Company owned approximately 12.9% of the outstanding
common stock of Gray (representing 26.1% of the voting rights), in addition to
warrants to purchase additional Gray common stock; 10.1% of the outstanding
common stock of Rawlings; and 35.1% of the outstanding common stock of iHigh.
The Companys investments in non-voting Gray preferred stock were sold in
September 2001. In December 2001, the Company sold its investment in Sarkes
Tarzian, Inc. (Tarzian) to Gray. The Company owned 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 (representing 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).

On September 25, 2002, the Company changed its fiscal year end from June 30 to
a new fiscal year end of August 31. As a result of this change, the Companys
quarterly reporting periods will be, subsequent to the transition period from
July 1, 2002 to August 31, 2002, comprised of three calendar months ending
November 30, February 28 (or 29), May 31 and August 31.

HOST-USA ACQUISITION

On December 17, 1999, the Company acquired the stock of Host, Universal Sports
America, Inc. (USA) and Capital Sports Properties, Inc. (Capital) not
previously owned, directly or indirectly, by the Company (the Host-USA
Acquisition). Aggregate consideration (net of cash acquired) was
approximately $116.9 million, which included Common Stock (totaling 11,687,000
shares) and stock options (for a total of 2,819,000 shares of Common Stock)
valued at approximately $52.3 million, 8% subordinated notes having a face
value of approximately $18.6 million, cash (net of approximately $9.7 million
in cash acquired) of $44.8 million and transaction expenses of approximately
$1.2 million. The Company allocated $24.5 million of the Host-USA Acquisition
purchase price to identifiable intangible assets and

13



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##### 



recorded goodwill in the amount of $62.7 million. As of June 30, 2002,
goodwill and acquired intangibles, net of accumulated amortization, were
approximately 49% of the Companys total assets.

Prior to the Host-USA Acquisition, the Company accounted for its investment in
Host and Capital under the equity method, and for its investment in USA under
the cost method. Beginning December 17, 1999, the financial results of Host,
USA and Capital have been consolidated with those of the Company.

DISPOSAL OF COMPUTER PRINTER OPERATIONS

In July 2000, the Companys Board of Directors authorized the sale of Datasouth
Computer Corporation (Datasouth), the Companys wholly owned computer printer
manufacturing business segment. The Companys decision to discontinue its
Datasouth segment was attributable to the strategic decision to focus on the
sports and affinity marketing and management businesses following the Host-USA
Acquisition. The Company consummated a sale of Datasouths operating assets in
September 2000. Accordingly, the operating results and net assets associated
with Datasouths computer printer manufacturing business as of and for the year
ended June 30, 2001 and all prior periods presented herein have been reflected
as discontinued operations in the accompanying consolidated financial
statements.

An estimated loss on the sale of Datasouth of $6,522,000, including a $350,000
pretax provision for estimated operating losses during the disposal period, was
combined with Datasouths operating results and presented as discontinued
operations in the consolidated financial statements for the year ended June 30,
2000. As of June 30, 2002, remaining proceeds on the sale of Datasouth of
approximately $3,400,000 are estimated to be due and payable to the Company in
variable quarterly installments. Actual amounts ultimately realized on the
sale could differ materially from the amounts assumed in arriving at the loss
on disposal. To the extent actual proceeds differ from the estimates that are
reflected as of June 30, 2002, or as managements estimates are revised, the
variance will be reported in discontinued operations in future periods.

CERTAIN RELATIONSHIPS

J. Mack Robinson, Chairman of the Board of the Company, is Chief Executive
Officer and as of September 2002, the Chairman of the Board of Gray (having
formerly been Grays President and Chief Executive Officer and a director), and
the beneficial owner of Gray common stock representing approximately 54.6% of
the combined voting power of Grays two classes of common stock as of June 30,
2002. Robert S. Prather, Jr., President, Chief Executive Officer and a
director of the Company, is a director of Gray and was named President and
Chief Operating Officer of Gray in September 2002 (having formerly been an
executive vice president of Gray), and the beneficial owner of Gray common
stock representing approximately 38.2% of the combined voting power of Grays
two classes of common stock. Hilton H. Howell, Jr., the Companys Vice
President and Secretary, is a director of Gray and was named Vice Chairman of
Gray in September 2002 (having formerly been an executive vice president of
Gray), and the beneficial owner of Gray common stock representing approximately
42.8% of the combined voting power of Grays two classes of common stock. Each
of Messrs. Robinson, Prather and Howells beneficial ownership percentages
includes the Companys beneficial ownership of approximately 35.4% of the
combined voting power of Grays common stocks. Beneficial ownership
percentages noted above include warrants and options to acquire shares of Gray
common stock were exercisable on, or within 60 days after, June 30, 2002.

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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.

Goodwill and Other Intangible Assets

Goodwill and purchased intangible assets (i.e., customer relationships and
trademarks) associated with the Host-USA Acquisition were amortized over their
estimated useful lives on a straight-line basis until June 30, 2001. Effective
July 1, 2001, the Company adopted Financial Accounting Standards Board
Statement No. 142, Accounting for Goodwill and Other Intangible Assets,(FAS
142) which changed the Companys accounting for the goodwill and certain other
intangible assets acquired in the Host-USA Acquisition, and also affected the
Companys accounting for its equity in earnings (losses) of affiliated
companies. In accordance with FAS 142, commencing July 1, 2001, the Company
ceased amortizing the unamortized amount of goodwill and trademarks, but the
Company is now required to periodically assess the carrying value of goodwill
and trademarks associated with each of five distinct business units that
comprise three business segments of the Company to determine if an impairment
in value has occurred. The initial impairment test has been completed, and the
Company concluded that the carrying amount of goodwill and trademarks as of
July 1, 2001 for each business unit acquired in the Host-USA Acquisition did
not exceed its net realizable value. Therefore, the adoption of FAS 142 had no
effect on the Companys financial statements as of July 1, 2001. In August
2002, the Company agreed to significantly modify the terms of an agreement that
originally provided for the continuation of a significant customer
relationship. The terms of such modification were substantial enough that the
Company accelerated amortization of $6,582,000 of its customer base intangible
asset at June 30, 2002. The remaining value assigned to customer relationships
will continue to be amortized over a 16-year average life, at a rate of
approximately $680,000 per year, except for a specific customer relationship
having a carrying value of $1,161,750 that will be amortized on a straight-line
basis through August 31, 2004, resulting in annual amortization expense of
approximately $536,000 during that period. 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 $75,064,000 as of June 30, 2002 and $82,888,000
as of June 30, 2001, of which, goodwill was $57,862,000 as of both dates.

FAS 142 also eliminated the requirement to amortize the excess of the Companys
investment over the underlying equity of the Companys equity method
investments, to the extent that such excess is attributable to indefinite life
intangible assets. The carrying value of the Companys investment in Gray of
$19,060,000 as of June 30, 2002 is largely dependent on Grays continuing
assessment of the value of Grays goodwill, broadcast licenses, network
affiliation agreements and other intangible assets. Impairment in Grays
carrying value of its intangible assets could have a significant impact on the
Companys carrying value of its investment in Gray.

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

15



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all of these deferred tax assets will not be realized. As of June 30, 2002 the
Company has a net deferred tax asset of $21,400,000, primarily due to net
operating loss carryforwards for federal tax purposes that expire beginning in
2018, net of a valuation allowance of $1,275,000. The Company believes it will
generate adequate taxable income from operations and/or the sale or other
disposition of appreciated investment assets in an amount sufficient to realize
the deferred tax asset.

Derivative Instruments and Hedging Activities

Effective July 1, 2000, the Company adopted the Financial Accounting Standards
Boards Statement No. 133, Accounting for Derivative Investments and Hedging
Activities(FAS 133). FAS 133 requires the Company to recognize all
derivative instruments (i.e., warrants to purchase additional shares of Gray
common stock and interest rate swap agreements) on the balance sheet at fair
value. The aggregate fair market value of derivatives as of June 30, 2002 and
2001 of $9,464,000 and $8,218,000, respectively, is included in the Companys
balance sheet as a component of Other assets. The Companys adoption of FAS
133 resulted in a decrease in Stockholders Equity and Total Assets of
$1,120,000 as of July 1, 2000. Changes in the estimated fair value of
derivatives that do not meet the specific criteria in FAS 133 for hedge
accounting (and none of the Companys derivative instruments have been
determined to qualify for hedge accounting treatment) are included in the
earnings (losses) reported for the period of the change. Management estimates
the fair value of the warrants based on independent appraisals received on a
quarterly basis, and estimates the fair value of interest rate swap agreements
based on estimated market values provided by the counterparties to the swap
agreements.

Valuation of Investments in Affiliated
Companies 
The Company accounts for its investments in Gray and iHigh, and until December
31, 2001, Rawlings, by the equity method. Effective December 31, 2001, the
Company began accounting for its investment in Rawlings as an
available-for-sale marketable security. (See Notes 2, 6 and 17 to the
Consolidated Financial Statements for a complete discussion of the accounting
for the investment in Rawlings.) As a result, the Companys carrying value of
its investment in Rawlings is based on the closing price of Rawlings common
stock as quoted on the Nasdaq Stock Market, and is reported on the balance
sheet as a component of Investment in affiliated companies. As of June 30,
2002, the Companys unrealized loss in its investment in Rawlings was
$3,382,000, as reported net of deferred tax of $1,302,000, as Other
comprehensive accumulated loss. If and when management believes that any or
all of the remaining unrealized loss represents a permanent impairment in the
estimated value of the investment in Rawlings, the estimated impairment amount
would be charged to the earnings (losses) reported for the period in which that
determination was made. Likewise, if management determines that the carrying
value of those investments accounted for by the equity method become
permanently impaired in whole or in part, the estimated amount of the permanent
impairment would be charged to the earnings (losses) reported for the period in
which that determination was made. In the fiscal year ended June 30, 2002, the
Company recognized a charge of $2,822,000 related to managements estimate of
impairment in the carrying value of certain investments. Management has made
such permanent impairment determinations in prior years as well, and
accordingly in the period of such determination, the Company reduced the
carrying value of the investment and reported an associated charge in its
Statement of Operations.

LIQUIDITY AND CAPITAL RESOURCES

Credit Arrangements 
As of June 30, 2002, the Companys indebtedness to its bank lenders was
$93,907,000. Under agreements effective June 28, 2002, September 13, 2002 and
October 11, 2002, the Company and its bank lenders amended the Companys bank
credit agreement to modify

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borrowing capacity restrictions, revise certain financial covenants, provide
for certain scheduled principal payments, revise the maturity date of the
obligations under the bank credit facility to September 30, 2003, and reduce
the interest rate charged on outstanding borrowings, among other changes.
Under the amended agreement, the Company must make scheduled payments on its
term loans of at least $5,000,000 by each of January 15, 2003, April 15, 2003
and July 15, 2003. The amended agreement also requires the Company to maintain
a minimum net worth amount at all times and requires the maintenance of minimum
profitability thresholds determined quarterly. In order to facilitate funding
the required principal payments, the Company will likely be required to (a)
sell certain investment assets held by the Company; or (b) issue and sell
equity securities of the Company, which may include the Companys preferred
stock; or (c) a combination thereof. Although there is no assurance that the
Company will be able to effect the foregoing potential transactions or generate
sufficient cash from these potential transactions within a time frame required
by the bank lenders, on the basis of preliminary discussions with third
parties, including affiliates, with whom such transactions may be consummated,
the Company believes that it will be able to fund the scheduled principal
payments in accordance with the terms of the amended bank credit facility.
Prior to the maturity date, the Company will likely be required to refinance
the total amount due and payable to the banks at that time. The Companys debt
to the banks is collateralized by a lien on all of the Companys assets.

As amended in October 2002, the Companys credit agreement provides for (a) two
term loans for borrowings totaling $73,932,000, bearing interest at either the
banks prime rate plus .75% or the London Interbank Offered Rate (LIBOR) plus
3.75%, requiring minimum aggregate principal payments of $5,000,000 by each of
January 15, 2003, April 15, 2003 and July 15, 2003, with all amounts
outstanding under the term loans due on September 30, 2003; and (b) a revolving
loan commitment (the Revolver) for maximum borrowings of $20,000,000 until
maturity on September 30, 2003, bearing interest at either the banks prime
rate plus .75% or LIBOR plus 3.75%. Borrowings under the Revolver are allowed
to exceed 100% of eligible accounts receivable, however amounts borrowed
exceeding such threshold will bear an additional amount of interest at a rate
of 2% per annum. As of October 11, 2002, borrowings of $20,000,000 were
outstanding under the Revolver, and there was no additional available borrowing
capacity under the Revolver at that date. The Company anticipates that it will
continue to utilize fully the availability under the Revolver and invest any
excess cash on hand in highly-liquid investments.

In August 2002, the Company received federal income tax refunds and accrued
interest thereon of approximately $4,250,000 that was used by the Company to
fund working capital requirements. In July 2002, the Companys Chairman
provided the Company short-term loans totaling $4,000,000 to increase the
Companys cash available for working capital purposes. On August 31, 2002, the
loans were refinanced with the issuance of the Companys convertible preferred
stock to the Companys Chairman having a face amount of $4,097,000. In
September 2002, the Companys Chairman and certain other affiliates of the
Chairman invested an aggregate $3,000,000 in the Companys convertible
preferred stock, which was used by the Company for working capital purposes.
Under the terms of the amended credit agreement, up to an additional
$12,500,000 in funding for working capital purposes, if necessary, may be
sourced from the issuance of equity securities, including shares of the
Companys redeemable preferred stock, or by the issuance of subordinated debt.
Through October 11, 2002, the Company had sourced $7,097,000 of cash for
working capital purposes from the previously-discussed issues of preferred
stock to the Companys Chairman and his affiliates. Therefore, the Company has
the capacity to source an additional $5,403,000 of cash from the issuance of
equity or debt securities during the remaining term of the credit facility.

17



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The Companys Chairman of the board personally guarantees substantially all of
the debt outstanding under the current credit facility, and if the Company is
unable to meet its principal payment obligations under the recently amended
credit facility, 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.
Under the terms of his guarantee, the Chairman 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.
The guarantee amount will reduce in the future as principal payments are made
to the bank lenders on the outstanding term loans.

In connection with the Host-USA Acquisition, the Company issued 8% subordinated
notes, having an aggregate face value of $18,594,000. Interest is payable
quarterly, and the notes had an original maturity date of January 17, 2003.
Through October 11, 2002, holders representing an aggregate amount of
approximately $18,200,000 of these subordinated notes agreed to amend the
maturity date of their note, in substantially all cases, to January 17, 2006.
It is anticipated that by no later than December 31, 2002, the remaining note
holders will agree to the same or similar terms. Payment of interest and
principal on all subordinated notes is subordinate to the Companys bank credit
agreement.

The Company met all of its principal payment requirements for the fiscal year
ended June 30, 2002, reducing its term debt by $20,793,000. In order to meet
these principal payment obligations, the Company, as anticipated by the Company
at the time it agreed to the principal maturity schedule, sold its remaining
investments in Gray preferred stock and its investment in Tarzian common stock,
resulting in cash proceeds of $16,803,000. In addition, the Company issued
shares of its series B convertible preferred stock, resulting in cash proceeds
of $2,400,000.

The Companys capital expenditures are not expected to exceed $600,000 for the
year ending June 30, 2003. The Companys cash flow is cyclical, in that during
the period from July 1 through August 31, the Company historically uses more
cash than is generated due to the seasonality of the Companys predominant
operating segment. During the period from January 1 through April 30, the
Company has historically generated more cash than it uses, as this is generally
the period during which the most substantial amount of revenue is derived from
the Companys predominant operating segment. The Company believes that
although there is no borrowing capacity currently available under its revolving
credit facility, the cash flow anticipated from operations beginning in October
2002 will be sufficient to fund the Companys working capital, capital spending
and interest payment requirements up to the September 30, 2003 maturity date of
the bank credit facility. As previously discussed, the Company anticipates
that the required principal payments to its bank lenders prior to September 30,
2003 will be made with proceeds from the sale of investment securities,
issuance of equity securities or a combination thereof. The Companys bank
credit agreement, as amended, provides the Company the ability to issue
additional subordinated debt or equity securities for cash proceeds of up to
$5,403,000 without requiring an associated reduction in its outstanding debt to
the banks.

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Historical Cash Flow Information 
Summary 
The following summarizes the Companys historical cash flow activities (amounts
in 000s):

|                                                     |                                             |   |                     |        |      |   |        |        |   |   |        |         |  
|---------------------------------------------------- | ------------------------------------------- | - | ------------------- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------- | -
|                                                     |                                             |   | Year Ended June 30,
|                                                     |                                             |   |                    
|                                                     |                                             |   | 2002                |        | 2001 |   | 2000  
|                                                     |                                             |   |                     |        |      |   |       
|Cash flows from operating activities:                |                                             |   |                     |        |      |   |        |        |   |   |        |        
|                                                     | Continuing operations                       |   | $                   | (5,321 | )    |   | $      | (1,758 | ) |   | $      | (117    | )
|                                                     | Discontinued operations                     |   |                     | (127   | )    |   |        | 2,126  |   |   |        | 676     |  
|Cash flows from investing activities:                |                                             |   |                     |        |      |   |        |        |   |   |        |        
|                                                     | Continuing operation investing activities   |   |                     | 15,691 |      |   |        | 2,695  |   |   |        | (46,072 | )
|                                                     | Discontinued operation investing activities |   |                     | 843    |      |   |        | 2,347  |   |   |        | (642    | )
|Cash flows from financing activities                 |                                             |   | (13,070             | )      |      |   | (3,392 | )      |   |   | 46,451 |        
|                                                     |                                             |   |                     |        |      |   |        |        |   |   |        |        
|Net increase (decrease) in cash and cash equivalents |                                             | $ | (1,984              | )      |      | $ | 2,018  |        |   | $ | 296    |        
|                                                     |                                             |   |                     |        |      |   |        |        |   |   |        |        

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 June 30,
|                                                      |  |                    
|                                                      |  | 2002                |        | 2001 |  | 2000
|                                                      |  |                     |        |      |  |     
|Operating income (loss)                               |  | $                   | (9,474 | )    |  | $    | (3,878  | ) |  | $ | (1,930 | )
|Depreciation and amortization included in operations  |  |                     | 9,342  |      |  |      | 5,917   |   |  |   | 3,656  |  
|Interest expense, net of interest and dividend income |  |                     | (9,562 | )    |  |      | (10,735 | ) |  |   | (7,788 | )
|Net change in operating assets and liabilities        |  |                     | 10,385 |      |  |      | 5,017   |   |  |   | 5,260  |  
|Other changes in operating cash flows                 |  |                     | (6,012 | )    |  |      | 1,921   |   |  |   | 685    |  
|                                                      |  |                     |        |      |  |      |         |   |  |   |        |  
|Total cash flows from continuing operations           |  |                     | (5,321 | )    |  |      | (1,758  | ) |  |   | (117   | )
|Cash flows from discontinued operating activities     |  |                     | (127   | )    |  |      | 2,126   |   |  |   | 676    |  
|                                                      |  |                     |        |      |  |      |         |   |  |   |        |  
|Total cash flows from operating activities            |  | $                   | (5,448 | )    |  | $    | 368     |   |  | $ | 559    |  
|                                                      |  |                     |        |      |  |      |         |   |  |   |        |  

The Companys total cash flows from continuing operations for each of the
fiscal years ended June 30, 2002, 2001 and 2000 have been unfavorably affected
as a result of interest expense, net of interest and dividend income, which has
exceeded the Companys operating income before non-cash depreciation and
amortization expense.

The net change in operating assets and liabilities has had a favorable impact
on total cash flows from continuing operations. In the fiscal year ended June
30, 2002, accounts receivable decreased $13,251,000 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; prepaid costs and expenses were
comparable with the prior year, decreasing $428,000; and accounts payable and
accrued expenses decreased $1,868,000 due to (a) a $7,265,000 decline in
deferred revenue; less (b) a $1,722,000 increase in guaranteed rights fees and
profit splits payable; less (c) a $1,152,000 increase in accounts payable; less
(d) a $3,810,000 increase in incurred unbilled costs. Deferred revenue
declined 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
June 30, 2001, 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 the 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

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Contract in August 2002 was to accelerate revenue (and thereby decreasing
deferred income) by approximately $1,500,000, and increasing accrued expenses
(primarily guaranteed rights fees payable) by approximately $3,700,000.
Accounts payable increased primarily due to the deferred payment of certain
operating expenses at June 30, 2002 compared to June 30, 2001. Incurred
unbilled costs increased as of June 30, 2002 compared to the prior year as a
result of the differences in the timing of billings related to certain active
projects as of June 30, 2002 compared to the active projects as of June 30,
2001.

In the fiscal year ended June 30, 2001, accounts receivable increased $833,000
primarily due to changes in the timing of billings for contracts in place as of
June 30, 2001 compared to June 30, 2000; prepaid costs and expenses decreased
$572,000 due to decreases in event management costs of the 2001 event tours
compared to those during the 2000 event tours; and accounts payable and accrued
expenses increased $4,271,000 primarily due to the deferred payment of certain
operating expenses at June 30, 2001 compared to June 30, 2000. In the fiscal
year ended June 30, 2000, accounts receivable and prepaid costs and expenses
decreased $15,794,000 due to decreases (subsequent to the date of the Host-USA
Acquisition) in prepaid costs under various contracts and accounts receivable,
and accounts payable and accrued expenses decreased $11,585,000 primarily due
to decreases (subsequent to the date of the Host-USA Acquisition) in the
accruals for guaranteed rights payments and incurred unbilled costs under
various contracts.

Other changes in operating cash flows include the income on Grays option to
purchase the Companys investment in Tarzian of $349,000, $1,289,000 and
$810,000 in the fiscal years ended June 30, 2002, 2001 and 2000, respectively.
The option commenced in January 1999 and was exercised in December 2001.

Accounts receivable, accounts payable and certain accrued expenses were
retained by the Company to be liquidated and were not included in the sale of
the Datasouth assets in September 2000. Therefore, during the fiscal year
ended June 30, 2002, cash was used in discontinued operations due to the
deferred payment of certain accrued obligations retained by the Company.
During the fiscal year ended June 30, 2001, cash was provided by discontinued
operations due to a decrease in inventories prior to the sale of Datasouth in
September 2000, and a decrease in accounts receivable, net of accounts payable
and accrued expenses, during the period subsequent to the sale. During the
fiscal year ended June 30, 2000, cash was provided by the operating activities
of the discontinued Datasouth operation due to decreases in accounts receivable
and inventories, net of a decrease in accounts payable and accrued expenses, of
$376,000.

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 June 30,
|                                                                |  |                    
|                                                                |  | 2002                |        | 2001 |  | 2000
|                                                                |  |                     |        |      |  |     
|Capital expenditures                                            |  | $                   | (279   | )    |  | $    | (1,166 | ) |  | $ | (1,037  | )
|Investments in and acquisition of businesses                    |  |                     | (705   | )    |  |      | (1,232 | ) |  |   | (45,315 | )
|Proceeds on sale or other disposition of investment assets      |  |                     | 16,803 |      |  |      | 5,330  |   |  |   | 267     |  
|Other investing cash flows                                      |  |                     | (128   | )    |  |      | (237   | ) |  |   | 13      |  
|                                                                |  |                     |        |      |  |      |        |   |  |   |         |  
|Total cash flows from continuing operation investing activities |  |                     | 15,691 |      |  |      | 2,695  |   |  |   | (46,072 | )
|Cash flows from discontinued operation investing activities     |  |                     | 843    |      |  |      | 2,347  |   |  |   | (642    | )
|                                                                |  |                     |        |      |  |      |        |   |  |   |         |  
|Total cash flows from investing activities                      |  | $                   | 16,534 |      |  | $    | 5,042  |   |  | $ | (46,714 | )
|                                                                |  |                     |        |      |  |      |        |   |  |   |         |  

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In the fiscal year ended June 30, 2002, the Company sold its remaining
investments in Gray series A and series B preferred stock and its investment in
Tarzian common stock, resulting in proceeds of $16,803,000. The Companys
investments in Gray preferred stock were sold to a company affiliated with the
Companys Chairman and the Tarzian investment was sold to Gray under the terms
of an option agreement of which Gray and the Company were parties thereto. In
the fiscal year ended June 30, 2001, Gray redeemed $5,000,000 of its series B
preferred stock owned by the Company. In the fiscal year ended June 30, 2000,
the Company completed the Host-USA Acquisition, expending cash (net of cash
acquired) of $45,315,000.

In the fiscal years ended June 30, 2002 and 2001, cash of approximately
$879,000 and $2,400,000, respectively, was provided by investing activities of
discontinued operations as a result of the proceeds on the sale of Datasouth,
some of which were deferred until after the effective date of the sale. Cash
used in investing activities of discontinued operations was $642,000 for the
fiscal year ended June 30, 2000 due to capital expenditures of $84,000 and
deferred cash payments of $558,000 for Datasouths acquisition of a printer
business.

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 June 30,
|                                                         |  |                    
|                                                         |  | 2002                |         | 2001 |  | 2000
|                                                         |  |                     |         |      |  |     
|Net borrowings (repayments) on revolving lines of credit |  | $                   | 5,600   |      |  | $    | 5,175   |   |  | $ | (996   | )
|Net proceeds (repayments) on long-term debt              |  |                     | (20,793 | )    |  |      | (10,866 | ) |  |   | 47,835 |  
|Issuance of preferred stock                              |  |                     | 2,400   |      |  |      | 3,000   |   |  |   |        |  
|Other financing cash flows                               |  |                     | (277    | )    |  |      | (701    | ) |  |   | (388   | )
|                                                         |  |                     |         |      |  |      |         |   |  |   |        |  
|Total cash flows from financing activities               |  | $                   | (13,070 | )    |  | $    | (3,392  | ) |  | $ | 46,451 |  
|                                                         |  |                     |         |      |  |      |         |   |  |   |        |  

In the fiscal year ended June 30, 2002 and 2001, the Company reduced its
long-term debt as a result of proceeds received on the sale or other
disposition of investment assets in addition to proceeds received on the sale
of Datasouth. Proceeds on the issuance of the Companys preferred stock to
companies affiliated with the Companys Chairman were used to reduce long-term
debt in the fiscal year ended June 30, 2002 and were used to fund working
capital needs in the fiscal year ended June 30, 2001. The financing of the
Host-USA Acquisition included incremental borrowings of long-term debt in the
fiscal year ended June 30, 2000. There were no discontinued operation
financing activities in the fiscal years ended June 30, 2002, 2001 or 2000.

Commitments 
As of June 30, 2002, Host was obligated to a final guaranteed rights fee
payment of $5,000,000 to the NCAA under the Host-NCAA Contract. Although the
original contract with CBS Sports commencing September 1, 2002 obligated Host
to an aggregate guaranteed rights fee of $575 million, of which, $40 million
would have been payable during the initial contract year commencing September
1, 2002, Host has been relieved of substantially all of that obligation under
the terms of a new agreement executed in September 2002.

The Company also commits under certain other contracts, which expire at varying
times through 2006, to the payment of guaranteed rights fees. Future
guaranteed rights fee commitments as of June 30, 2002, excluding those under
the Host-NCAA Contract and the Host-CBS Contract, total approximately $15.3
million for the fiscal year ending June 30, 2003 and approximately $43.7
million over the entire remaining term of such contracts, which range from one
to four years.

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The Company is a party to two interest rate swap agreements described in Note 9
to the Consolidated Financial Statements. The estimated cost of terminating
the swap agreements, if the Company elected to do so, was approximately $2.5
million as of June 30, 2002.

Dividends on the Companys series B 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 Nasdaq closing price for the twenty
trading days immediately preceding each dividend payment date. On July 1,
2002, the Company declared a dividend to its series B preferred stockholders of
record as of June 15, 2002, and paid such dividend in July 2002, having an
aggregate value of $408,000, in the form of 440,165 shares of the Companys
common stock.

RESULTS OF CONTINUING OPERATIONS  FISCAL YEAR ENDED JUNE 30, 2002 COMPARED TO
FISCAL YEAR ENDED JUNE 30, 2001

Results Derived from Operating Businesses

Total revenues for the fiscal years ended June 30, 2002 and 2001 are summarized
as follows (amounts in $000s):

|                                             |  |                     |         |  |  |  |  |      |  |   |         | 
|-------------------------------------------- |  | ------------------- | ------- |  |  |  |  | ---- |  | - | ------- | 
|                                             |  | Year Ended June 30,
|                                             |  |                    
|                                             |  | 2002                |         |  |  |  |  | 2001
|                                             |  |                     |         |  |  |  |  |     
|Collegiate Marketing and Production Services |  | $                   | 79,099  |  |  |  |  |      |  | $ | 85,019  | 
|Affinity Events                              |  |                     | 19,248  |  |  |  |  |      |  |   | 24,177  | 
|Affinity Management Services                 |  |                     | 14,714  |  |  |  |  |      |  |   | 11,117  | 
|Consulting                                   |  |                     | 11      |  |  |  |  |      |  |   | 24      | 
|                                             |  |                     |         |  |  |  |  |      |  |   |         | 
|                                             |  | $                   | 113,072 |  |  |  |  |      |  | $ | 120,337 | 
|                                             |  |                     |         |  |  |  |  |      |  |   |         | 

Total revenues and operating results for the Collegiate Marketing and
Production Services segment and the Affinity Events segment were unfavorably
impacted in the fiscal year ended June 30, 2002 by the economic downturn and
the resulting decline in corporate advertising and sponsorships, particularly
during Hosts peak selling period for corporate advertising and sponsorships
which was primarily from September 2001 through February 2002. The Company
believes that sales of corporate sponsorships associated with the NCAA
Corporate Sponsor Program were negatively affected in the fiscal year ended
June 30, 2002 since the Host-NCAA Contract was due to expire on August 31,
2002. The Company believes that NCAA corporate sponsors strongly prefer
multi-year renewable commitments over single-year commitments, given the
required time that it takes for a corporate sponsor to activate promotional
programs related to an NCAA corporate sponsorship. It was therefore very
difficult for the Company to attract and sign new NCAA corporate sponsors or
replace NCAA corporate sponsors whose contracts had expired. Even though Host
had signed the Host-CBS Contract under which Host then had the ability to
continue selling NCAA corporate sponsorships, due to the nature of the Host-CBS
Contract, no existing NCAA corporate sponsor contracts could extend beyond the
August 31, 2002 termination date of the Host-NCAA Contract. Due to the change
in the licensing rights provided to Host under the terms of the restructured
Host-CBS Contract compared to the Host-NCAA Contract, effective September 1,
2002, total revenues derived by the Collegiate Marketing and Production
Services segment will be significantly less than in prior years, as will direct
operating costs of services rendered, due to a significant reduction in
guaranteed rights fees that were incurred in prior years to acquire such
licensing rights. Total revenues for the Collegiate Marketing and Production
Services segment were favorably affected by approximately $1,500,000 in the

22



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fiscal year ended June 30, 2002 as a result of amending the termination dates
of certain sponsorship contracts during the fiscal year from August 31, 2002 to
June 30, 2002.

There were no significant transactions consummated by Gray during the fiscal
year ended June 30, 2002 or 2001 that generated any significant
consulting fee income for the Company. As a result of the Companys 12.9% equity investment in Gray,
approximately 12.9% of consulting fees charged to Gray is not recognized as
income by the Company until Gray chooses to amortize or otherwise reduce the
book value of its goodwill, or upon a reduction in the Companys proportionate
ownership of Gray common stock. There can be no assurance that the Company
will recognize any consulting fees in the future, however the Company
anticipates recognizing consulting fee income of at least $4,350,000 by
December 2002 as a result of the execution by Gray of a definitive agreement to
acquire Stations Holding Company, Inc. (Stations). The Company has received
a $5,000,000 deposit from Gray as its consulting fee for services performed in
connection with Grays planned acquisition of Stations; however, the fee is
refundable to Gray if Grays acquisition of Stations does not ultimately occur.
Assuming consummation of Grays acquisition of Stations, at least
approximately 87.1% of the $5,000,000 fee, or approximately $4,350,000, will be
reported as income by the Company, and approximately 12.9%, or approximately
$650,000, will be deferred and reported as income by the Company only under the
circumstances described above.

Total operating costs and expenses for the fiscal years ended June 30, 2002 and
2001 are summarized as follows (amounts in $000s):

|                                            |  |                     |         |  |  |  |  |      |  |   |         | 
|------------------------------------------- |  | ------------------- | ------- |  |  |  |  | ---- |  | - | ------- | 
|                                            |  | Year Ended June 30,
|                                            |  |                    
|                                            |  | 2002                |         |  |  |  |  | 2001
|                                            |  |                     |         |  |  |  |  |     
|Direct operating costs of services rendered |  | $                   | 88,531  |  |  |  |  |      |  | $ | 81,421  | 
|Selling, general and administrative         |  |                     | 32,773  |  |  |  |  |      |  |   | 38,527  | 
|Amortization of acquisition intangibles     |  |                     | 1,242   |  |  |  |  |      |  |   | 4,267   | 
|                                            |  |                     |         |  |  |  |  |      |  |   |         | 
|                                            |  | $                   | 122,546 |  |  |  |  |      |  | $ | 124,215 | 
|                                            |  |                     |         |  |  |  |  |      |  |   |         | 

Direct operating costs of services rendered increased for the fiscal year ended
June 30, 2002 from the prior fiscal year due to increases in the direct cost of
obtaining certain marketing rights from the NCAA, colleges and universities,
and athletic conferences. The Company must commit under certain contracts to
the payment of guaranteed rights fees and/or profit-sharing fees, and the total
amounts incurred as guaranteed rights fees and profit-sharing fees historically
increase each year under the terms of multi-year contracts and contract renewal
agreements. The total amount expensed by the Company for guaranteed rights
fees and profit-sharing fees was $54,664,000 for the fiscal year ended June 30,
2002 compared to $46,073,000 for the prior fiscal year. Direct operating costs
of services rendered were increased in the fiscal year ended June 30, 2002 by
approximately $3,300,000 as a result of the acceleration of termination dates
of certain corporate sponsorship contracts to June 30, 2002 from August 31,
2002. As noted above, the Company anticipates that total revenues and total
direct operating costs of services rendered for the Collegiate Marketing and
Production Services segment will significantly reduce subsequent to June 30,
2002.

Selling, general and administrative costs declined for the fiscal year ended
June 30, 2002 from 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 $19,197,000 for the year ended June 30, 2002 compared to
$21,378,000 for the prior fiscal year. Travel costs were substantially reduced
through efforts to operate more efficiently and

23



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control travel spending. As a result, total travel expense included in
selling, general and administrative expense declined to $1,584,000 for the year
ended June 30, 2002 compared to $3,555,000 for the prior fiscal year. It is
anticipated that travel expenses will continue to decrease as a result of the
restructuring of the Host-CBS Contract.

Amortization of acquisition intangibles, primarily attributable to the Host-USA
Acquisition, declined for the fiscal year ended June 30, 2002 from the prior
fiscal year as a result of the Companys previously-discussed adoption of FAS
142, which eliminated the requirement to amortize goodwill and other
acquisition intangible assets. As a result of the changes made to the Host-CBS
Contract, the Company accelerated approximately $6,582,000 of amortization
expense at June 30, 2002 pertaining to the customer base intangible asset,
since such modifications significantly altered the contractual nature of the
Companys underlying relationship with the NCAA.

Operating income (loss) for the fiscal years ended June 30, 2002 and 2001 is
summarized as follows (amounts in 000s):

|                                             |  |                     |         |   |  |  |  |      |  |   |        |  
|-------------------------------------------- |  | ------------------- | ------- | - |  |  |  | ---- |  | - | ------ | -
|                                             |  | Year Ended June 30,
|                                             |  |                    
|                                             |  | 2002                |         |   |  |  |  | 2001
|                                             |  |                     |         |   |  |  |  |     
|Collegiate Marketing and Production Services |  | $                   | (4,945  | ) |  |  |  |      |  | $ | 4,795  |  
|Affinity Events                              |  |                     | (2,424  | ) |  |  |  |      |  |   | (3,837 | )
|Affinity Management Services                 |  |                     | 1,275   |   |  |  |  |      |  |   | 1,681  |  
|Consulting                                   |  |                     | 11      |   |  |  |  |      |  |   | 24     |  
|Amortization of acquisition intangibles      |  |                     | (7,824  | ) |  |  |  |      |  |   | (4,267 | )
|Unallocated general and administrative costs |  |                     | (2,149  | ) |  |  |  |      |  |   | (2,274 | )
|                                             |  |                     |         |   |  |  |  |      |  |   |        |  
|                                             |  | $                   | (16,056 | ) |  |  |  |      |  | $ | (3,878 | )
|                                             |  |                     |         |   |  |  |  |      |  |   |        |  

Results Derived from Investments and
Derivative Instruments 
Equity in earnings (losses) of affiliated companies, totaling $(1,962,000) for
the fiscal year ended June 30, 2002 and $(4,235,000) for the fiscal year ended
June 30, 2001 included (a) the Companys proportionate share of the earnings or
losses of (i) Gray; (ii) iHigh; and (iii) until December 31, 2001, Rawlings,
net of (b) amortization charges totaling $684,000 in 2001. Subsequent to
December 31, 2001, the Company accounts for its investment in Rawlings as an
available-for-sale marketable security (see Notes 6 and 15 to the
Consolidated Financial Statements). As a result of adopting FAS 142 effective
July 1, 2001, which eliminated the requirement for amortizing goodwill and
certain other intangible assets, no amortization was charged to the investment
in affiliated companies in the fiscal year ended June 30, 2002, thereby having
a favorable impact of approximately $566,000 on the current year equity in
earnings (losses) of affiliated companies.

Interest and dividend income of $151,000 and $810,000 for the fiscal years
ended June 30, 2002 and 2001, respectively, was primarily derived from
dividends paid on the Companys investment in Grays series A and series B
preferred stock, all of which was sold by September 2001. Shares of Gray
series A and series B preferred stock were sold in September 2001 for
$6,803,000, resulting in a gain of $3,064,000. Shares of Gray series A
preferred stock were redeemed by Gray in December 2000 for $5,000,000,
resulting in a gain of $2,160,000.

In the fiscal year ended June 30, 2002, the Company recognized a charge of
$2,822,000 associated with the estimated impairment in the value of certain of
the Companys investments. The determination to reduce the carrying amount of
these investments was made based on managements estimate of the amount that
might ultimately be recovered on a sale or other disposition of the investment
and managements estimate of amounts which are

24



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committed to be invested in the future for which management does not reasonably
anticipate recovery.

In the fiscal year ended June 30, 2001, Total Sports, Inc. (Total Sports) was
sold to Quokka Sports Inc. (Quokka). In exchange for the Companys
investment in preferred and common stock of Total Sports, the Company received
Quokka common stock and warrants to purchase Quokka common stock. During the
fiscal year ended June 30, 2001, Quokka declared bankruptcy and discontinued
its business operations. As a result, the Company reduced the book value of
its investment in Quokka to zero, recording non-cash charges totaling
$8,017,000. In addition to the charge taken to reduce the book value of its
investment in Quokka, the Company also recognized charges totaling $939,000
associated with the estimated impairment in the value of other investments.

The net change in the value of certain derivative instruments, consisting of
warrants to purchase Gray common stock and interest rate swap agreements, was
$(3,345,000) and $2,988,000 for the fiscal years ended June 30, 2002 and 2001,
respectively. The value of the derivative instruments declined in the fiscal
year ended June 30, 2002 as a result of a decline on the value of the warrants,
and a decline on the value of the interest rate swap agreements as variable
interest rates declined. As a result of the previously-discussed adoption of
FAS 133, the Company recognized the cumulative effect of the accounting change
of $(1,120,000), representing the value of the derivatives as of July 1, 2000
of $(1,807,000), less a deferred tax provision of $687,000.

Other income for the fiscal years ended June 30, 2002 and 2001 consisted
primarily of income from an option agreement with Gray whereby Gray had the
right to acquire the Companys investment in Tarzian. In December 2001, Gray
exercised its option and acquired the investment in Tarzian for $10,000,000.

In the fiscal year ended June 30, 2002, the Company recognized an extraordinary
loss of $(627,000), net of tax, as its proportionate share of an extraordinary
loss recognized by Gray related to a charge resulting from Grays early
extinguishment of debt.

In the fiscal year ended June 30, 2002, the Company recognized the cumulative
effect of an accounting change of $(2,620,000), net of tax, as its
proportionate share of a cumulative effect adjustment recognized by Gray in
January 2002 in connection with a change in Grays accounting for goodwill and
other intangible assets.

Interest Expense and Debt Related Costs

Interest expense decreased to $9,713,000 for the fiscal year ended June 30,
2002 from $11,545,000 for the prior fiscal year, as a result of a reduction in
long-term debt and declines in variable interest rates on which a significant
amount of the debt is subject.

Debt issue cost amortization of $2,830,000 and $2,410,000 for the fiscal years
ended June 30, 2002 and 2001, respectively, resulted from the amortization
of costs paid in connection with obtaining bank financing, as well as
amortization of the value of shares of the Companys common stock issued to the
Companys Chairman, who has personally guaranteed the Companys debt under its
bank credit agreement. During the fiscal years ended June 30, 2002 and 2001,
the Company issued approximately 1,055,000 shares and 874,000 shares,
respectively, of common stock to the Companys Chairman to compensate him for
his personal guarantee. The value of the shares issued, approximately $753,000
in fiscal 2002 and $1,449,000 in fiscal 2001, is amortized over the period for
which the shares provide compensation, and approximately $1,565,000 and
$1,262,000 is included in debt issue cost amortization for the fiscal years
ended June 30, 2002 and 2001, respectively.

25



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Income Taxes 
As of June 30, 2002, the Company had a net operating loss carryforward for tax
purposes of approximately $48.5 million to reduce Federal taxable income in the
future, and other tax credit carryforwards totaling approximately $600,000 to
reduce regular Federal income tax liabilities in the future. As of June 30,
2002, the Company had a net deferred tax asset of $21,400,000, net of a
valuation allowance established in the fiscal year ended June 30, 2002 of
$1,275,000, primarily due to a net operating loss carryforward for federal tax
purposes that expire beginning in 2018. The Company believes it will generate
adequate taxable income from operations or the sale or other disposition of
appreciated nonoperating assets in an amount sufficient to realize the deferred
tax asset prior to expiration of the net operating loss carryforward. The
principal differences between the federal statutory tax rate of 34% and the
effective tax rate are nondeductible intangibles amortization expense, state
income taxes and, for the fiscal year ended June 30, 2002, a change in the
amount of the valuation allowance.

RESULTS OF CONTINUING OPERATIONS  FISCAL YEAR ENDED JUNE 30, 2001 COMPARED TO
FISCAL YEAR ENDED JUNE 30, 2000

Results Derived from Operating Businesses

Total revenues for the fiscal years ended June 30, 2001 and 2000 are summarized
as follows (amounts in $000s):

|                                             |  |                     |         |  |  |  |  |      |  |   |        | 
|-------------------------------------------- |  | ------------------- | ------- |  |  |  |  | ---- |  | - | ------ | 
|                                             |  | Year Ended June 30,
|                                             |  |                    
|                                             |  | 2001                |         |  |  |  |  | 2000
|                                             |  |                     |         |  |  |  |  |     
|Collegiate Marketing and Production Services |  | $                   | 85,019  |  |  |  |  |      |  | $ | 54,443 | 
|Affinity Events                              |  |                     | 24,177  |  |  |  |  |      |  |   | 11,312 | 
|Affinity Management Services                 |  |                     | 11,117  |  |  |  |  |      |  |   | 4,934  | 
|Consulting                                   |  |                     | 24      |  |  |  |  |      |  |   | 1,311  | 
|                                             |  |                     |         |  |  |  |  |      |  |   |        | 
|                                             |  | $                   | 120,337 |  |  |  |  |      |  | $ | 72,000 | 
|                                             |  |                     |         |  |  |  |  |      |  |   |        | 

Total revenues for the fiscal year ended June 30, 2000 included revenues of
companies acquired in the Host-USA Acquisition only for the period from
December 17, 1999 (date of acquisition) through June 30, 2000. Therefore,
whereas the operating results for the year ended June 30, 2001 include
operating results for the Collegiate Marketing and Production Services,
Affinity Events and the Affinity Management Services business segments for an
entire fiscal year, the results for these three segments reported for the year
ended June 30, 2000 only include the results for the period from December 17,
1999 (date of acquisition) through June 30, 2000. Had the Host-USA
Acquisition occurred as of or prior to July 1, 1999, the results for the fiscal
year ended June 30, 2001 would have reflected a decline in total revenue of
approximately 9.3% from $129,711,000 pro forma revenue for the fiscal year
ended June 30, 2000.

The Company believes that the weak U.S. economy resulted in a decline in
corporate spending for advertising and sponsorships during the year ended June
30, 2001 compared to the previous fiscal year. Sales of corporate sponsorships
associated with the NCAA Corporate Sponsor Program were also negatively
affected in the fiscal year ended June 30, 2001 by the fact that during that
year, there was a period of time during which Host had publicly announced that
it had ceased negotiations with CBS Sports on an extension of Hosts
representation of the NCAA in connection with the Corporate Partner Program.
The Company believes that since prospective corporate sponsors had to then
assume that Host might not continue its administration of this Program, and
since the Company believes that corporate sponsors strongly prefer multi-year
renewable commitments over what was then a two-year maximum arrangement, Hosts
ability to sign new NCAA corporate sponsors for the then remaining two years of
the Host-NCAA Contract was negatively affected. Total revenue, in comparison
with pro forma revenue for the fiscal year ended June 30, 2000, was unfavorably

26



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##### 



impacted somewhat due to the elimination of certain loss-generating projects in
the fiscal year ended June 30, 2001 (which likewise resulted in a reduction in
pro forma operating costs and expenses).

There were no significant transactions consummated by Gray during the fiscal
year ended June 30, 2001, therefore consulting fee income on services provided
to Gray was only $24,000. In the fiscal year ended June 30, 2000, the Company
recognized consulting fee income of $1,311,000, primarily in connection with
Grays acquisition of three television stations.

Total operating costs and expenses for the fiscal years ended June 30, 2001 and
2000 are summarized as follows (amounts in $000s):

|                                            |  |                     |         |  |  |  |  |      |  |   |        | 
|------------------------------------------- |  | ------------------- | ------- |  |  |  |  | ---- |  | - | ------ | 
|                                            |  | Year Ended June 30,
|                                            |  |                    
|                                            |  | 2001                |         |  |  |  |  | 2000
|                                            |  |                     |         |  |  |  |  |     
|Direct operating costs of services rendered |  | $                   | 81,421  |  |  |  |  |      |  | $ | 49,437 | 
|Selling, general and administrative         |  |                     | 38,527  |  |  |  |  |      |  |   | 21,891 | 
|Amortization of acquisition intangibles     |  |                     | 4,267   |  |  |  |  |      |  |   | 2,602  | 
|                                            |  |                     |         |  |  |  |  |      |  |   |        | 
|                                            |  | $                   | 124,215 |  |  |  |  |      |  | $ | 73,930 | 
|                                            |  |                     |         |  |  |  |  |      |  |   |        | 

Prior year operating costs and expenses included those of the companies
acquired in the Host-USA Acquisition only for the period from December 17, 1999
through June 30, 2000. Operating costs and expenses attributable to companies
acquired in the Host-USA Acquisition were $117,769,000 for the fiscal year
ended June 30, 2001 and $68,320,000 in the prior fiscal year. Had the Host-USA
Acquisition occurred as of or prior to July 1, 1999, the results for the fiscal
year ended June 30, 2001 would have reflected a decrease in total operating
costs and expenses of approximately 6.6% from the $133,028,000 total operating
costs and expenses for the fiscal year ended June 30, 2000 on a pro forma
basis.

Direct operating costs of services rendered for the fiscal year ended June 30,
2001 represent a decline from the total pro forma direct costs and expenses for
the fiscal year ended June 30, 2000, due to the elimination of certain
loss-generating projects (resulting in a decline in total pro forma revenue as
well), headcount reductions occurring in January 2000 as Host and USA
operations were merged and reductions in certain operating costs associated
with the Companys Affinity Events business which were enacted late in the
fiscal year ended June 30, 2000. The overall reduction in pro forma direct
operating costs and expenses was lessened by the increase in total guaranteed
rights fees and profit-sharing fees under the terms of multi-year contracts and
contract renewals.

Selling, general and administrative costs remained relatively constant in the
fiscal year ended June 30, 2001 in comparison with the previous fiscal year on
a pro forma basis, with the exception of a nonrecurring expense of $1,460,000
in the fiscal year ended June 30, 2000 for costs associated with a potential
transaction involving one of the Companys investments.

Amortization of acquisition intangibles, primarily attributable to the Host-USA
Acquisition, were approximately the same for the fiscal year ended June 30,
2001 as the pro forma expense for the fiscal year ended June 30, 2000.

27



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Operating income (loss) for the fiscal years ended June 30, 2001 and 2000 is
summarized as follows (amounts in 000s):

|                                             |  |                     |        |   |  |  |  |      |  |   |        |  
|-------------------------------------------- |  | ------------------- | ------ | - |  |  |  | ---- |  | - | ------ | -
|                                             |  | Year Ended June 30,
|                                             |  |                    
|                                             |  | 2001                |        |   |  |  |  | 2000
|                                             |  |                     |        |   |  |  |  |     
|Collegiate Marketing and Production Services |  | $                   | 4,795  |   |  |  |  |      |  | $ | 4,354  |  
|Affinity Events                              |  |                     | (3,837 | ) |  |  |  |      |  |   | (2,551 | )
|Affinity Management Services                 |  |                     | 1,681  |   |  |  |  |      |  |   | 568    |  
|Consulting                                   |  |                     | 24     |   |  |  |  |      |  |   | 1,311  |  
|Amortization of acquisition intangibles      |  |                     | (4,267 | ) |  |  |  |      |  |   | (2,602 | )
|Unallocated general and administrative costs |  |                     | (2,274 | ) |  |  |  |      |  |   | (3,010 | )
|                                             |  |                     |        |   |  |  |  |      |  |   |        |  
|                                             |  | $                   | (3,878 | ) |  |  |  |      |  | $ | (1,930 | )
|                                             |  |                     |        |   |  |  |  |      |  |   |        |  

Had the Host-USA Acquisition occurred on or prior to July 1, 1999, the results
for the fiscal year ended June 30, 2001 would have reflected an increase in the
loss from operations of approximately $561,000 from $3,317,000 for the fiscal
year ended June 30, 2000 presented on a pro forma basis.

Results Derived from Investments and
Derivative Instruments 
Equity in earnings (losses) of affiliated companies, totaling $(4,235,000) for
the fiscal year ended June 30, 2001 and $(2,533,000) for the fiscal year ended
June 30, 2000 included (a) the Companys proportionate share of the earnings or
losses of (i) Gray; (ii) Rawlings; (iii) subsequent to December 17, 1999, iHigh
and certain other equity investments; and (iv) prior to December 17, 1999, Host
and Capital, net of (b) amortization charges totaling $684,000 in 2001 and
$699,000 in 2000.

In January 1999, USA sold its investment in broadcast.com, inc., recognizing a
gain of approximately $40 million. As a result of Hosts equity investment in
USA and the Companys equity investment in Host reported on a six-month lag
basis, the Company recognized approximately $1.9 million in equity in earnings
of affiliates in the fiscal year ended June 30, 2000 due to USAs gain on the
sale.

Rawlings recognized an after-tax charge of approximately $12.8 million
associated with its decision to sell its Vic hockey business in its fiscal
quarter ended May 31, 2000. As a result, the Companys pretax equity in
earnings (losses) of Rawlings was negatively impacted in the fiscal year ended
June 30, 2000 by approximately $1.3 million.

Interest and dividend income of $810,000 and $958,000 for the fiscal years
ended June 30, 2001 and 2000, respectively, was primarily derived from
dividends paid on the Companys investment in Grays series A and series B
preferred stock. Dividend income decreased from the previous fiscal year due
to Grays redemption of a portion of its series A preferred stock in December
2000 for $5,000,000, resulting in a gain to the Company of $2,160,000.

In the fiscal year ended June 30, 2001,the Company reduced the book value of
its investment in Quokka to zero, recording non-cash charges totaling
$8,017,000. In the fiscal year ended June 30, 2000, the Company recognized an
expense of $2,850,000 associated with the impairment in the value of the
Companys investment in a warrant for Rawlings common stock. The determination
to reduce the carrying value of the Companys investment in the Rawlings
warrant was made based on managements assessment that the likelihood that the
warrant would vest prior to its expiration date, in accordance with the present
terms of the warrant, was remote. As a result of this assessment, management
believed its ability to recover any of the carrying value of the investment in
the warrant was remote. The warrant expired unexercised in November 2001.

28



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##### 



The net change in the value of certain derivative instruments, consisting of
warrants to purchase Gray common stock and interest rate swap agreements, was
$2,988,000 for the fiscal year ended June 30, 2001, as a result of an increase
in the value of the warrants, net of a reduction in the value of the interest
rate swap agreements as variable interest rates declined. As a result of the
previously-discussed adoption of FAS 133, the Company recognized the cumulative
effect of the accounting change of $(1,120,000), representing the value of the
derivatives as of July 1, 2000 of $(1,807,000), less a deferred tax provision
of $687,000.

As a result of Grays issuance of shares of its class B common stock in October
1999 in connection with consideration paid in the acquisition of three
television stations, the Companys common equity ownership of Gray was reduced
from 16.9% to 13.1%, resulting in a pretax gain for the Company of $490,000 in
the fiscal year ended June 30, 2000. There can be no assurance that such sales
or such gains of a material nature will occur in the future.

As a result of accounting errors discovered by the Company in the financial
statements of USA subsequent to the Host-USA Acquisition, the Company recorded
a charge of $11,330,000 in December 1999, reflecting the extent to which USAs
net tangible current assets as of the date of the Host-USA Acquisition were
overstated. The errors resulted from inaccurate computations of prepaid costs
and expenses, sponsor contract receivables and deferred revenue associated with
the Companys (and prior to the Host-USA Acquisition, USAs) Affinity Events
business.

Other income for the fiscal years ended June 30, 2001 and 2000 consisted
primarily of income from an option agreement with Gray whereby Gray has the
right to acquire the Companys investment in Tarzian.

Interest Expense and Debt Related Costs
Interest expense was $11,545,000 and $8,746,000 for the fiscal years ended June
30, 2001 and 2000, respectively, increasing over the prior fiscal year due to
increased borrowing in order to effect the Host-USA Acquisition in December
1999.

Debt issue cost amortization of $2,410,000 and $953,000 for the fiscal years
ended June 30, 2001 and 2000, respectively, resulted from the amortization of
costs paid in connection with obtaining bank financing primarily for the
Host-USA Acquisition, as well as amortization of the value of shares of the
Companys common stock issued to the Companys Chairman, who personally
guaranteed the Companys debt under its bank credit agreement. During the
fiscal years ended June 30, 2001 and 2000, the Company issued approximately
874,000 shares and 305,000 shares, respectively, of common stock to the
Companys Chairman to compensate him for his personal guarantee. The value of
the shares issued, approximately $1,449,000 in fiscal 2001 and $1,219,000 in
fiscal 2000, is amortized over one year, and approximately $1,262,000 and
$610,000 is included in debt issue cost amortization for the fiscal years ended
June 30, 2001 and 2000, respectively.

Income Taxes 
The principal differences between the federal statutory tax rate of 34% and the
effective tax rate are nondeductible goodwill amortization and state income
taxes, and in the fiscal year ended June 30, 2000 only, correction of purchase
price.

RESULTS OF DISCONTINUED OPERATIONS

Revenue from Datasouths computer printer operations was $4,406,000 for the
period July 1, 2000 to September 29, 2000, the date on which the operating
business was sold to another computer printer company. Gross profit from
printer operations was 23.2% for the period.

29



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##### 



Operating expenses associated with discontinued operations for the period July
1, 2000 to September 29, 2000 of $1,221,000 represent 27.7% or revenue.
Estimated operating losses during the disposal period were accrued as of June
30, 2000 and included as a component of the estimated loss on the disposal of
the discontinued segment. Under the terms of the sale, Datasouth continued to
employ personnel and operate Datasouths manufacturing and administration
facility on behalf of the purchaser during a transition period subject to a
transition services agreement. The purchaser reimbursed Datasouth for
substantially all personnel and operating costs incurred during the transition
period. The transition period ended on June 30, 2001, at which time all
remaining employees of Datasouth became employees of the purchaser.

Revenue from Datasouths computer printer operations of $24,959,000 for the
fiscal year ended June 30, 2000 and the gross profit margin from printer
operations was 24.8% of revenue. Operating expenses associated with
discontinued operations of $6,507,000 for the fiscal year ended June 30, 2000
represented 26.1% of revenue. Operating expenses included non-cash goodwill
amortization expense of $555,000 for the fiscal year ended June 30, 2000.

The Company allocated an income tax benefit to the discontinued segment of
$10,000 for the fiscal year ended June 30, 2000, representing an effective tax
rate of 3.0%. The effective tax rate was low due since nondeductible goodwill
amortization in the period nearly equaled the amount of pretax loss.

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 (as described in Liquidity and Capital Resources above)
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 $519,000, $668,000 and $538,000 for
the fiscal years ended June 30, 2002, 2001 and 2000, respectively. 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.

The Company holds investments in certain common stocks, preferred stocks and
options to purchase common stock. The Company is exposed to changes in market
values of these investments, some of which are publicly traded common stocks.
In each case where there exists a quoted market price for a publicly-traded
security in which the Company holds investments, the investment is accounted
for under the equity method, whereby changes in the quoted market price of the
security do not impact the carrying value of the investment. However,
fluctuations in market prices of investments could ultimately affect the
amounts the Company might realize upon a disposal of some or all of its
investments. Based on

30



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##### 



managements estimates of the aggregate fair value of the Companys investments
in affiliated companies (as described in Note 13 to the consolidated financial
statements), a 10% change in the aggregate market value of such investments
would increase or decrease such aggregate market value by approximately
$4,600,000 and $7,700,000 as of June 30, 2002 and 2001, respectively.

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 and
Grays leverage may adversely affect their ability to obtain financing, thereby
impairing their ability to withstand economic downturns or competitive
pressures; (ii) Grays business depends, in part, on sales of advertising time
and space and on its relationships with, and success of, its national network
affiliates; (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; (vi) war or acts of terrorism or a continued
domestic economic downturn or recession could materially adversely impact
corporate discretionary spending, such as sponsorships and advertising sold by
the Company and Gray.

Item 7A. Quantitative and
Qualitative Disclosures About Market Risk

See Interest Rate and Market Rate Risk in Item 7 Managements Discussion and
Analysis.

31



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##### 



Item 8. Financial
Statements and Supplementary Data

|                                                                                                                                                                                                                               |                                                                                                                                                   |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                                                                               |                                                                                                                                                   |  | Page
|                                                                                                                                                                                                                               |                                                                                                                                                   |  |     
|Consolidated Financial Statements of Bull Run Corporation:                                                                                                                                                                     |                                                                                                                                                   |  |      |   
|                                                                                                                                                                                                                               |                                                                                                                                                   |  |      |   
|                                                                                                                                                                                                                               | Reports of Independent Accountants                                                                                                                |  |      | 33 | 
|                                                                                                                                                                                                                               | Consolidated Balance Sheets at June 30, 2002 and 2001                                                                                             |  |      | 35 | 
|                                                                                                                                                                                                                               | Consolidated Statements of Operations for each of the years in the three-
year period ended June 30, 2002                                         |  |      | 36 | 
|                                                                                                                                                                                                                               | Consolidated Statements of Redeemable Preferred Stock and Stockholders
Equity for each of the years in the three-year period ended June 30, 2002 |  |      | 37 | 
|                                                                                                                                                                                                                               | Consolidated Statements of Cash Flows for each of the years in the three-
year period ended June 30, 2002                                         |  |      | 38 | 
|                                                                                                                                                                                                                               | Notes to Consolidated Financial Statements                                                                                                        |  |      | 39 | 
|                                                                                                                                                                                                                               | Selected Quarterly Financial Data (Unaudited)                                                                                                     |  |      | 61 | 
|                                                                                                                                                                                                                               |                                                                                                                                                   |  |      |   
|Report of Independent Auditors on the Consolidated Financial Statements of Gray
Communications Systems, Inc. as of December 31, 2000 and for the year
then ended                                                               |                                                                                                                                                   |  | F-1  |   
|                                                                                                                                                                                                                               |                                                                                                                                                   |  |      |   
|Report of Independent Public Accountants on the Consolidated Financial
Statements of Rawlings Sporting Goods Company, Inc. as of August 31,
2000 and 1999, and for each of the three years in the period ended
August 31, 2000 |                                                                                                                                                   |  | F-2  |   

32



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REPORT OF INDEPENDENT ACCOUNTANTS

BOARD OF DIRECTORS AND STOCKHOLDERS OF BULL RUN CORPORATION:

We have audited the accompanying consolidated balance sheets of Bull Run
Corporation as of June 30, 2002 and 2001, and the related consolidated
statements of operations, stockholders equity and cash flows for the years
then ended. 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 did not audit the financial statements of
Gray Television, Inc. (a corporation in which the Company has a 13% interest),
as of December 31, 2000 and for the year then ended, and the financial
statements of Rawlings Sporting Goods Company, Inc. (a corporation in which the
Company has a 10% interest), as of August 31, 2000 and for the year then ended.
Those statements were audited by other auditors whose reports thereon have
been furnished to us, and our opinion expressed herein, insofar as it relates
to the amounts for the periods ended December 31, 2000 and August 31, 2000
included for Gray Television, Inc. and Rawlings Sporting Goods Company, Inc.,
respectively, is based solely on their reports.

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

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Bull Run Corporation
at June 30, 2002 and 2001, and the consolidated results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.

PRICEWATERHOUSECOOPERS LLP

Atlanta, Georgia
September 12, 2002, except as to Note 9,
for which the date is October 11, 2002

33



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##### 



REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS AND STOCKHOLDERS OF BULL RUN CORPORATION:

We have audited the accompanying consolidated statements of operations,
stockholders equity and cash flows of Bull Run Corporation for the year ended
June 30, 2000. 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 audit. The financial statements of Rawlings
Sporting Goods Company, Inc., (a corporation in which the Company has a 10%
interest), as of August 31, 1999 and for the year then ended, have been audited
by other auditors whose report has been furnished to us; insofar as our opinion
relates to data included for Rawlings Sporting Goods Company, Inc., it is based
solely on their report.

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

In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash flows of
Bull Run Corporation for the year ended June 30, 2000, in conformity with
accounting principles generally accepted in the United States.

| | ERNST & YOUNG LLP
| | -----------------

Charlotte, North Carolina
September 28, 2000, except for Note 3 as to which the date is
July 26, 2001

34



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##### 



BULL RUN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------- | ------- |  |  |  |  | ---- | ------- | ------- | ------- | 
|                                                                                                                                                              |                                                                                                                                       |                            |         | June 30,
|                                                                                                                                                              |                                                                                                                                       |                            |         |         
|                                                                                                                                                              |                                                                                                                                       |                            |         | 2002     |         |  |  |  |  | 2001
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |     
|ASSETS                                                                                                                                                        |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|Current assets:                                                                                                                                               |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              | Cash and cash equivalents                                                                                                             |                            | $       | 653      |         |  |  |  |  |      | $       | 2,637   |        
|                                                                                                                                                              | Accounts receivable, net of allowance of $444 and
$545 as of June 30, 2002 and 2001, respectively                                     |                            |         | 16,296   |         |  |  |  |  |      |         | 29,547  |        
|                                                                                                                                                              | Inventories                                                                                                                           |                            |         | 644      |         |  |  |  |  |      |         | 494     |        
|                                                                                                                                                              | Prepaid costs and expenses                                                                                                            |                            |         | 2,674    |         |  |  |  |  |      |         | 3,117   |        
|                                                                                                                                                              | Income taxes receivable                                                                                                               |                            |         | 4,187    |         |  |  |  |  |      |         | 4,626   |        
|                                                                                                                                                              | Deferred income taxes                                                                                                                 |                            |         |          |         |  |  |  |  |      |         | 121     |        
|                                                                                                                                                              | Net current assets of discontinued segment                                                                                            |                            |         | 104      |         |  |  |  |  |      |         |         |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       | Total current assets       |         |          | 24,558  |  |  |  |  |      |         |         | 40,542  | 
|Property and equipment, net                                                                                                                                   |                                                                                                                                       |                            | 5,398   |          |         |  |  |  |  |      | 6,623   |        
|Investment in affiliated companies                                                                                                                            |                                                                                                                                       |                            | 25,115  |          |         |  |  |  |  |      | 50,399  |        
|Goodwill                                                                                                                                                      |                                                                                                                                       |                            | 57,862  |          |         |  |  |  |  |      | 57,862  |        
|Customer base and trademarks                                                                                                                                  |                                                                                                                                       |                            | 17,202  |          |         |  |  |  |  |      | 25,026  |        
|Deferred income taxes                                                                                                                                         |                                                                                                                                       |                            | 21,400  |          |         |  |  |  |  |      | 9,191   |        
|Other assets                                                                                                                                                  |                                                                                                                                       |                            | 9,464   |          |         |  |  |  |  |      | 14,313  |        
|Net noncurrent assets of discontinued segment                                                                                                                 |                                                                                                                                       |                            |         |          |         |  |  |  |  |      | 2,582   |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       | $                          | 160,999 |          |         |  |  |  |  | $    | 206,538 |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                          |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|Current liabilities:                                                                                                                                          |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              | Current portion of long-term debt                                                                                                     |                            | $       | 15,000   |         |  |  |  |  |      | $       | 20,590  |        
|                                                                                                                                                              | Accounts payable                                                                                                                      |                            |         | 7,212    |         |  |  |  |  |      |         | 6,060   |        
|                                                                                                                                                              | Deferred revenue                                                                                                                      |                            |         | 9,624    |         |  |  |  |  |      |         | 16,889  |        
|                                                                                                                                                              | Accrued and other liabilities                                                                                                         |                            |         | 19,549   |         |  |  |  |  |      |         | 13,942  |        
|                                                                                                                                                              | Net current liabilities of discontinued segment                                                                                       |                            |         |          |         |  |  |  |  |      |         | 11      |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       | Total current liabilities  |         |          | 51,385  |  |  |  |  |      |         |         | 57,492  | 
|Long-term debt                                                                                                                                                |                                                                                                                                       |                            | 98,091  |          |         |  |  |  |  |      | 107,693 |        
|Other liabilities                                                                                                                                             |                                                                                                                                       |                            | 1,992   |          |         |  |  |  |  |      | 3,749   |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       | Total liabilities          |         |          | 151,468 |  |  |  |  |      |         |         | 168,934 | 
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|Commitments and contingencies                                                                                                                                 |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|Redeemable Series B convertible preferred stock, $.01 par value,
(authorized 100 shares; issued and outstanding 5 shares; $5,400
aggregate liquidation value) |                                                                                                                                       |                            | 5,400   |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|Stockholders equity:                                                                                                                                         |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              | Series A preferred stock, $.01 par value (authorized 100 shares; issued
and outstanding 3 shares; $3,000 aggregate liquidation value) |                            |         |          |         |  |  |  |  |      |         | 2,178   |        
|                                                                                                                                                              | Common stock, $.01 par value (authorized 100,000 shares; issued 38,108
and 36,526 shares as of June 30, 2001 and 2000, respectively)  |                            |         | 381      |         |  |  |  |  |      |         | 365     |        
|                                                                                                                                                              | Additional paid-in capital                                                                                                            |                            |         | 78,698   |         |  |  |  |  |      |         | 78,380  |        
|                                                                                                                                                              | Treasury stock, at cost (542 shares)                                                                                                  |                            |         | (1,393   | )       |  |  |  |  |      |         | (1,393  | )      
|                                                                                                                                                              | Other comprehensive accumulated loss                                                                                                  |                            |         | (2,080   | )       |  |  |  |  |      |         |         |        
|                                                                                                                                                              | Retained earnings (accumulated deficit)                                                                                               |                            |         | (71,475  | )       |  |  |  |  |      |         | (41,926 | )      
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       | Total stockholders equity |         |          | 4,131   |  |  |  |  |      |         |         | 37,604  | 
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        
|                                                                                                                                                              |                                                                                                                                       | $                          | 160,999 |          |         |  |  |  |  | $    | 206,538 |        
|                                                                                                                                                              |                                                                                                                                       |                            |         |          |         |  |  |  |  |      |         |        

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

35



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BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)

|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |         |         |  
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------- | ------------------- | ------- | ---- | ------- | ------- | ------- | - | ------ | ------- | ------- | -
|                                                                                              |                                                       |                                                                                               |         | Year Ended June 30,
|                                                                                              |                                                       |                                                                                               |         |                    
|                                                                                              |                                                       |                                                                                               |         | 2002                |         | 2001 |         | 2000   
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |        
|Revenue from services rendered                                                                |                                                       | $                                                                                             | 113,072 |                     |         | $    | 120,337 |         |         | $ | 72,000 |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|Operating costs and expenses:                                                                 |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              | Direct operating costs of services rendered           |                                                                                               |         | 88,531              |         |      |         | 81,421  |         |   |        | 49,437  |        
|                                                                                              | Selling, general and administrative                   |                                                                                               |         | 32,773              |         |      |         | 38,527  |         |   |        | 21,891  |        
|                                                                                              | Amortization of acquisition intangibles               |                                                                                               |         | 7,824               |         |      |         | 4,267   |         |   |        | 2,602   |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       |                                                                                               | 129,128 |                     |         |      | 124,215 |         |         |   | 73,930 |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Operating loss                                                                                |         |                     | (16,056 | )    |         |         | (3,878  | ) |        |         | (1,930  | )
|Other income (expense):                                                                       |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              | Equity in earnings (losses) of affiliated companies   |                                                                                               |         | (1,962              | )       |      |         | (4,235  | )       |   |        | (2,533  | )      
|                                                                                              | Gain on issuance of shares by affiliate               |                                                                                               |         |                     |         |      |         |         |         |   |        | 490     |        
|                                                                                              | Gain on disposition of investments                    |                                                                                               |         | 3,064               |         |      |         | 2,160   |         |   |        |         |        
|                                                                                              | Reduction in valuation of investment in affiliate     |                                                                                               |         | (2,822              | )       |      |         | (8,956  | )       |   |        | (2,850  | )      
|                                                                                              | Correction of purchase price allocation               |                                                                                               |         |                     |         |      |         |         |         |   |        | (11,330 | )      
|                                                                                              | Net change in value of certain derivative instruments |                                                                                               |         | (3,345              | )       |      |         | 2,988   |         |   |        |         |        
|                                                                                              | Interest and dividend income                          |                                                                                               |         | 151                 |         |      |         | 810     |         |   |        | 958     |        
|                                                                                              | Interest expense                                      |                                                                                               |         | (9,713              | )       |      |         | (11,545 | )       |   |        | (8,746  | )      
|                                                                                              | Debt issue cost amortization                          |                                                                                               |         | (2,830              | )       |      |         | (2,410  | )       |   |        | (953    | )      
|                                                                                              | Other income (expense)                                |                                                                                               |         | 350                 |         |      |         | 1,254   |         |   |        | 832     |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Loss from continuing operations before income
taxes, extraordinary item and cumulative effect |         |                     | (33,163 | )    |         |         | (23,812 | ) |        |         | (26,062 | )
|Income tax benefit                                                                            |                                                       |                                                                                               | 7,257   |                     |         |      | 6,228   |         |         |   | 5,077  |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Loss from continuing operations before
extraordinary item and cumulative effect               |         |                     | (25,906 | )    |         |         | (17,584 | ) |        |         | (20,985 | )
|Extraordinary loss, net of tax benefit of $233                                                |                                                       |                                                                                               | (627    | )                   |         |      |         |         |         |   |        |        
|Cumulative effect of accounting change, net of tax
benefit of $1,350 in 2002 and $687 in 2001 |                                                       |                                                                                               | (2,620  | )                   |         |      | (1,120  | )       |         |   |        |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Loss from continuing operations                                                               |         |                     | (29,153 | )    |         |         | (18,704 | ) |        |         | (20,985 | )
|Loss on operations of discontinued segment, net of tax                                        |                                                       |                                                                                               |         |                     |         |      |         |         |         |   | (317   | )      
|Estimated loss on disposal of discontinued segment, net of tax                                |                                                       |                                                                                               |         |                     |         |      |         |         |         |   | (6,522 | )      
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Net loss                                                                                      |         |                     | (29,153 | )    |         |         | (18,704 | ) |        |         | (27,824 | )
|Preferred dividends                                                                           |                                                       |                                                                                               | (396    | )                   |         |      |         |         |         |   |        |        
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Net loss available to common stockholders                                                     |         | $                   | (29,549 | )    |         | $       | (18,704 | ) |        | $       | (27,824 | )
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|Loss per share available to common stockholders, basic and diluted:                           |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | Loss from continuing operations before extraordinary
item and cumulative effect adjustment    |         | $                   | (0.72   | )    |         | $       | (0.50   | ) |        | $       | (0.72   | )
|                                                                                              |                                                       | Extraordinary loss                                                                            |         |                     | (0.02   | )    |         |         |         |   |        |         |         |  
|                                                                                              |                                                       | Cumulative effect of accounting change                                                        |         |                     | (0.07   | )    |         |         | (0.03   | ) |        |         |         |  
|                                                                                              |                                                       | Income (loss) from discontinued segment                                                       |         |                     |         |      |         |         |         |   |        |         | (0.24   | )
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              |                                                       | $                                                                                             | (0.81   | )                   |         | $    | (0.53   | )       |         | $ | (0.96  | )      
|                                                                                              |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|Weighted average number of common shares outstanding:                                         |                                                       |                                                                                               |         |                     |         |      |         |         |         |   |        |        
|                                                                                              | Basic and diluted                                     |                                                                                               |         | 36,485              |         |      |         | 35,307  |         |   |        | 29,044  |        

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

36



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##### 



BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS EQUITY
(Amounts in thousands)

|                                                                               |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   |        |  
|------------------------------------------------------------------------------ |  | ---------- | ----- | --------- |  | ------------ | ------ | ---------- |  | ------- | ------ |  |  | - | --- |  |  | - | ------ | -
|                                                                               |  | Redeemable |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |  
|                                                                               |  | Series B   |       | Series A  |  | Common Stock |        | Additional
|                                                                               |  | Preferred  |       | Preferred |  |              |        | Paid-In   
|                                                                               |  | Stock      |       | Stock     |  | Shares       |        | Amount     |  | Capital
|                                                                               |  |            |       |           |  |              |        |            |  |        
|As of July 1, 1999                                                             |  |            |       |           |  |              |        |            |  |         | 22,983 |  |  | $ | 230 |  |  | $ | 21,840 |  
|Issuance of common stock                                                       |  |            |       |           |  |              |        |            |  |         | 11,992 |  |  |   | 120 |  |  |   | 44,657 |  
|Issuance of nonqualified stock options                                         |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   | 8,700  |  
|Exercise of stock options                                                      |  |            |       |           |  |              |        |            |  |         | 652    |  |  |   | 6   |  |  |   | 776    |  
|Tax benefit from exercise of
nonqualified stock options                        |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   | 150    |  
|                                                                               |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   |        |  
|As of June 30, 2000                                                            |  |            |       |           |  |              |        |            |  | $       | 35,627 |  |  | $ | 356 |  |  | $ | 76,123 |  
|Issuance of Series A preferred stock
with detachable warrants                  |  |            |       |           |  |              | 2,178  |            |  |         |        |  |  |   |     |  |  |   | 822    |  
|Issuance of common stock                                                       |  |            |       |           |  |              |        |            |  |         | 874    |  |  |   | 9   |  |  |   | 1,440  |  
|Exercise of stock options                                                      |  |            |       |           |  |              |        |            |  |         | 25     |  |  |   | 0   |  |  |   | 17     |  
|Tax expense from exercise of
nonqualified stock options                        |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   | (22    | )
|                                                                               |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   |        |  
|As of June 30, 2001                                                            |  | $          |       |           |  | $            | 2,178  |            |  |         | 36,526 |  |  | $ | 365 |  |  | $ | 78,380 |  
|Exchange of Series A preferred stock
and warrants for Series B preferred stock |  |            | 3,000 |           |  |              | (2,178 | )          |  |         |        |  |  |   |     |  |  |   | (822   | )
|Issuance of Series B preferred stock                                           |  |            | 2,400 |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   |        |  
|Issuance of common stock                                                       |  |            |       |           |  |              |        |            |  |         | 1,522  |  |  |   | 15  |  |  |   | 1,088  |  
|Exercise of stock options                                                      |  |            |       |           |  |              |        |            |  |         | 60     |  |  |   | 1   |  |  |   | 52     |  
|                                                                               |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   |        |  
|As of June 30, 2002                                                            |  | $          | 5,400 |           |  | $            |       |            |  |         | 38,108 |  |  | $ | 381 |  |  | $ | 78,698 |  
|                                                                               |  |            |       |           |  |              |        |            |  |         |        |  |  |   |     |  |  |   |        |  

|                                                                               |  |          |        |             |  |               |        |               |  |       |         |   |  |   |         |  
|------------------------------------------------------------------------------ |  | -------- | ------ | ----------- |  | ------------- | ------ | ------------- |  | ----- | ------- | - |  | - | ------- | -
|                                                                               |  |          |        |             |  | Other         |        | Retained      |  |       |         |  
|                                                                               |  |          |        |             |  | Comprehensive |        | Earnings      |  | Total
|                                                                               |  | Treasury |        | Accumulated |  | (Accumulated  |        | Stockholders'
|                                                                               |  | Stock    |        | Loss        |  | Deficit)      |        | Equity       
|                                                                               |  |          |        |             |  |               |        |              
|As of July 1, 1999                                                             |  | $        | (1,393 | )           |  |               |        |               |  | $     | 4,602   |   |  | $ | 25,279  |  
|Issuance of common stock                                                       |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 44,777  |  
|Issuance of nonqualified stock options                                         |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 8,700   |  
|Exercise of stock options                                                      |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 782     |  
|Tax benefit from exercise of
nonqualified stock options                        |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 150     |  
|Net loss                                                                       |  |          |        |             |  |               |        |               |  |       | (27,824 | ) |  |   | (27,824 | )
|                                                                               |  |          |        |             |  |               |        |               |  |       |         |   |  |   |         |  
|As of June 30, 2000                                                            |  | $        | (1,393 | )           |  |               |        |               |  | $     | (23,222 | ) |  | $ | 51,864  |  
|Issuance of Series A preferred stock
with detachable warrants                  |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 3,000   |  
|Issuance of common stock                                                       |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 1,449   |  
|Exercise of stock options                                                      |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 17      |  
|Tax expense from exercise of
nonqualified stock options                        |  |          |        |             |  |               |        |               |  |       |         |   |  |   | (22     | )
|Net loss available to common stockholders                                      |  |          |        |             |  |               |        |               |  |       | (18,704 | ) |  |   | (18,704 | )
|                                                                               |  |          |        |             |  |               |        |               |  |       |         |   |  |   |         |  
|As of June 30, 2001                                                            |  | $        | (1,393 | )           |  | $             |        |               |  | $     | (41,926 | ) |  | $ | 37,604  |  
|Exchange of Series A preferred stock
and warrants for Series B preferred stock |  |          |        |             |  |               |        |               |  |       |         |   |  |   | (3,000  | )
|Issuance of common stock                                                       |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 1,103   |  
|Exercise of stock options                                                      |  |          |        |             |  |               |        |               |  |       |         |   |  |   | 53      |  
|Other comprehensive loss                                                       |  |          |        |             |  |               | (2,080 | )             |  |       |         |   |  |   | (2,080  | )
|Preferred dividends                                                            |  |          |        |             |  |               |        |               |  |       | (396    | ) |  |   | (396    | )
|Net loss                                                                       |  |          |        |             |  |               |        |               |  |       | (29,153 | ) |  |   | (29,153 | )
|                                                                               |  |          |        |             |  |               |        |               |  |       |         |   |  |   |         |  
|As of June 30, 2002                                                            |  | $        | (1,393 | )           |  | $             | (2,080 | )             |  | $     | (71,475 | ) |  | $ | 4,131   |  
|                                                                               |  |          |        |             |  |               |        |               |  |       |         |   |  |   |         |  

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

37



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##### 



BULL RUN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |         |         |  
|-------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------- | ------- | ------------------- | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------- | -
|                                                                           |                                                                              |                                       |         | Year Ended June 30,
|                                                                           |                                                                              |                                       |         |                    
|                                                                           |                                                                              |                                       |         | 2002                |        | 2001 |         | 2000   
|                                                                           |                                                                              |                                       |         |                     |        |      |         |        
|Cash flows from operating activities:                                      |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|                                                                           | Net loss                                                                     |                                       | $       | (29,153             | )      |      | $       | (18,704 | )      |   | $       | (27,824 | )      
|                                                                           | Loss (income) from discontinued segment                                      |                                       |         |                     |        |      |         |         |        |   |         | 6,839   |        
|                                                                           | Adjustments to reconcile net loss to net cash used in
continuing operations: |                                       |         |                     |        |      |         |         |        |   |         |         |        
|                                                                           | Cumulative effect of accounting change                                       |                                       |         | 2,620               |        |      |         | 1,120   |        |   |         |         |        
|                                                                           | Extraordinary loss                                                           |                                       |         | 627                 |        |      |         |         |        |   |         |         |        
|                                                                           | Correction of purchase price allocation                                      |                                       |         |                     |        |      |         |         |        |   |         | 11,330  |        
|                                                                           | Provision for bad debts                                                      |                                       |         | 630                 |        |      |         | 576     |        |   |         | 267     |        
|                                                                           | Depreciation and amortization                                                |                                       |         | 12,270              |        |      |         | 8,438   |        |   |         | 4,669   |        
|                                                                           | Equity in (earnings) losses of affiliated companies                          |                                       |         | 1,962               |        |      |         | 4,235   |        |   |         | 2,533   |        
|                                                                           | Other expense (income) derived from investment in affiliates, net            |                                       |         | (120                | )      |      |         | 6,718   |        |   |         | 2,423   |        
|                                                                           | Net appreciation in value of derivative instruments                          |                                       |         | 3,345               |        |      |         | (2,988  | )      |   |         |         |        
|                                                                           | Deferred income taxes                                                        |                                       |         | (7,257              | )      |      |         | (5,594  | )      |   |         | (5,347  | )      
|                                                                           | Change in operating assets and liabilities:                                  |                                       |         |                     |        |      |         |         |        |   |         |         |        
|                                                                           |                                                                              | Accounts receivable                   |         |                     | 12,621 |      |         |         | (1,409 | ) |         |         | 12,497  |  
|                                                                           |                                                                              | Inventories                           |         |                     | (150   | )    |         |         | 185    |   |         |         | 270     |  
|                                                                           |                                                                              | Prepaid costs and expenses            |         |                     | 428    |      |         |         | 572    |   |         |         | 3,030   |  
|                                                                           |                                                                              | Accounts payable and accrued expenses |         |                     | (1,868 | )    |         |         | 4,271  |   |         |         | (11,585 | )
|                                                                           |                                                                              | Other long-term liabilities           |         |                     | (1,276 | )    |         |         | 822    |   |         |         | 781     |  
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Net cash used in continuing operations                                     |                                                                              |                                       | (5,321  | )                   |        |      | (1,758  | )       |        |   | (117    | )      
|Net cash provided by (used in) discontinued operations                     |                                                                              |                                       | (127    | )                   |        |      | 2,126   |         |        |   | 676     |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Net cash provided by (used in) operating activities                        |                                                                              |                                       | (5,448  | )                   |        |      | 368     |         |        |   | 559     |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Cash flows from investing activities:                                      |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Capital expenditures                                                       |                                                                              |                                       | (279    | )                   |        |      | (1,166  | )       |        |   | (1,037  | )      
|Investment in affiliated companies                                         |                                                                              |                                       | (705    | )                   |        |      | (223    | )       |        |   |         |        
|Proceeds on dispositions of investments                                    |                                                                              |                                       | 16,803  |                     |        |      | 5,330   |         |        |   | 267     |        
|Acquisition of businesses, net of cash acquired                            |                                                                              |                                       |         |                     |        |      | (1,232  | )       |        |   | (45,315 | )      
|Other investing activities                                                 |                                                                              |                                       | (128    | )                   |        |      | (14     | )       |        |   | 13      |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Net cash provided by (used in) continuing operation investing activities   |                                                                              |                                       | 15,691  |                     |        |      | 2,695   |         |        |   | (46,072 | )      
|Net cash provided by (used in) discontinued operation investing activities |                                                                              |                                       | 843     |                     |        |      | 2,347   |         |        |   | (642    | )      
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Net cash provided by (used in) investing activities                        |                                                                              |                                       | 16,534  |                     |        |      | 5,042   |         |        |   | (46,714 | )      
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Cash flows from financing activities:                                      |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Borrowings from notes payable and revolving lines of credit                |                                                                              |                                       | 22,950  |                     |        |      | 23,625  |         |        |   | 32,702  |        
|Repayments on notes payable and revolving lines of credit                  |                                                                              |                                       | (17,350 | )                   |        |      | (18,450 | )       |        |   | (33,698 | )      
|Proceeds from long-term debt                                               |                                                                              |                                       |         |                     |        |      |         |         |        |   | 95,000  |        
|Repayments on long-term debt                                               |                                                                              |                                       | (20,793 | )                   |        |      | (10,866 | )       |        |   | (47,165 | )      
|Debt issue costs                                                           |                                                                              |                                       | (680    | )                   |        |      | (718    | )       |        |   | (1,170  | )      
|Issuance of common stock                                                   |                                                                              |                                       | 350     |                     |        |      |         |         |        |   |         |        
|Exercise of stock options                                                  |                                                                              |                                       | 53      |                     |        |      | 17      |         |        |   | 782     |        
|Issuance of preferred stock                                                |                                                                              |                                       | 2,400   |                     |        |      | 3,000   |         |        |   |         |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Net cash provided by (used in) continuing operation financing activities   |                                                                              |                                       | (13,070 | )                   |        |      | (3,392  | )       |        |   | 46,451  |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Net increase (decrease) in cash and cash equivalents                       |                                                                              |                                       | (1,984  | )                   |        |      | 2,018   |         |        |   | 296     |        
|Cash and cash equivalents, beginning of year                               |                                                                              |                                       | 2,637   |                     |        |      | 619     |         |        |   | 323     |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        
|Cash and cash equivalents, end of year                                     |                                                                              | $                                     | 653     |                     |        | $    | 2,637   |         |        | $ | 619     |        
|                                                                           |                                                                              |                                       |         |                     |        |      |         |         |        |   |         |        

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

38



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##### 



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) provides media and marketing services to universities, athletic
conferences and various associations and, in addition, market, and operate,
amateur participatory sporting events through its wholly owned subsidiary, Host
Communications, Inc. (Host). On December 17, 1999, Bull Run acquired the
capital stock of Host, Universal Sports America, Inc. (USA) and Capital
Sports Properties, Inc. (Capital) not then owned, directly or indirectly, by
Bull Run (the Host-USA Acquisition as discussed further in Note 3). The
financial results of Host, USA and Capital have therefore been consolidated
with those of Bull Run beginning on December 17, 1999. Effective July 1, 2000,
USA was merged into Host.

In September 2000, the Company sold the computer printer manufacturing business
segment operated by its wholly owned subsidiary, Datasouth Computer Corporation
(Datasouth). Datasouth is reported as a discontinued operation (and
discussed further in Note 4).

The Company also holds significant investments in sports and media companies,
including Gray Television, Inc. (Gray, formerly known as Gray Communications
Systems, Inc.), an owner and operator of 13 television stations, four daily
newspapers and other media and communications businesses; Rawlings Sporting
Goods Company, Inc. (Rawlings), a leading supplier of team sports equipment
in North America; and iHigh, Inc. (iHigh), a company developing a network of
Internet web sites focused on high school sports and activities.

Effective August 31, 2002, the Company will change its fiscal year end from
June 30 to August 31. As a result, the Company will file with the U.S.
Securities and Exchange Commission a Transition Report for the period July 1,
2002 to August 31, 2002 on                      Form 10-Q, and future filings will be
submitted for the quarterly periods ended November 30, February 28 (or 29), May
31 and August 31.

Unless otherwise indicated, amounts provided in these notes to the consolidated
financial statements pertain to continuing operations.

2. 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. Host, USA (prior
to its merger with Host on July 1, 2000) and Capital are included as wholly
owned subsidiaries beginning December 17, 1999.

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.

Revenue Recognition and Rights Fee Expenses Revenue from services are
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

39



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##### 



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 June 30, 2002,
2001 and 2000, net revenues included barter transactions of approximately
$2,700, $2,400 and $1,800, respectively, and operating expenses included barter
transactions of approximately $3,100, $2,500 and $1,100, respectively.

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 In certain situations, the Company may
invoice certain customers up to 90 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.

The Company has 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 dated July 1, 2001 (the Host-CBS Contract) which
granted the Company many of the same or similar rights as previously granted to
the Company by the NCAA. The Host-CBS Contract was restructured in September
2002. Although the restructured agreement continues to provide for licensing
of NCAA trademarks, publishing and other rights, it does not provide for the
sublicensing of NCAA corporate sponsorship rights; therefore, the Company will
no longer derive revenues from the sale of NCAA corporate sponsorship rights
subsequent to June 30, 2002. The restructured agreement also substantially
eliminated the obligation to pay a significant guaranteed rights fee associated
with the procurement of corporate sponsorship rights. The Company expects the
changes in the Host-CBS Contract will result in a significant reduction in
total revenues and direct operating costs of services rendered, and a reduction
in accounts receivable and accrued expenses subsequent to June 30, 2002. For
the fiscal years ended June 30, 2002, 2001 and 2000, approximately 25%, 26% and
36% of the Companys revenues from continuing operations arose from
sublicensing NCAA corporate sponsor rights, respectively. Accounts receivable
included approximately $2,790 and $10,537 as of June 30, 2002 and 2001,
respectively, due from NCAA corporate sponsors.

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 10 years. Leasehold improvements
and equipment held under capital leases are amortized

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over the lesser of the lease term or the estimated useful life of the asset.
Depreciation expense for continuing operations was $1,518, $1,650 and $1,054
for the fiscal years ended June 30, 2002, 2001 and 2000, respectively.
Depreciation expense for discontinued operations was $0, $76 and $426 for the
fiscal years ended June 30, 2002, 2001 and 2000, respectively.

Investment in Affiliated Companies The Company accounts for its investments
in Gray and iHigh by the equity method. Until December 31, 2001, the Company
accounted for its investment in Rawlings by the equity method. Prior to the
Host-USA Acquisition, the Company accounted for its investments in Host and
Capital by the equity method. Until the Company reduced the carrying value of
its investment in Quokka Sports, Inc. (Quokka, which was initially an
investment in Total Sports, Inc., prior to the sale of Total Sports to Quokka
in September 2000) to zero in 2001, the Company accounted for its investment in
Total Sports by the cost method. Prior to selling its investment in Sarkes
Tarzian, Inc. (Tarzian) in December 2001, the Company accounted for its
investment in Tarzian by the cost method. Prior to the Host-USA Acquisition,
the Company accounted for its investment in USA by the cost method.

In December 2001, the two directors of the Company who also served on Rawlings
board of directors resigned from Rawlings board. As a result, the Company
determined it no longer exercised significant influence over Rawlings
policy-making decisions, and began accounting for its investment in Rawlings as
an available-for-sale marketable security. Therefore, beginning December 31,
2001, Investment in affiliated companies on the balance sheet includes the
Companys investment in Rawlings at the current market value as determined by
the closing price of Rawlings common stock as quoted on the Nasdaq Stock
Market. The carrying value of the investment in Rawlings in excess of the
current market value, net of deferred taxes, is reported in the balance sheet
as Other comprehensive accumulated loss. Unrealized market value changes in
Rawlings common stock will be reflected as a change in Investment in
affiliated companies and Other comprehensive accumulated loss, except for
any potential permanent impairment charges, which would be reported as losses
in the Consolidated Statement of Operations.

As a result of adopting Financial Accounting Standards Board Statement No. 142,
Accounting for Goodwill and Other Intangible Assets,(FASB Statement No.
142) effective July 1, 2001, the requirement to amortize the excess of the
Companys investment over the underlying equity of the Companys equity method
investments was eliminated. The unamortized difference, totaling approximately
$8,057 as of June 30, 2002 and $14,100 as of June 30, 2001, was amortized over
10 to 40 years until June 30, 2001, and such amortization (totaling $684 and
$699 in the fiscal years ended June 30, 2001 and 2000, respectively) resulted
in a reduction in the Companys equity in earnings of affiliated companies.

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.

Goodwill and Other Long-Lived Assets Prior to July 1, 2001, goodwill and
certain purchased intangibles (i.e., trademarks) associated with the Host-USA
Acquisition were amortized over 20 years. Effective July 1, 2001, the Company
adopted FASB Statement No. 142, which eliminated the requirement to amortize
goodwill and trademarks. Under the provisions of

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FASB Statement No. 142, the Company is required to periodically assess the
carrying value of goodwill and trademarks associated with each of five distinct
business units that comprise three business segments of the Company to
determine if an impairment in value has occurred. The initial impairment test
was completed as of December 31, 2001, and concluded that the carrying amount
of goodwill and trademarks as of July 1, 2001 for each business unit acquired
in the Host-USA Acquisition did not exceed its net realizable value based on
the Companys estimate of future cash flows to be generated by each of the five
business units. If the Company concludes that the carrying value of such
intangibles for any of the five business units exceeds its respective net
realizable value, the Company would expense such excess and decrease goodwill
and/or trademarks as reported in the balance sheet. Management believes that
the occurrence of negative cash flows in certain of the business units in
certain fiscal periods subsequent to the Host-USA Acquisition was due to
nonrecurring factors, and as a result, management believes that its estimates
of future positive cash flows for these business units is reasonable.

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 a
result of the changes made to the Host-CBS Contract, the Company accelerated
approximately $6,582 of amortization expense at June 30, 2002, pertaining to
the customer base intangible assets, since such modifications significantly
altered the contractual nature of the Companys underlying relationship with
the NCAA. Subsequent to June 30, 2002, the Company estimates annual
amortization expense to be approximately $1,216 until August 31, 2004, then
$680 per year thereafter until fully amortized in December 2015.

Accumulated amortization of acquisition intangibles was $14,691 and $6,867 as
of June 30, 2002 and 2001, respectively, including $4,885 associated with
goodwill as of both dates.

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 optionholders 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. The value of stock
options issued by the Company in connection with the Host-USA Acquisition,
having an exercise price which was less than the fair value of the shares of
Bull Run common stock as of the date of the Host-USA Acquisition, was included
as a component of the Host-USA Acquisition price.

Derivative Instruments and Hedging Activities Effective July 1, 2000, the
Company adopted Financial Accounting Standards Board Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities.As a result,
as of July 1, 2000, the Company recognizes all derivatives, which include the
value of interest rate swap agreements and the value of the Companys warrants
to purchase Gray common stock, on the balance sheet at fair value. The
Companys adoption of this Statement resulted in a decrease in Stockholders
Equity and Total Assets of $1,120 as of July 1, 2000, and resulted in net
appreciation (depreciation) in the value of its derivatives of $(3,345) and
$2,988 for the fiscal years ended June 30, 2002 and 2001, respectively.

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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.

3. HOST-USA ACQUISITION

Aggregate consideration paid in connection with the Host-USA Acquisition (net
of cash acquired) was approximately $116,900, which included common stock
(totaling 11,687 shares) and stock options (for 2,819 shares of common stock)
valued at approximately $52,300, 8% subordinated notes having a face value of
approximately $18,600, cash (net of approximately $9,700 in cash acquired) of
$44,800 and transaction expenses of approximately $1,200.

The Host-USA Acquisition has been accounted for under the purchase method of
accounting, whereby the assets and liabilities of the acquired businesses have
been included as of December 17, 1999 based on an allocation of the purchase
price.

The estimated fair values of assets and liabilities acquired are summarized as
follows:

|                                                                               |  |   |         |  
|------------------------------------------------------------------------------ |  | - | ------- | -
|Receivables                                                                    |  | $ | 42,218  |  
|Inventories                                                                    |  |   | 918     |  
|Prepaid costs and expenses                                                     |  |   | 6,740   |  
|Income taxes receivable                                                        |  |   | 3,689   |  
|Property and equipment                                                         |  |   | 7,112   |  
|Investment in affiliated companies                                             |  |   | 11,320  |  
|Goodwill                                                                       |  |   | 62,747  |  
|Customer base and trademarks                                                   |  |   | 24,500  |  
|Deferred income taxes                                                          |  |   | 2,738   |  
|Other assets                                                                   |  |   | 1,075   |  
|Current liabilities assumed                                                    |  |   | (42,862 | )
|Other liabilities assumed                                                      |  |   | (330    | )
|                                                                               |  |   |         |  
|                                                                               |  |   | 119,865 |  
|Less: Investment in Host, Capital and USA
immediately prior to the acquisition |  |   | (14,339 | )
|                                                                               |  |   |         |  
|                                                                               |  |   | 105,526 |  
|Purchase price in excess of fair value of
assets and liabilities acquired      |  |   | 11,330  |  
|                                                                               |  |   |         |  
|                                                                               |  | $ | 116,856 |  
|                                                                               |  |   |         |  

Subsequent to the Host-USA Acquisition, the Company discovered errors in the
financial statements of USA at the acquisition date. These errors involved an
overstatement of net current assets as of the acquisition date of $11,330. The
errors were a result of incorrect computations of prepaid costs and expenses,
sponsor contract receivables and deferred revenues associated with the
Companys (and prior to the Host-USA Acquisition, USAs) Affinity Events
business. As a result, the Company recorded an expense of $11,330 in December
1999, reflecting the extent to which USAs net current assets as of the date of
the Host-USA Acquisition were overstated.

As a result of the anticipated reorganization immediately following the
Host-USA Acquisition, the Company accrued approximately $195 for costs to close
certain duplicative office facilities and accrued approximately $1,500 in
severance costs for approximately 50 terminated employees of the acquired
companies, primarily in the Collegiate Marketing and Production

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Services and
the Affinity Events business segments. These costs were accrued as part of the
preliminary allocation of the purchase price, and through June 30, 2002, the
Company has expended substantially all of the amounts originally reserved for
its intended purposes.

Had the Host-USA Acquisition been consummated as of July 1, 1999, for the
fiscal year ended June 30, 2000, the Companys pro forma (unaudited) total
revenues would have been $129,711, the operating loss would have been $(3,317),
the loss from continuing operations would have been $(14,952), the net loss
would have been $(21,791) and the basic and diluted loss per share would have
been $(.63). The pro forma operating loss for the fiscal year ended June 30,
2000 includes amortization of acquisition intangibles of $4,545, and does not
include the $11,330 expense related to the overstatement of net current assets
acquired from USA. These pro forma results are not necessarily indicative of
actual results that might have occurred had the operations and management of
the Company and the acquired companies been combined in prior years.

4. DISCONTINUED OPERATION

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.

The loss on the sale of Datasouth of $6,522, including a $350 pretax provision
for operating losses during the disposal period, were combined with Datasouths
operating results and presented as discontinued operations in the financial
statements for the year ended June 30, 2000. Certain of the proceeds to be
realized on the sale of Datasouths assets are deferred under a note agreement
with the purchaser that was amended in July 2002 to provide for variable
quarterly payments by the purchaser to the Company based on a calculation based
on the purchasers operating profits. To the extent actual proceeds on the
sale of Datasouths assets differ from managements estimate of such proceeds
as of June 30, 2002, such differences will be reported as discontinued
operations in future periods.

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 assets are presented net of
current liabilities and noncurrent assets are presented net of noncurrent
liabilities.

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The following is a summary of assets and liabilities of these discontinued
operations:

|                     |                                       |   |          |    |   |  |  |  |      |   |       |       |  
|-------------------- | ------------------------------------- | - | -------- | -- | - |  |  |  | ---- | - | ----- | ----- | -
|                     |                                       |   | June 30,
|                     |                                       |   |         
|                     |                                       |   | 2002     |    |   |  |  |  | 2001
|                     |                                       |   |          |    |   |  |  |  |     
|Current assets:      |                                       |   |          |    |   |  |  |  |      |   |       |      
|                     | Accounts receivable, net              |   | $        | 25 |   |  |  |  |      |   | $     | 168   |  
|                     | Other current assets                  |   |          | 87 |   |  |  |  |      |   |       |       |  
|Current liabilities: |                                       |   |          |    |   |  |  |  |      |   |       |      
|                     | Accounts payable and accrued expenses |   |          | (8 | ) |  |  |  |      |   |       | (179  | )
|                     |                                       |   |          |    |   |  |  |  |      |   |       |      
|                     |                                       | $ | 104      |    |   |  |  |  |      | $ | (11   | )    
|                     |                                       |   |          |    |   |  |  |  |      |   |       |      
|Noncurrent assets:   |                                       |   |          |    |   |  |  |  |      |   |       |      
|                     | Undeveloped land                      |   |          |    |   |  |  |  |      |   | $     | 700   |  
|                     | Other assets                          |   |          |    |   |  |  |  |      |   |       | 4     |  
|                     | Deferred income taxes                 |   |          |    |   |  |  |  |      |   |       | 1,878 |  
|                     |                                       |   |          |    |   |  |  |  |      |   |       |      
|                     |                                       |   |          |    |   |  |  |  |      | $ | 2,582 |      
|                     |                                       |   |          |    |   |  |  |  |      |   |       |      

The following summarizes revenues and operating results from these discontinued
operations:

|                                |  |                     |       |      |  |   |        |  
|------------------------------- |  | ------------------- | ----- | ---- |  | - | ------ | -
|                                |  | Year Ended June 30,
|                                |  |                    
|                                |  | 2001                |       | 2000
|                                |  |                     |       |     
|Revenue from printer operations |  | $                   | 4,406 |      |  | $ | 24,959 |  
|Income (loss) from operations   |  |                     | 0     |      |  |   | (326   | )

Revenue from printer operations for the year ended June 30, 2001 represented
revenue generated from July 1, 2000 to September 29, 2000, the date Datasouth
was sold. No interest expense has been allocated to discontinued operations.
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 disposal of Datasouth.

5. SUPPLEMENTAL CASH FLOW DISCLOSURES

|                                            |                                                                 |   |                     |     |      |   |        |       |  |   |       |        | 
|------------------------------------------- | --------------------------------------------------------------- | - | ------------------- | --- | ---- | - | ------ | ----- |  | - | ----- | ------ | 
|                                            |                                                                 |   | Year Ended June 30,
|                                            |                                                                 |   |                    
|                                            |                                                                 |   | 2002                |     | 2001 |   | 2000  
|                                            |                                                                 |   |                     |     |      |   |       
|Interest paid                               |                                                                 | $ | 10,143              |     |      | $ | 11,907 |       |  | $ | 8,323 |       
|Income taxes paid (recovered), net          |                                                                 |   | (472                | )   |      |   | (2,015 | )     |  |   | 397   |       
|Noncash investing and financing activities: |                                                                 |   |                     |     |      |   |        |       |  |   |       |       
|                                            | Common stock and stock options issued in
Host-USA Acquisition   |   |                     |     |      |   |        |       |  |   |       | 52,258 | 
|                                            | Issuance of subordinated notes in Host-USA
Acquisition          |   |                     |     |      |   |        |       |  |   |       | 18,594 | 
|                                            | Issuance of common stock in connection with
debt issuance costs |   |                     | 753 |      |   |        | 1,449 |  |   |       | 1,219  | 

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6. INVESTMENT IN AFFILIATED COMPANIES

The Companys investment in affiliated companies consists of the following:

|               |       |        |               |          |               |        |      |          |  |   |        |        |  |  |      |   | 
|-------------- | ----- | ------ | ------------- | -------- | ------------- | ------ | ---- | -------- |  | - | ------ | ------ |  |  | ---- | - | 
|               |       |        | June 30, 2002 |          | June 30, 2001
|               |       |        |               |          |              
|Affiliate      |       | Amount |               | Voting % |               | Amount |      | Voting %
|               |       |        |               |          |               |        |      |         
|Gray common    |       | $      | 19,060        |          |               |        | 26.1 | %        |  | $ | 24,515 |        |  |  | 26.1 | %
|Gray preferred |       |        |               |          |               |        |      |          |  |   | 3,738  |        |  |  |      |  
|Tarzian        |       |        |               |          |               |        |      |          |  |   | 10,000 |        |  |  | 33.5 | %
|Rawlings       |       |        | 4,328         |          |               |        | 10.1 | %        |  |   | 8,184  |        |  |  | 10.1 | %
|iHigh          |       |        | 1,727         |          |               |        | 35.1 | %        |  |   | 2,802  |        |  |  | 35.1 | %
|Other          |       |        |               |          |               |        |      |          |  |   | 1,160  |        |  |  |      |  
|               |       |        |               |          |               |        |      |          |  |   |        |        |  |  |      |  
|               | Total |        | $             | 25,115   |               |        |      |          |  |   | $      | 50,399 |  |  |      |   | 
|               |       |        |               |          |               |        |      |          |  |   |        |        |  |  |      |  

Equity in earnings (losses) of affiliated companies consists of the following:

|          |       |      |                     |        |   |      |        |        |   |   |        |        |  
|--------- | ----- | ---- | ------------------- | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|          |       |      | Year Ended June 30,
|          |       |      |                    
|Affiliate |       | 2002 |                     | 2001   |   | 2000
|          |       |      |                     |        |   |     
|Gray      |       | $    | (414                | )      |   | $    | (1,661 | )      |   | $ | (1,661 | )     
|Rawlings  |       |      | (474                | )      |   |      | 113    |        |   |   | (1,770 | )     
|iHigh     |       |      | (1,074              | )      |   |      | (2,614 | )      |   |   | (706   | )     
|Host      |       |      |                     |        |   |      |        |        |   |   | 492    |       
|Capital   |       |      |                     |        |   |      |        |        |   |   | 1,091  |       
|Other     |       |      |                     |        |   |      | (73    | )      |   |   | 21     |       
|          |       |      |                     |        |   |      |        |        |   |   |        |       
|          | Total |      | $                   | (1,962 | ) |      | $      | (4,235 | ) |   | $      | (2,533 | )
|          |       |      |                     |        |   |      |        |        |   |   |        |       

Investment in Gray and Gain on Issuance of Common Shares As of June 30, 2002,
the Company owned approximately 12.9% of Grays outstanding common stock and
warrants to purchase additional shares of Grays common stocks. Certain
executive officers of the Company are also executive officers of Gray.

In the fiscal year ended June 30, 2002, the Company recognized an extraordinary
loss of $627, net of tax, as its proportionate share of an extraordinary loss
recognized by Gray in January 2002 related to a charge resulting from Grays
early extinguishment of debt.

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 FASB Statement No. 142, and Grays associated
reduction in previously unamortized goodwill and purchased intangibles.

The Company provides consulting services to Gray from time to time in
connection with Grays acquisitions (including acquisition financing) and
dispositions. As a result of the Companys 12.9% equity investment in Gray,
approximately 12.9% of the consulting fees charged to Gray is deferred and
recognized as consulting fee income as Gray amortizes its goodwill or as the
Companys proportionate equity investment in Gray declines. The Company
recognized consulting fee income from Gray of $11, $24 and $1,311 for the
fiscal years ended June 30, 2002, 2001 and 2000, respectively, for services
rendered in connection with certain of Grays acquisitions and dispositions.
Deferred income related to

46



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consulting fees charged to Gray was $663 and $674 as
of June 30, 2002 and 2001, respectively.

Until all remaining shares were sold in September 2001, the Company owned
shares of Grays series A preferred stock entitling the holder thereof to
annual cumulative cash dividends of $800 per share, payable quarterly, and
shares of Grays series B preferred stock entitling the holder thereof to
annual cumulative dividends of $600 per share, payable quarterly. Dividends on
the series B preferred stock were payable in cash or in additional shares of
series B preferred stock, at Grays option. Total dividend income on Gray
series A and B preferred stock recognized by the Company was $127, $695 and
$905 for the fiscal years ended June 30, 2002, 2001 and 2000, respectively. 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. In
the fiscal year ended June 30, 2001, Gray redeemed series A preferred stock
held by the Company at its redemption value of $5,000, resulting in a gain to
the Company of $2,160. Proceeds on the sale and redemption of Gray preferred
stocks were used to reduce the Companys long-term debt.

In connection with the Companys purchases of Grays series A and series B
preferred stock in 1996, the Company acquired warrants to purchase up to 731
shares of Grays class A common stock at $11.92 per share and warrants to
purchase up to 375 shares of Grays class A common stock at $16.00 per share.
All of the warrants owned by the Company to purchase 1,106 shares of Grays
class A common stock are fully vested and exercisable, and all such warrants
expire in 2006. The Companys warrants for 100 shares of Grays common stock
(formerly called class B common stock) are described under Investment in
Tarzian below. The aggregate carrying value of the warrants, amounting to
$7,409 and $10,116 as of June 30, 2002 and 2001, respectively, is included on
the balance sheet as a component of other assets (refer also to the
discussion of FASB Statement No. 133 in Note 2 under the caption Derivative
Instruments and Hedging Activities).

In October 1999, Gray acquired three television stations for consideration that
included shares of Grays common stock valued at approximately $49,500, or
$14.41 per share. As a result of such issuance, the Companys common equity
ownership of Gray was reduced from 16.9% to 13.1% (resulting in a reduction in
the Companys voting interest in Gray from 27.5% to 26.2%). As a result of
this dilution, and since the newly issued shares were issued at a price which
exceeded the Companys investment carrying value per share, the Company
recognized a $490 pretax gain on Grays issuance of shares in the year ended
June 30, 2000.

Grays common stocks are publicly traded on The New York Stock Exchange
(symbols: GTN and GTN.A). The aggregate market value of Gray common stock
owned by the Company was $36,676 on June 30, 2002 and $38,593 on June 30, 2001,
based on the closing price per share as quoted on The New York Stock Exchange
as of those dates.

Investment in Tarzian In January 1999, the Company acquired shares of the
outstanding common stock of Tarzian for $10,000. The acquired 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 a
complaint with the United States District Court for the Southern District of
Indiana, claiming that it had a binding contract with the seller to purchase
the shares from the seller prior to the Companys purchase of the shares, and
requests judgment providing that the seller be required to sell the shares to
Tarzian. The Company believes that a binding contract between Tarzian and the

47



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seller did not exist prior to the Companys purchase of the shares, and in any
case, the Companys purchase agreement with the seller provides that in the
event that a court of competent jurisdiction awards title to a person or entity
other than the Company, the purchase agreement is rescinded, and the seller is
required to pay the Company the full $10,000 purchase price, plus interest.
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 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. 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. The Company used the proceeds on the sale to reduce
its outstanding long-term debt.

The Company recognized option and finders fee income from Gray of $349, $1,289
and $810 for the fiscal years ended June 30, 2002, 2001 and 2000, respectively.
As of June 30, 2002 and 2001, option and finder fee income of $398 and $747,
respectively, was deferred as a result of the Companys 12.9% equity investment
position in Gray, and will be recognized if and when Gray records expense
associated with these fees or as the Companys proportionate equity investment
in Gray declines.

The Company received from Gray warrants to acquire 100 shares of Grays common
stock (formerly called class B common stock) at $13.625 per share, in
connection with the option agreement. The warrants vested in December 2001
upon Grays exercise of the option and will expire in 2011. The value of these
warrants are included in the balance sheet as a component of other assets
(see discussion in Investment in Gray and Gain on Issuance of Common Shares
above).

Investment in Rawlings In November 1997, the Company entered into a series of
agreements with Rawlings, including an Investment Purchase Agreement (the
Purchase Agreement), and a Standstill Agreement. Pursuant to the Purchase
Agreement, the Company acquired warrants to purchase approximately 10% of
Rawlings common stock. The warrant expired unexercised in November 2001. The
Standstill Agreement provides that, until July 2003, the Company is restricted
in acquiring additional shares of Rawlings common stock or participating in
certain types of corporate events relating to Rawlings, including proxy
contests and tender offers, subject to certain exceptions. In accordance with
the terms of the Standstill Agreement, the two directors of the Company who
also served on Rawlings board of directors were required to resign from the
Rawlings board in November 2001 upon the expiration of the Rawlings warrants.
As a result of the loss of seats on Rawlings board of directors, the Company
no longer exercises significant influence over Rawlings policy-making
decisions, and therefore effective December 31, 2001, the Company began
accounting for its
investment in Rawlings as an available-for sale security (as described in
Note 2 under the caption Investment in Affiliated Companies).

Under the terms of the Purchase Agreement, the Company also acquired
approximately 10.3% (representing 10.1% as of June 30, 2002) of Rawlings
outstanding common stock in the open market from November 1997 through January
1998. The Companys total cost to purchase the warrants pursuant to the
Purchase Agreement was approximately $2,850. During the year ended June 30,
2000, the Company reduced the book value of its investment in the Rawlings
warrants to zero, recognizing a $2,850 expense.

48



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In its fiscal quarter ended May 31, 2000, Rawlings recognized an after tax
charge of $12,800 associated with its decision to sell its Vic hockey business.
As a result, the Companys pretax equity in losses of Rawlings was negatively
impacted in the fiscal year ended June 30, 2000 by approximately $1,300.

Rawlings common stock is publicly traded on the Nasdaq Stock Market. The
aggregate market value of Rawlings common stock owned by the Company was $4,328
and $3,726 on June 30, 2002 and 2001, respectively, based on the closing price
per share as quoted on the Nasdaq Stock Market as of those dates.

Investment in Quokka / Total Sports In 1998 and 1999, the Company acquired
shares of Total Sports, Inc. convertible preferred stocks for an aggregate cost
of $3,500. In connection with the Host-USA Acquisition, the Company acquired
Total Sports common stock owned by Host valued at $3,651.

In November 2000, Total Sports was sold to Quokka Sports, Inc. (Quokka). In
exchange for its investment in preferred and common stock of Total Sports, the
Company received Quokka common stock and warrants to purchase Quokka common
stock. Quokkas common stock was publicly traded on the Nasdaq Stock Market
until April 2001, when Quokka announced its intention to seek protection under
the Federal Bankruptcy Code and soon thereafter, ceased all operations. On the
effective date of the exchange, the Company reduced the book value of its
investment in Total Sports to the fair market value of the Quokka common stock
received in the exchange, recognizing a pretax loss of approximately $6,200 as
of the effective date of the exchange. In March 2001, the Company further
reduced the book value of its investment in Quokka to zero, recording an
additional non-cash charge of approximately $1,800. Quokka operated a
sports-oriented web site and provided web site services for amateur and
professional sports organizations and conferences, college athletic
departments, and selected corporations.

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 valued at $6,122 as of the acquisition date.

Investments in Host, USA and Capital Prior to the Host-USA Acquisition, the
Company was effectively Hosts largest stockholder, owning directly or
indirectly approximately 32.5% of Host common stock and 51.5% of Host preferred
stock. The Companys indirect ownership of Hosts common stock and Hosts
preferred stock was owned by Capital, in which the Company owned 51.5% of the
common stock. The Company and Host together were the largest stockholders of
USA, with the Company owning approximately 3% of USA capital stock and Host
owning approximately 33.8% of USA capital stock. Capitals assets consisted
solely of investments in Host common stock and all of Host 8% series B
preferred stock.

The Company recognized its equity in earnings of Host on a six-month lag basis.
In January 1999, USA sold its investment in broadcast.com, inc., a marketable
security, recognizing an after-tax gain of approximately $40,000. As a result
of Hosts equity investment in USA and the Companys equity investment in Host
reported on a six-month lag basis, the Company recognized approximately $1,900
as equity in earnings of affiliates in the fiscal year ended June 30, 2000 due
to USAs gain on the disposal of broadcast.com, inc.

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Summarized Aggregate Financial Information(unaudited)

The aggregate financial position of Gray and iHigh is as follows:

|                           |  |          |         |      |  |   |         | 
|-------------------------- |  | -------- | ------- | ---- |  | - | ------- | 
|                           |  | June 30,
|                           |  |         
|                           |  | 2002     |         | 2001
|                           |  |          |         |     
|Current assets             |  | $        | 47,168  |      |  | $ | 33,667  | 
|Property and equipment     |  |          | 61,687  |      |  |   | 68,425  | 
|Total assets               |  |          | 597,632 |      |  |   | 619,139 | 
|Current liabilities        |  |          | 25,078  |      |  |   | 29,124  | 
|Long-term debt             |  |          | 378,676 |      |  |   | 368,167 | 
|Total liabilities          |  |          | 461,911 |      |  |   | 469,741 | 
|Redeemable preferred stock |  |          | 39,233  |      |  |   |         | 
|Stockholders equity       |  |          | 96,488  |      |  |   | 149,398 | 

The aggregate operating results of Gray and iHigh are as follows:

|                       |  |                     |         |      |  |      |         |   |  |   |         |  
|---------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                       |  | Year Ended June 30,
|                       |  |                    
|                       |  | 2002                |         | 2001 |  | 2000
|                       |  |                     |         |      |  |     
|Operating revenue      |  | $                   | 161,819 |      |  | $    | 168,518 |   |  | $ | 159,834 |  
|Income from operations |  |                     | 27,147  |      |  |      | 20,936  |   |  |   | 20,412  |  
|Net loss               |  |                     | (5,597  | )    |  |      | (14,305 | ) |  |   | (11,639 | )

Due to aggregate cumulative net losses reported by affiliated companies during
the period in which the Company has had its investment in each affiliate, there
are no aggregate undistributed earnings of investments accounted for by the
equity method as of June 30, 2002.

7. PROPERTY AND EQUIPMENT

The Companys property and equipment consist of the following:

|                                          |  |          |       |  |  |  |  |      |  |   |       | 
|----------------------------------------- |  | -------- | ----- |  |  |  |  | ---- |  | - | ----- | 
|                                          |  | June 30,
|                                          |  |         
|                                          |  | 2002     |       |  |  |  |  | 2001
|                                          |  |          |       |  |  |  |  |     
|Land                                      |  | $        | 448   |  |  |  |  |      |  | $ | 448   | 
|Building                                  |  |          | 962   |  |  |  |  |      |  |   | 962   | 
|Leasehold and building improvements       |  |          | 622   |  |  |  |  |      |  |   | 851   | 
|Machinery & equipment                     |  |          | 2,854 |  |  |  |  |      |  |   | 2,598 | 
|Office furniture and equipment            |  |          | 3,628 |  |  |  |  |      |  |   | 4,166 | 
|                                          |  |          |       |  |  |  |  |      |  |   |       | 
|                                          |  |          | 8,514 |  |  |  |  |      |  |   | 9,025 | 
|Accumulated depreciation and amortization |  |          | 3,116 |  |  |  |  |      |  |   | 2,402 | 
|                                          |  |          |       |  |  |  |  |      |  |   |       | 
|                                          |  | $        | 5,398 |  |  |  |  |      |  | $ | 6,623 | 
|                                          |  |          |       |  |  |  |  |      |  |   |       | 

50



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8. ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consist of the following:

|                                         |  |          |        |  |  |  |  |      |  |   |        | 
|---------------------------------------- |  | -------- | ------ |  |  |  |  | ---- |  | - | ------ | 
|                                         |  | June 30,
|                                         |  |         
|                                         |  | 2002     |        |  |  |  |  | 2001
|                                         |  |          |        |  |  |  |  |     
|Incurred unbilled costs                  |  | $        | 6,966  |  |  |  |  |      |  | $ | 3,156  | 
|Guaranteed rights fees and profit splits |  |          | 9,305  |  |  |  |  |      |  |   | 7,583  | 
|Interest                                 |  |          | 952    |  |  |  |  |      |  |   | 1,040  | 
|Other                                    |  |          | 2,326  |  |  |  |  |      |  |   | 2,163  | 
|                                         |  |          |        |  |  |  |  |      |  |   |        | 
|                                         |  | $        | 19,549 |  |  |  |  |      |  | $ | 13,942 | 
|                                         |  |          |        |  |  |  |  |      |  |   |        | 

9. LONG-TERM DEBT AND NOTES PAYABLE

As amended in October 2002, the Companys bank credit agreement provides for
(a) two term loans (the Term Loans) for borrowings totaling $73,932, bearing
interest at either the banks prime rate plus .75% or the London Interbank
Offered Rate (LIBOR) plus 3.75%, requiring minimum aggregate principal
payments of $5,000 by each of January 15, 2003, April 15, 2003 and July 15,
2003, with all amounts outstanding under the Term Loans due on September 30,
2003; and (b) a revolving loan commitment (the Revolver) for maximum
borrowings of $20,000 until maturity on September 30, 2003, bearing interest at
either the banks prime rate plus .75% or LIBOR plus 3.75%. Interest is
payable monthly. Borrowings under the Revolver are allowed to exceed 100% of
eligible accounts receivable, however amounts borrowed exceeding such threshold
will bear an additional amount of interest at a rate of 2% per annum. As of
June 30, 2002, borrowings of $73,932 were outstanding under the Term Loans,
borrowings of $19,975 were outstanding under the Revolver, and additional
available borrowing capacity under the Revolver was $25 at that date, of which,
the Company anticipates repayment of up to $15,000 in the year ending June 30,
2003. As a result of the amendment in October 2002 and the Companys plans for
principal repayment by June 30, 2003, $15,000 has been presented in the balance
sheet as the current portion of long-term debt, and the remainder is classified
as a long-term liability. As of June 30, 2002, all borrowings under the Term
Loans were subject to the banks prime rate-based rate of 6.25% and all
borrowings under the Revolver were subject to the banks prime rate-based rate
of 5.75%.

As of June 30, 2001, the Company had borrowings totaling $84,134 outstanding
under the Term Loans and borrowings of $24,375 outstanding on the Revolver. As
of June 30, 2001, all borrowings under the Term Loans were subject to the
banks prime rate-based rate of 7.75% and all borrowings under the Revolver
were subject to the banks prime rate-based rate of 7.25%.

The bank credit agreement, as amended, contains certain financial covenants,
including the maintenance of a minimum amount of net worth and maintenance of
minimum profitability thresholds determined quarterly. Long-term debt is
collateralized by all of the Companys assets, including all of its investments
in affiliated companies. During the fiscal years ended June 30, 2002 and 2001,
the Company was periodically out of compliance with certain financial
covenants, some of which having since been eliminated under the amended credit
agreement, and other provisions considered to be events of default under the
terms of the credit agreement; however, the Company obtained waivers of each of
these events of default, and is presently in compliance with all provisions of
the credit agreement as last amended on October 11, 2002.

51



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In connection with the Companys bank credit facilities, the Companys Chairman
of the board entered into a guarantee agreement in favor of the banks, for
which he received compensation from the Company during the fiscal years ended
June 30, 2002, 2001 and 2000 in the form of 1,055,000, 874,000 and 305,000
restricted shares of the Companys common stock then valued at $753, $1,449 and
$1,219, respectively. As amended, the agreement provides for the Chairmans
personal guarantee of up to $91,000 of the Companys outstanding bank debt.
The guaranteed amount reduces dollar for dollar, subject to certain
limitations, as the aggregate outstanding amount under the Term Loans is
reduced. The guarantee agreement provides that if the Company defaults on its
bank loan, the banks have the right to require the Chairman to repay the amount
of such loan to the banks up to the maximum amount of his personal guarantee.
Under the terms of his guarantee, if the banks exercise their rights to demand
repayment from the guarantor, the Chairman has the option to purchase the
entire loan from the banks, and thereby becoming the holder of the Companys
debt currently payable to the banks as a secured creditor.

In connection with the Host-USA Acquisition, the Company issued 8% subordinated
notes having an aggregate face value of $18,594. Interest is payable quarterly
and the notes had an original maturity date of January 17, 2003. Through
October 11, 2002, holders representing an aggregate amount of approximately
$18,200 of these subordinated notes agreed to amend the maturity date of their
note, in substantially all cases, to January 17, 2006. It is anticipated that
by no later than December 31, 2002, the remaining note holders will agree to
the same or similar terms. Payment of interest and principal on all
subordinated notes is subordinate to the Companys bank credit agreement. In
connection with the acquisition of certain business operations, the Company
also issued 9% subordinated notes in September 2000 having an aggregate face
value of $1,180, due in annual installments of $590 with interest. Payment of
interest and principal on all of the subordinated notes is subordinate to the
Companys bank credit agreement. In October 2002 the holders of these
subordinated notes representing an aggregate outstanding amount of $590 agreed
to amend the maturity date of their notes to March 31, 2004. The total amount
of subordinated notes payable as of June 30, 2002 and 2001 was $19,184 and
$19,774, respectively.

The Company is a party to two interest rate swap agreements. The first
agreement, terminating on December 31, 2002, involves 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 second agreement, terminating on
December 31, 2002 (or December 31, 2004, at the banks option), 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
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.

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10. INCOME TAXES

The Companys income tax benefit attributable to continuing operations consists
of the following:

|         |         |   |                     |  |      |   |       |  |  |   |       |      |  
|-------- | ------- | - | ------------------- |  | ---- | - | ----- |  |  | - | ----- | ---- | -
|         |         |   | Year Ended June 30,
|         |         |   |                    
|         |         |   | 2002                |  | 2001 |   | 2000 
|         |         |   |                     |  |      |   |      
|Current: |         |   |                     |  |      |   |       |  |  |   |       |     
|         | Federal |   | $                   |  |      |   | $     |  |  |   | $     |      |  
|         | State   |   |                     |  |      |   |       |  |  |   |       | (271 | )
|         |         |   |                     |  |      |   |       |  |  |   |       |     
|         |         |   |                     |  |      |   |       |  |  |   | (271  | )   
|Deferred |         |   | 7,257               |  |      |   | 6,228 |  |  |   | 5,348 |     
|         |         |   |                     |  |      |   |       |  |  |   |       |     
|         |         | $ | 7,257               |  |      | $ | 6,228 |  |  | $ | 5,077 |     
|         |         |   |                     |  |      |   |       |  |  |   |       |     

The principal differences between the federal statutory tax rate and the
effective tax rate applicable to continuing operations are as follows:

|                                           |  |                     |      |      |  |      |      |   |  |  |       |  
|------------------------------------------ |  | ------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ----- | -
|                                           |  | Year Ended June 30,
|                                           |  |                    
|                                           |  | 2002                |      | 2001 |  | 2000
|                                           |  |                     |      |      |  |     
|Federal statutory tax rate                 |  |                     | 34.0 | %    |  |      | 34.0 | % |  |  | 34.0  | %
|Non-deductible intangibles amortization    |  |                     | (8.0 | )    |  |      | (6.0 | ) |  |  | (3.3  | )
|Correction of purchase price allocation    |  |                     |      |      |  |      |      |   |  |  | (14.8 | )
|State income taxes, net of federal benefit |  |                     | 2.1  |      |  |      | 2.0  |   |  |  | 1.4   |  
|Change in valuation allowance              |  |                     | (3.8 | )    |  |      |      |   |  |  |       |  
|Other, net                                 |  |                     | (2.4 | )    |  |      | (3.8 | ) |  |  | 2.1   |  
|                                           |  |                     |      |      |  |      |      |   |  |  |       |  
|Effective tax rate                         |  |                     | 21.9 | %    |  |      | 26.2 | % |  |  | 19.4  | %
|                                           |  |                     |      |      |  |      |      |   |  |  |       |  

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Deferred tax liabilities (assets) associated with continuing operations are
comprised of the following:

|                                              |                                                |   |          |         |   |  |  |  |      |   |        |         |  
|--------------------------------------------- | ---------------------------------------------- | - | -------- | ------- | - |  |  |  | ---- | - | ------ | ------- | -
|                                              |                                                |   | June 30,
|                                              |                                                |   |         
|                                              |                                                |   | 2002     |         |   |  |  |  | 2001
|                                              |                                                |   |          |         |   |  |  |  |     
|Property and equipment                        |                                                | $ | 1,786    |         |   |  |  |  |      | $ | 608    |        
|Prepaid costs and expenses                    |                                                |   |          |         |   |  |  |  |      |   | 397    |        
|Valuation of derivative financial instruments |                                                |   | 1,100    |         |   |  |  |  |      |   | 1,933  |        
|Other, net                                    |                                                |   | 42       |         |   |  |  |  |      |   |        |        
|                                              |                                                |   |          |         |   |  |  |  |      |   |        |        
|                                              | Gross deferred tax liabilities                 |   |          | 2,928   |   |  |  |  |      |   |        | 2,938   |  
|                                              |                                                |   |          |         |   |  |  |  |      |   |        |        
|Allowance for doubtful accounts               |                                                |   | (167     | )       |   |  |  |  |      |   | (204   | )      
|Investment in affiliated companies            |                                                |   | (4,010   | )       |   |  |  |  |      |   | (194   | )      
|Accrued expenses                              |                                                |   | (1,338   | )       |   |  |  |  |      |   | (338   | )      
|Deferred income                               |                                                |   | (452     | )       |   |  |  |  |      |   | (714   | )      
|Nonqualified stock options outstanding        |                                                |   | (1,395   | )       |   |  |  |  |      |   | (1,395 | )      
|Net operating loss carryforward               |                                                |   | (17,635  | )       |   |  |  |  |      |   | (8,913 | )      
|Alternative Minimum Tax credit carryforward   |                                                |   | (490     | )       |   |  |  |  |      |   | (357   | )      
|Business credit carryforward                  |                                                |   | (116     | )       |   |  |  |  |      |   | (116   | )      
|Other, net                                    |                                                |   |          |         |   |  |  |  |      |   | (19    | )      
|                                              |                                                |   |          |         |   |  |  |  |      |   |        |        
|                                              | Gross deferred tax assets                      |   |          | (25,603 | ) |  |  |  |      |   |        | (12,250 | )
|                                              | Less: valuation allowance                      |   |          | 1,275   |   |  |  |  |      |   |        |         |  
|                                              |                                                |   |          |         |   |  |  |  |      |   |        |        
|                                              | Deferred tax assets net of valuation allowance |   |          | (24,328 | ) |  |  |  |      |   |        | (12,250 | )
|                                              |                                                |   |          |         |   |  |  |  |      |   |        |        
|                                              | Total deferred tax liability (asset), net      |   | $        | (21,400 | ) |  |  |  |      |   | $      | (9,312  | )
|                                              |                                                |   |          |         |   |  |  |  |      |   |        |        

The loss on operations of the discontinued segment for the year ended June 30,
2000 is presented net of a tax benefit of $10. The loss on disposal of the
discontinued segment for the fiscal year ended June 30, 2000 is presented net
of an income tax benefit of $1,247.

As of June 30, 2002, the Company has a net operating loss carryforward for tax
purposes of approximately $48,500 expiring beginning in 2018 to reduce Federal
taxable income in the future. The Company also has as of June 30, 2002 an
Alternative Minimum Tax credit carryforward of $490, and a business credit
carryforward of $116, to reduce regular Federal tax liabilities in the future.
In the fiscal year ended June 30, 2002, the Company established a valuation
allowance of $1,275 because it was estimated that the Company may not
ultimately realize all of the tax benefits from the operating loss carryforward
prior to its expiration.

11. PREFERRED STOCK ISSUANCE AND EXCHANGE

In June 2001, the Company issued 3,000 shares of its series A preferred stock
(the Series A Preferred Stock) with detachable warrants, for cash of $3,000,
to companies of which the Companys Chairman is an executive officer and/or
principal stockholder. In November 2001,
the Company issued 2,400 shares of its redeemable series B convertible
preferred stock (the Series B Preferred Stock) for cash of $2,400 to a
company of which the Companys Chairman is an executive officer and principal
stockholder. In addition, all holders of the Series A Preferred Stock elected
to exchange their aggregate total of 3,000 shares of Series A Preferred Stock
and the detachable warrants for the same number of shares of Series B Preferred
Stock. Each share of the Series B Preferred Stock is convertible at the
holders option into 1,000 shares of the Companys common stock beginning in
November 2003. The holder of the Series B 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

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to pay such dividends in cash or in shares of the Companys common stock. The
liquidation and redemption price of the Series B Preferred Stock is $1,000 per
share. The Company has the option to redeem the Series B Preferred Stock at
any time; however, the Series B Preferred Stock must be redeemed by the tenth
anniversary of the date of issuance.

12. STOCK OPTIONS

The Companys 1994 Long Term Incentive Plan (the 1994 Plan) reserves 7,200
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 2,819 exercisable shares were granted to former holders of options
for Host and USA shares, at exercise prices ranging from $.34 to $4.06 per
share. As of June 30, 2002 and 2001, there were 545 and 1,221 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 350 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 135 as of June 30, 2002 and 150 as of June 30, 2001.

Information with respect to the Companys stock option plans follows:

|                                |           |                    |               |       |        |       |              |              |   |              | 
|------------------------------- | --------- | ------------------ | ------------- | ----- | ------ | ----- | ------------ | ------------ | - | ------------ | 
|                                |           |                    |               |       | Option |       | Option      
|                                |           |                    |               |       | Shares |       | Price Range 
|                                |           |                    |               |       |        |       |             
|Outstanding as of July 1, 1999  |           |                    | 1,530         |       |        | $     | 0.75 - $4.38 |             
|                                | Grants    |                    |               | 3,004 |        |       | $            | 0.34 - $4.25 |  
|                                | Exercised |                    |               | (652  | )      |       | $            | 0.34 - $4.06 |  
|                                | Forfeited |                    |               | (24   | )      |       | $            | 2.31 - $2.41 |  
|                                |           |                    |               |       |        |       |              |             
|Outstanding as of June 30, 2000 |           |                    | 3,858         |       |        | $     | 0.34 - $4.38 |             
|                                | Grants    |                    |               | 1,360 |        |       | $            | 1.35 - $2.06 |  
|                                | Exercised |                    |               | (25   | )      |       | $            | 0.69         |  
|                                | Forfeited |                    |               | (364  | )      |       | $            | 0.69 - $4.06 |  
|                                |           |                    |               |       |        |       |              |             
|Outstanding as of June 30, 2001 |           |                    | 4,829         |       |        | $     | 0.34 - $4.38 |             
|                                | Grants    |                    |               | 1,175 |        |       | $            | .93 - $1.05  |  
|                                | Exercised |                    |               | (60   | )      |       | $            | 0.88         |  
|                                | Forfeited |                    |               | (485  | )      |       | $            | 0.88 - $4.25 |  
|                                |           |                    |               |       |        |       |              |             
|Outstanding as of June 30, 2002 |           |                    | 5,459         |       |        | $     | 0.34 - $4.38 |             
|                                |           |                    |               |       |        |       |              |             
|                                |           | Exercisable as of: |               |       |        |       |              |              |   |             
|                                |           |                    | June 30, 2000 |       |        | 3,594 |              |              | $ | 0.34 - $4.38 | 
|                                |           |                    | June 30, 2001 |       |        | 3,359 |              |              | $ | 0.34 - $4.38 | 
|                                |           |                    | June 30, 2002 |       |        | 3,766 |              |              | $ | 0.34 - $4.38 | 

The weighted average per share fair value of options granted was $.62, $.83 and
$1.85 for the fiscal years ended June 30, 2002, 2001 and 2000, respectively.
As of June 30, 2002, the number of outstanding shares under option, weighted
average option exercise price and weighted average remaining option contractual
life was as follows: 75 exercisable shares at $.75 per share, expiring in 0.3
years; 372 exercisable shares at $.88 per share, expiring in 2.0 years; 150
exercisable shares at $1.50 per share, expiring in 2.3 years; 80 exercisable
shares

55



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##### 



at $2.44 per share, expiring in 3.8 years; 5 exercisable shares at $2.38
per share, expiring in 4.8 years; 10 exercisable shares at $4.38 per share,
expiring in 5.9 years; 60 exercisable shares at $3.73 per share expiring in 6.7
years; 2,152 exercisable shares at $.77 per share expiring in 3.7 years; 141
shares at $4.25 per share expiring in 7.8 years (98 shares of which were
exercisable); 1,333 shares at $1.48 per share expiring in 7.4 years (450 shares
of which were exercisable); and 1,081 shares at $1.05 per share expiring in 9.1
years (313 shares of which were exercisable).

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 5.17%, dividend yield of
0.0%, a weighted average volatility factor of .477, and a weighted average
expected life for the options of 7.3 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 $(29,589), or $(.81) per share
(basic and diluted), for the fiscal year ended June 30, 2002; $(18,901), or
$(.54) per share (basic and diluted), for the fiscal year ended June 30, 2001;
and $(27,974), or $(.96) per share (basic and diluted), for the fiscal year
ended June 30, 2000. Since FAS 123 is applicable only to options granted
subsequent to December 31, 1994, its pro forma effect has not fully reflected
until the year ended June 30, 2001.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The aggregate fair value of the Companys investment in affiliated companies
was approximately $46,000, compared to the carrying value of $25,115, as of
June 30, 2002, and $77,000, compared to the carrying value of $50,399, as of
June 30, 2001. The estimate of fair value was based on, in the case of Gray,
independent appraisals as of June 30, 2002 and 2001 used in connection for
valuing the warrants to acquire the common stock of Gray owned by the Company;
in the case of publicly-traded Rawlings, quoted market prices on the Nasdaq
Stock Market as of June 30, 2002 and 2001; in the case of Tarzian as of June
30, 2001, acquisition cost; and in the case of iHigh, the value attributed to
iHigh at the date of the Host-USA Acquisition less the Companys equity in
iHighs net losses since the Host-USA Acquisition; and management estimates.

The fair value of the Companys interest rate swap agreements, having an
aggregate notional amount of $45,000, is included as a component of other
assets in the consolidated balance sheet (see Derivative Instruments and
Hedging Activities in Note 2). The fair value, which equals the estimated
amount to be received (paid) on terminating the swap agreements, if the Company
had elected to do so, was approximately $(2,536) as of June 30, 2002 and
$(1,897) as of June 30, 2001. The aggregate fair value of warrants to acquire
the common stock of Gray, likewise included as a component of other assets in
the consolidated balance sheet, was $7,409 as of June 30, 2002 and $10,116 as
of June 30, 2001. The fair values of the warrants were determined based on an
independent appraisal as of June 30, 2002 and 2001, respectively.

All other financial instruments, including cash, cash equivalents, receivables,
payables and variable rate bank debt are estimated to have a fair value which
approximates carrying value in the financial statements.

56



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##### 



14. RETIREMENT PLANS

The Company had two 401(k) defined contribution benefit plans (following a
merger of two plans effective July 1, 2001), 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. One of the two plans was terminated
as of January 1, 2002. 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 plans were $517,
$1,163 and $349 for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively, including contributions made to the Host and USA plans subsequent
to the date of the Host-USA Acquisition.

15. COMMITMENTS AND CONTINGENCIES

The Company was obligated under the Host-NCAA Contract to issue an irrevocable
letter of credit in contractually determined amounts to guarantee the Companys
payments to the NCAA for each contract period. The Company arranged for
insurance companies to issue performance bonds on behalf of the Company in lieu
of a portion of the irrevocable letter of credit as part of the guarantee to
the NCAA. As of June 30, 2002, there was a $5,000 performance bond issued for
the benefit of the NCAA and no outstanding letters of credit. The Host-NCAA
Contract ended in August 31, 2002. Subsequent to June 30, 2002, the final
guaranteed rights fee installment was paid to the NCAA and the $5,000
performance bond expired. Under the Host-CBS Contract, the Company was
originally obligated to a $575,000 guaranteed rights fee obligation over a
11-year period; however, as a result of the changes to the contract executed in
September 2002, the guaranteed rights fee obligation was substantially
eliminated.

The Company commits under certain contracts, which expire at varying times
through 2006, to the payment of guaranteed rights fees. Future guaranteed
rights fee commitments as of June 30, 2002 totaled approximately $15,300 for
the year ending June 30, 2003 and approximately $43,700 over the entire
remaining term of such contracts, which range from one to four years.

Bull Runs executive offices are leased from a company affiliated with a
principal stockholder and director of the Company under an operating lease
expiring in December 2002. Host has various operating leases for facilities
and equipment expiring in 2003 through 2011. The Companys total rental
expense was $2,617, $2,505 and $1,843 for the fiscal years ended June 30,
2002, 2001 and 2000, respectively. The minimum annual rental commitments under
these and other leases with an original lease term exceeding one year are
$2,246, $1,450, $1,223, $740 and $260 for the years ending June 30, 2003, 2004,
2005, 2006 and 2007, respectively, and $823 thereafter.

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.

57



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16. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings
(loss) per share:

|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                           |  | Year Ended June 30,
|                                                                                                           |  |                    
|                                                                                                           |  | 2002                |         | 2001 |  | 2000
|                                                                                                           |  |                     |         |      |  |     
|Loss from continuing operations before extraordinary item
and cumulative effect of accounting change       |  | $                   | (25,906 | )    |  | $    | (17,584 | ) |  | $ | (20,985 | )
|Preferred dividends                                                                                        |  |                     | (396    | )    |  |      |         |   |  |   |         |  
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|Loss available to common stockholders before extraordinary
item and cumulative effect of accounting change |  |                     | (26,302 | )    |  |      | (17,584 | ) |  |   | (20,985 | )
|Extraordinary loss                                                                                         |  |                     | (627    | )    |  |      |         |   |  |   |         |  
|Cumulative effect of accounting change                                                                     |  |                     | (2,620  | )    |  |      | (1,120  | ) |  |   |         |  
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|Loss from continuing operations                                                                            |  |                     | (29,549 | )    |  |      | (18,704 | ) |  |   | (20,985 | )
|Loss from discontinued operations                                                                          |  |                     |         |      |  |      |         |   |  |   | (6,839  | )
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|Net loss available to common stockholders                                                                  |  | $                   | (29,549 | )    |  | $    | (18,704 | ) |  | $ | (27,824 | )
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|                                                                                                          
|Weighted average number of common shares
outstanding for basic loss per share                              |  |                     | 36,485  |      |  |      | 35,307  |   |  |   | 29,044  |  
|Effect of dilutive employee stock options                                                                  |  |                     |         |      |  |      |         |   |  |   |         |  
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|Adjusted weighted average number of common shares
and assumed conversions for diluted loss per share       |  |                     | 36,485  |      |  |      | 35,307  |   |  |   | 29,044  |  
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|                                                                                                          
|Basic and diluted earnings (loss) per share:                                                               |  |                     |         |      |  |      |         |   |  |   |         |  
|Loss available to common stockholders before extraordinary
item and cumulative effect of accounting change |  | $                   | (0.72   | )    |  | $    | (0.50   | ) |  | $ | (0.72   | )
|Extraordinary loss                                                                                         |  |                     | (0.02   | )    |  |      |         |   |  |   |         |  
|Cumulative effect of accounting change                                                                     |  |                     | (0.07   | )    |  |      | (0.03   | ) |  |   |         |  
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|Loss from continuing operations                                                                            |  |                     | (0.81   | )    |  |      | (0.53   | ) |  |   | (0.72   | )
|Loss from discontinued operations                                                                          |  |                     |         |      |  |      |         |   |  |   | (0.24   | )
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  
|Net loss available to common stockholders                                                                  |  | $                   | (0.81   | )    |  | $    | (0.53   | ) |  | $ | (0.96   | )
|                                                                                                           |  |                     |         |      |  |      |         |   |  |   |         |  

The effect of potentially dilutive employee stock options not considered above
because they were anti-dilutive was 1,088 shares, 1,813 shares and 1,831 shares
for the fiscal years ended June 30, 2002, 2001 and 2000, respectively.

17. OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is as follows:

|                          |                                                                                |   |                     |        |      |   |         |   |  |   |         |   | 
|------------------------- | ------------------------------------------------------------------------------ | - | ------------------- | ------ | ---- | - | ------- | - |  | - | ------- | - | 
|                          |                                                                                |   | Year Ended June 30,
|                          |                                                                                |   |                    
|                          |                                                                                |   | 2002                |        | 2001 |   | 2000   
|                          |                                                                                |   |                     |        |      |   |        
|Net loss                  |                                                                                | $ | (29,153             | )      |      | $ | (18,704 | ) |  | $ | (27,824 | )
|Other comprehensive loss: |                                                                                |   |                     |        |      |   |         |   |  |   |         |  
|                          | Change in the valuation of available-for-sale
investments, net of deferred tax |   |                     | (2,080 | )    |   |         |   |  |   |         |   | 
|                          |                                                                                |   |                     |        |      |   |         |   |  |   |         |  
|Comprehensive loss        |                                                                                | $ | (31,233             | )      |      | $ | (18,704 | ) |  | $ | (27,824 | )
|                          |                                                                                |   |                     |        |      |   |         |   |  |   |         |  

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

58



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##### 



for it as an available-for-sale marketable security (as
discussed in Note 6 under the caption Investment in Affiliated Companies).
Changes in the value of the Companys investment in Rawlings common stock, as
determined by the closing price of Rawlings common stock quoted on the Nasdaq
Stock Market as the beginning and end of each fiscal period, will result in
future comprehensive income or loss.

18. SEGMENT DATA (unaudited)

Following the Host-USA Acquisition, the Company had four 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); (b) event management and marketing services
(Affinity Events); (c) association management services (Affinity Management
Services); and (d) consulting services (Consulting). A fifth business
segment, associated with computer printer manufacturing and related sales and
services, has been classified as a discontinued segment. Information for each
of the Companys segments associated with continuing operations is presented
below. Operating results for the Collegiate Marketing and Production Services,
Affinity Events and Affinity Management Services segments presented for the
year ended June 30, 2000 only include results for the period December 17, 1999
(the date of the Host-USA Acquisition) through June 30, 2000.

|                                     |                                              |   |                     |        |      |   |         |        |   |   |        |        |  
|------------------------------------ | -------------------------------------------- | - | ------------------- | ------ | ---- | - | ------- | ------ | - | - | ------ | ------ | -
|                                     |                                              |   | Year Ended June 30,
|                                     |                                              |   |                    
|                                     |                                              |   | 2002                |        | 2001 |   | 2000   
|                                     |                                              |   |                     |        |      |   |        
|Net revenues, continuing operations: |                                              |   |                     |        |      |   |         |        |   |   |        |       
|                                     | Collegiate Marketing and Production Services |   | $                   | 79,099 |      |   | $       | 85,019 |   |   | $      | 54,443 |  
|                                     | Affinity Events                              |   |                     | 19,248 |      |   |         | 24,177 |   |   |        | 11,312 |  
|                                     | Affinity Management Services                 |   |                     | 14,714 |      |   |         | 11,117 |   |   |        | 4,934  |  
|                                     | Consulting                                   |   |                     | 11     |      |   |         | 24     |   |   |        | 1,311  |  
|                                     |                                              |   |                     |        |      |   |         |        |   |   |        |       
|                                     |                                              | $ | 113,072             |        |      | $ | 120,337 |        |   | $ | 72,000 |       
|                                     |                                              |   |                     |        |      |   |         |        |   |   |        |       
|Operating income (loss):             |                                              |   |                     |        |      |   |         |        |   |   |        |       
|                                     | Collegiate Marketing and Production Services |   | $                   | (4,945 | )    |   | $       | 4,795  |   |   | $      | 4,354  |  
|                                     | Affinity Events                              |   |                     | (2,424 | )    |   |         | (3,837 | ) |   |        | (2,551 | )
|                                     | Affinity Management Services                 |   |                     | 1,275  |      |   |         | 1,681  |   |   |        | 568    |  
|                                     | Consulting                                   |   |                     | 11     |      |   |         | 24     |   |   |        | 1,311  |  
|                                     | Amortization of acquisition intangibles      |   |                     | (7,824 | )    |   |         | (4,267 | ) |   |        | (2,602 | )
|                                     | Unallocated general and administrative costs |   |                     | (2,149 | )    |   |         | (2,274 | ) |   |        | (3,010 | )
|                                     |                                              |   |                     |        |      |   |         |        |   |   |        |       
|                                     |                                              | $ | (16,056             | )      |      | $ | (3,878  | )      |   | $ | (1,930 | )     
|                                     |                                              |   |                     |        |      |   |         |        |   |   |        |       

59



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|                                             |                                              |   |                     |       |      |   |       |     |  |   |       |     | 
|-------------------------------------------- | -------------------------------------------- | - | ------------------- | ----- | ---- | - | ----- | --- |  | - | ----- | --- | 
|                                             |                                              |   | Year Ended June 30,
|                                             |                                              |   |                    
|                                             |                                              |   | 2001                |       | 2001 |   | 2000 
|                                             |                                              |   |                     |       |      |   |      
|Depreciation expense, continuing operations: |                                              |   |                     |       |      |   |       |     |  |   |       |    
|                                             | Collegiate Marketing and Production Services |   | $                   | 1,301 |      |   | $     | 901 |  |   | $     | 692 | 
|                                             | Affinity Events                              |   |                     | 92    |      |   |       | 634 |  |   |       | 176 | 
|                                             | Affinity Management Services                 |   |                     | 118   |      |   |       | 109 |  |   |       | 181 | 
|                                             | Unallocated general and administrative costs |   |                     | 7     |      |   |       | 6   |  |   |       | 5   | 
|                                             |                                              |   |                     |       |      |   |       |     |  |   |       |    
|                                             |                                              | $ | 1,518               |       |      | $ | 1,650 |     |  | $ | 1,054 |    
|                                             |                                              |   |                     |       |      |   |       |     |  |   |       |    
|                                             |                                              |   |                     |       |      |   |       |     |  |   |       |    
|Capital expenditures, continuing operations: |                                              |   |                     |       |      |   |       |     |  |   |       |    
|                                             | Collegiate Marketing and Production Services |   | $                   | 214   |      |   | $     | 430 |  |   | $     | 801 | 
|                                             | Affinity Events                              |   |                     | 44    |      |   |       | 656 |  |   |       | 47  | 
|                                             | Affinity Management Services                 |   |                     | 7     |      |   |       | 77  |  |   |       | 182 | 
|                                             | Unallocated general and administrative costs |   |                     | 14    |      |   |       | 3   |  |   |       | 7   | 
|                                             |                                              |   |                     |       |      |   |       |     |  |   |       |    
|                                             |                                              | $ | 279                 |       |      | $ | 1,166 |     |  | $ | 1,037 |    
|                                             |                                              |   |                     |       |      |   |       |     |  |   |       |    

|                                     |                                              |   |          |        |  |  |  |  |      |   |         |        |  |  |  |  | 
|------------------------------------ | -------------------------------------------- | - | -------- | ------ |  |  |  |  | ---- | - | ------- | ------ |  |  |  |  | 
|                                     |                                              |   | June 30,
|                                     |                                              |   |         
|                                     |                                              |   | 2002     |        |  |  |  |  | 2001 |   |         |        | 
|                                     |                                              |   |          |        |  |  |  |  |      |   |         |        | 
|Total assets, continuing operations: |                                              |   |          |        |  |  |  |  |      |   |         |       
|                                     | Collegiate Marketing and Production Services |   | $        | 17,732 |  |  |  |  |      |   | $       | 27,852 | 
|                                     | Affinity Events                              |   |          | 5,149  |  |  |  |  |      |   |         | 11,499 | 
|                                     | Affinity Management Services                 |   |          | 2,008  |  |  |  |  |      |   |         | 7,603  | 
|                                     | Investments in affiliated companies          |   |          | 25,115 |  |  |  |  |      |   |         | 50,399 | 
|                                     | Goodwill, customer base and trademarks       |   |          | 75,064 |  |  |  |  |      |   |         | 82,888 | 
|                                     | Net assets of discontinued segment           |   |          | 104    |  |  |  |  |      |   |         | 2,582  | 
|                                     | Other                                        |   |          | 35,827 |  |  |  |  |      |   |         | 23,715 | 
|                                     |                                              |   |          |        |  |  |  |  |      |   |         |       
|                                     |                                              | $ | 160,999  |        |  |  |  |  |      | $ | 206,538 |       
|                                     |                                              |   |          |        |  |  |  |  |      |   |         |       

60



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SUPPLEMENTARY DATA

SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars and shares in thousands, except per share amounts)

|                                                                                           |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |          |   |        |       |   |   |         |       |  
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------- | - | ------------- | ----- | ------------ | - | ------ | ----- | - |  | --------- |  | -------- | - | ------ | ----- | - | - | ------- | ----- | -
|                                                                                           |                                                                                                                             |   | Quarter Ended
|                                                                                           |                                                                                                                             |   |              
|                                                                                           |                                                                                                                             |   | September 30, |       | December 31, |   |        |       |   |  | March 31, |  | June 30,
|                                                                                           |                                                                                                                             |   | 2001          |       | 2001         |   |        |       |   |  | 2002      |  | 2002    
|                                                                                           |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |         
|Revenue from services rendered                                                             |                                                                                                                             | $ | 23,104        |       |              | $ | 34,082 |       |   |  |           |  |          | $ | 34,035 |       |   | $ | 21,851  |      
|Operating loss                                                                             |                                                                                                                             |   | (2,133        | )     |              |   | (672   | )     |   |  |           |  |          |   | (1,540 | )     |   |   | (11,711 | )    
|Loss from continuing operations before extraordinary
loss and cumulative effect adjustment |                                                                                                                             |   | (3,665        | )     |              |   | (3,297 | )     |   |  |           |  |          |   | (3,476 | )     |   |   | (15,468 | )    
|Extraordinary loss                                                                         |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |          |   | (627   | )     |   |   |         |      
|Cumulative effect of accounting change                                                     |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |          |   | (2,620 | )     |   |   |         |      
|Loss from continuing operations                                                            |                                                                                                                             |   | (3,665        | )     |              |   | (3,297 | )     |   |  |           |  |          |   | (6,723 | )     |   |   | (15,468 | )    
|Net loss                                                                                   |                                                                                                                             |   | (3,665        | )     |              |   | (3,297 | )     |   |  |           |  |          |   | (6,723 | )     |   |   | (15,468 | )    
|Preferred dividends                                                                        |                                                                                                                             |   | (68           | )     |              |   | (85    | )     |   |  |           |  |          |   | (121   | )     |   |   | (122    | )    
|Net loss available to common stockholders                                                  |                                                                                                                             |   | (3,733        | )     |              |   | (3,382 | )     |   |  |           |  |          |   | (6,844 | )     |   |   | (15,590 | )    
|Loss per share available to common stockholders,
basic and diluted:                        |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |          |   |        |       |   |   |         |      
|                                                                                           | Loss available to common stockholders from
continuing operations before extraordinary item
and cumulative effect adjustment |   | $             | (0.10 | )            |   | $      | (0.09 | ) |  |           |  |          |   | $      | (0.10 | ) |   | $       | (0.42 | )
|                                                                                           | Loss available to common stockholders from
continuing operations                                                            |   | $             | (0.10 | )            |   | $      | (0.09 | ) |  |           |  |          |   | $      | (0.19 | ) |   | $       | (0.42 | )
|                                                                                           | Net loss available to common stockholders                                                                                   |   | $             | (0.10 | )            |   | $      | (0.09 | ) |  |           |  |          |   | $      | (0.19 | ) |   | $       | (0.42 | )
|Weighted average number of shares, basic and
diluted                                       |                                                                                                                             |   | 36,002        |       |              |   | 36,136 |       |   |  |           |  |          |   | 36,514 |       |   |   | 37,290  |      
|                                                                                          
|                                                                                           |                                                                                                                             |   | September 30, |       | December 31, |   |        |       |   |  | March 31, |  | June 30,
|                                                                                           |                                                                                                                             |   | 2000          |       | 2000         |   |        |       |   |  | 2001      |  | 2001    
|                                                                                           |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |         
|Revenue from services rendered                                                             |                                                                                                                             | $ | 23,983        |       |              | $ | 35,905 |       |   |  |           |  |          | $ | 35,645 |       |   | $ | 24,804  |      
|Operating income (loss)                                                                    |                                                                                                                             |   | (3,947        | )     |              |   | 2,180  |       |   |  |           |  |          |   | (1,136 | )     |   |   | (975    | )    
|Loss from continuing operations before cumulative
effect adjustment                        |                                                                                                                             |   | (5,710        | )     |              |   | (33    | )     |   |  |           |  |          |   | (5,726 | )     |   |   | (6,115  | )    
|Cumulative effect of accounting change                                                     |                                                                                                                             |   | (1,120        | )     |              |   |        |       |   |  |           |  |          |   |        |       |   |   |         |      
|Loss from continuing operations                                                            |                                                                                                                             |   | (6,830        | )     |              |   | (33    | )     |   |  |           |  |          |   | (5,726 | )     |   |   | (6,115  | )    
|Net loss                                                                                   |                                                                                                                             |   | (6,830        | )     |              |   | (33    | )     |   |  |           |  |          |   | (5,726 | )     |   |   | (6,115  | )    
|Loss from continuing operations before cumulative
effect per share, basic and diluted:     |                                                                                                                             |   |               |       |              |   |        |       |   |  |           |  |          |   |        |       |   |   |         |      
|                                                                                           | Loss from continuing operations before cumulative
effect adjustment                                                         |   | $             | (0.16 | )            |   | $      | (0.00 | ) |  |           |  |          |   | $      | (0.16 | ) |   | $       | (0.17 | )
|                                                                                           | Loss from continuing operations                                                                                             |   | $             | (0.19 | )            |   | $      | (0.00 | ) |  |           |  |          |   | $      | (0.16 | ) |   | $       | (0.17 | )
|                                                                                           | Net loss                                                                                                                    |   | $             | (0.19 | )            |   | $      | (0.00 | ) |  |           |  |          |   | $      | (0.16 | ) |   | $       | (0.17 | )
|Weighted average number of shares, basic and
diluted                                       |                                                                                                                             |   | 35,085        |       |              |   | 35,085 |       |   |  |           |  |          |   | 35,213 |       |   |   | 35,844  |      

61



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Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure

None

PART III

Item 10. Directors and
Executive Officers of the Registrant

Set forth below is certain information concerning each of the officers and
directors of the Company as of September 30, 2002.

J. MACK ROBINSON, 79, has been a director of the Company since 1992, and
the Chairman of the Board since 1994, and was Secretary and Treasurer of the
Company in 1994; has been Chairman of the Board and President of Delta Life
Insurance Company since 1958; was President of Atlantic American Corporation,
(an insurance holding company) from 1988 to 1995, and Chairman of the Board of
Atlantic American Corporation since 1974; and has been a director of Gray since
1993, becoming Chairman in September 2002, Chief Executive Officer of Gray
since 1996, and from 1996 until September 2002, President of Gray.

GERALD N. AGRANOFF, 55, has been a director of the Company since 1990; is
the Managing Member of Inveraray Capital Management LLC (an investment
management company); is a general partner of SES Family Investment & Trading
Partnership, L.P. (an investment partnership); is the a general partner of, and
general counsel to, Edelman Securities Company, L.P. (a registered
broker-dealer), having been affiliated with the firm since 1982; he is Vice
Chairman, Acting President and a director of Dynacore Holdings Corporation; and
he is a director of Canal Capital Corporation.

JAMES W. BUSBY, 48, has been a director of the Company since 1994; has
been President of Del Mar of Wilmington Corporation (a real estate development
company) since 1997; was the President of Datasouth Computer Corporation, a
subsidiary of Bull Run since 1994, from 1984 to 1997; and was one of the
founders of Datasouth in 1977, serving as Secretary from 1977 until 1984.

W. JAMES HOST, 64, has been a director of the Company since 1999; and has
been the Chief Executive Officer of Host Communications, Inc., a subsidiary of
Bull Run since 1999, since founding the company in 1972.

HILTON H. HOWELL, JR., 40, has been a director of the Company since 1994
and its Vice President and Secretary since 1994; has been the President and
Chief Executive Officer of Atlantic American Corporation (an insurance holding
company) since 1995 and Executive Vice President from 1992 to 1995; has been
Executive Vice President and General Counsel of Delta Life Insurance Company
and Delta Fire & Casualty Insurance Co. since 1991; and has been a director of
Gray since 1993, Vice Chairman of Gray since September 2002 and Executive Vice
President of Gray from 2000 to September 2002.

MONTE C. JOHNSON, 65, has been a director of the Company since 2001; has
been self-employed as a business consultant since 1987; and has been President
of KAJO, Inc. (an oil and gas operating company) since 1995.

ROBERT S. PRATHER, JR., 57, has been the President and Chief Executive
Officer of the Company and a director since 1992; has been a director of Gray
since 1993, President and Chief Operating Officer of Gray since September 2002,
and was Executive Vice President of Gray from 1996 to September 2002; and is a
director of The Morgan Group,

62



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Inc. (a transportation company) and a director of Swiss Army Brands, Inc.
(a manufacturer and distributor of consumer products).

FREDERICK J. ERICKSON, 43, has been Vice President  Finance, Treasurer
and Chief Financial Officer of the Company since 1994; has served in the
capacity of Executive Vice President  Finance & Administration or similar
capacities with Datasouth since 1993; and was interim Chief Financial Officer
of Gray from March to September 1998.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Bull Runs
directors and executive officers, and persons who own more than 10 percent of
the Bull Run common stock, to file with the Securities and Exchange Commission
initial reports of ownership (Form 3) and reports of changes in ownership
(Forms 4 and 5) of Bull Run common stock. To the Companys knowledge, based
solely on review of the copies of such reports furnished to Bull Run and
representations that no other reports were required during the year ended June
30, 2002, all Section 16(a) filing requirements applicable to Bull Runs
executive officers, directors and greater than 10 percent beneficial owners
were met.

Item 11. Executive
Compensation

The following table contains information about the compensation earned by
Bull Runs President and Chief Executive Officer and the other executive
officer of Bull Run who earned more than $100,000 for the fiscal year ended
June 30, 2002.

Summary Compensation Table

|                        |                      |      |      |            |  |           |                     |            |        |          |         |            |  |            |   |            |  |   |                        |   |  |  |                |   |   |   |   |   |   |        |       |        |    
|----------------------- | -------------------- | ---- | ---- | ---------- |  | --------- | ------------------- | ---------- | ------ | -------- | ------- | ---------- |  | ---------- | - | ---------- |  | - | ---------------------- | - |  |  | -------------- | - | - | - | - | - | - | ------ | ----- | ------ | ---
|                        |                      |      |      |            |  |           |                     |            |        |          |         |            |  |            |   |            |  |   | Long-Term Compensation |   |  |  |               
|                        |                      |      |      |            |  |           |                     |            |        |          |         |            |  |            |   |            |  |   |                        |   |  |  |               
|                        |                      |      |      |            |  |           | Annual Compensation |            | Awards |          | Payouts |            |  |            |  
|                        |                      |      |      |            |  |           |                     |            |        |          |         |            |  |            |  
|(a)                     |                      | (b)  |      | (c)        |  | (d)       |                     | (e)        |        | (f)      |         | (g)        |  | (h)        |   | (i)       
|                        |                      |      |      |            |  |           |                     |            |        | Other    |         | Restricted |  | Securities |   |           
|Name and                |                      |      |      |            |  |           |                     | Annual     |        | Stock    |         | Underlying |  | LTIP       |   | All Other 
|Principal               |                      |      |      |            |  |           |                     | Compen-    |        | Award(s) |         | Options/   |  | Payouts    |   | Compen-   
|Position                |                      | Year |      | Salary ($) |  | Bonus ($) |                     | sation ($) |        | ($)      |         | SARs (#)   |  | ($)        |   | sation ($)
|                        |                      |      |      |            |  |           |                     |            |        |          |         |            |  |            |   |           
|Robert S. Prather, Jr., |                      |      | 2002 |            |  | $         | 349,600             |            |        | $        |        |            |  | $          |  |            |  | $ |                       |   |  |  |               |   |   | $ |  |   |   | $      | 4,108 | (1)   
|                        | President and Chief  |      |      | 2001       |  |           | $                   | 428,062    |        |          | $       | 150,000    |  |            | $ |           |  |   | $                      |  |  |  | 700,000 shares |   | $ |  |   |   | $ | 10,200 | (1)  
|                        | Executive Officer of |      |      | 2000       |  |           | $                   | 388,000    |        |          | $       | 125,000    |  |            | $ |           |  |   | $                      |  |  |  |                |  |   |   | $ |  |   |        | $     | 10,000 | (1)
|                        | Bull Run             |      |      |            |  |           |                     |            |        |          |         |            |  |            |   |            |  |   |                        |   |  |  |                |   |   |   |   |   |   |        |       |        |    
|                        |                      |      |      |            |  |           |                     |            |        |          |         |            |  |            |   |            |  |   |                        |   |  |  |                |   |   |   |   |   |   |        |       |       
|Frederick J. Erickson,  |                      |      | 2002 |            |  | $         | 159,000             |            |        | $        | 5,000   |            |  | $          |  |            |  | $ |                       |   |  |  |               |   |   | $ |  |   |   | $      | 7,036 | (1)   
|                        | Vice President-      |      |      | 2001       |  |           | $                   | 151,615    |        |          | $       | 50,000     |  |            | $ |           |  |   | $                      |  |  |  | 100,000 shares |   | $ |  |   |   | $ | 9,455  | (1)  
|                        | Finance of Bull Run  |      |      | 2000       |  |           | $                   | 140,500    |        |          | $       | 36,377     |  |            | $ |           |  |   | $                      |  |  |  |                |  |   |   | $ |  |   |        | $     | 10,613 | (1)



---

|(1) |  | Consists of employer contributions to the defined contribution retirement plan.
|--- |  | -------------------------------------------------------------------------------

Directors of the Company or its subsidiaries are entitled to a fee of
$15,000 per year for their services as directors, payable in cash or shares of
the Companys common stock at each directors option, and are reimbursed for
their expenses for each meeting attended. Audit Committee members are
compensated $1,000 for each meeting attended in person, and $500 for each
meeting attended telephonically. Robert S. Prather, Jr., a director who is
also an employee of the Company, received fees of $15,000 during the fiscal
years ended June 30, 2002 and 2001 for his services as a director. For the
fiscal years ended June 30, 2002 and 2001, W. James Host waived his right to
receive a directors fee. During the fiscal year ended June 30, 2001, Mr. J.
Mack Robinson, the Companys Chairman of the Board, was granted an option to purchase up to
350,000 shares of the Companys common

63



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##### 



stock at an exercise price of $1.49 per share (110% of the
market value of the Companys common stock on the date of grant) under the 1994
Long Term Incentive Plan. Directors who are not employees of the Company or
its subsidiaries are eligible to receive stock options under the Companys
Non-Employee Directors 1994 Stock Option Plan. During the fiscal year ended
June 30, 2002, each of Gerald N. Agranoff, James W. Busby and Monte C. Johnson,
directors of the Company, was granted an option to purchase up to 5,000 shares
of the Companys common stock at an exercise price of $.93 per share (the
market value of the Companys common stock on the date of grant) under the 1994
Non-Employee Directors Plan. During the fiscal years ended 2001 and 2000,
each of Mr. Agranoff and Mr. Busby was granted in each year an option to
purchase up to 5,000 shares of the Companys common stock at an exercise price
of $2.06 and $3.94 per share, respectively, (the market value of the Companys
common stock on the date of grant) under the 1994 Non-Employee Directors Plan.

Compensation Committee Interlocks and Insider Participation

J. Mack Robinson, Gerald N. Agranoff and James W. Busby are the members
the Companys Management Compensation and Stock Option Committee. Mr.
Robinson, the Companys Chairman of the Board, is also Chairman, Chief
Executive Officer and a director of Gray and serves on the Compensation
Committee of Gray. Mr. Busby was President of Datasouth Computer Corporation,
the Companys wholly owned subsidiary until its sale in 2001, from 1984 until
his retirement in 1997.

Robert S. Prather, Jr., President, Chief Executive Officer and a director
of the Company, is also President, Chief Executive Officer and a director of
Gray. Hilton H. Howell, Jr., Vice President, Secretary and a director of the
Company, is also Vice Chairman and a director of Gray.

The Company has provided consulting services to Gray from time to time in
connection with Grays acquisitions, dispositions and acquisition financing.
During the fiscal year ended June 30, 2002, the Company provided Gray such
services in connection with Grays pending acquisition of Stations Holding
Company, Inc., discussed elsewhere herein, for which the Company was paid
$5,000,000. This fee is refundable to Gray if Gray does not ultimately
acquire Stations. During the fiscal year ended June 30, 2002, Gray exercised
its option to purchase the Companys investment in Sarkes Tarzian, Inc. for
$10,000,000.

Employment Agreements

The Company had no employment agreements with any of its executive
officers during the year ended June 30, 2002.

Stock Options

There were no stock options granted during the fiscal year ended June 30,
2002 to the named executive officers. There were no stock appreciation rights
exercised during the fiscal year ended June 30, 2002 and none were outstanding
as of June 30, 2002.

64



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The following table sets forth information concerning outstanding and
unexercised options held by the named executive officers set forth in the table
above as of June 30, 2002.

Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

|                       |  |             |   |          |  |                            |   |                            |  |              |         |               |  |  |         |  |  |   |        |  |  |   |   | 
|---------------------- |  | ----------- | - | -------- |  | -------------------------- | - | -------------------------- |  | ------------ | ------- | ------------- |  |  | ------- |  |  | - | ------ |  |  | - | - | 
|(a)                    |  | (b)         |   | (c)      |  | (d)                        |   | (e)                       
|                       |  |             |   |          |  | Number of Securities       |   | Value of Unexercised      
|                       |  | Shares      |   |          |  |                            |   | Underlying Unexercised     |  | In-the Money
|                       |  | Acquired    |   | Value    |  | Options/SARs at FY-End (#) |   | Options/SARs at FY-End ($)
|                       |  | on Exercise |   | Realized |  |                            |   |                           
|Name                   |  | (#)         |   | ($)      |  | Exercisable                |   | Unexercisable              |  | Exercisable  |         | Unexercisable
|                       |  |             |   |          |  |                            |   |                            |  |              |         |              
|Robert S. Prather, Jr. |  |             |  |          |  | $                          |  |                            |  |              | 72,740  |               |  |  |        |  |  | $ | 40,465 |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              | 75,000  |               |  |  |        |  |  | $ | 11,250 |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              | 233,000 |               |  |  | 467,000 |  |  | $ |       |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              |         |               |  |  |         |  |  |   |        |  |  |   |   | 
|                       |  |             |   |          |  |                            |   |                            |  |              | 380,740 |               |  |  | 467,000 |  |  | $ | 51,715 |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              |         |               |  |  |         |  |  |   |        |  |  |   |   | 
|                       |  |             |   |          |  |                            |   |                            |  |              |         |               |  |  |         |  |  |   |        |  |  |   |   | 
|Frederick J. Erickson  |  |             |  |          |  | $                          |  |                            |  |              | 72,000  |               |  |  |        |  |  | $ | 1,800  |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              | 50,000  |               |  |  |        |  |  | $ |       |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              | 33,000  |               |  |  | 67,000  |  |  | $ |       |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              |         |               |  |  |         |  |  |   |        |  |  |   |   | 
|                       |  |             |   |          |  |                            |   |                            |  |              | 155,000 |               |  |  | 67,000  |  |  | $ | 1,800  |  |  | $ |  | 
|                       |  |             |   |          |  |                            |   |                            |  |              |         |               |  |  |         |  |  |   |        |  |  |   |   | 

Report of the Management Compensation and Stock Option Committee

Bull Runs executive compensation program is administered by the
Management Compensation and Stock Option Committee of the board of directors, a
committee currently composed of J. Mack Robinson, Gerald N. Agranoff and James
W. Busby, all of whom are non-employee directors. The Compensation Committee
makes recommendations to the board of directors concerning the overall
philosophy of Bull Runs executive compensation program, which consists of base
salaries, annual incentives and long-term incentives, and makes determinations
with respect to the grant of incentive awards, stock options and restricted
stock awards to the executive officers and certain employees of Bull Run and
its subsidiaries.

Executive Compensation Philosophy.Bull Runs executive compensation
program is designed to attract, retain and motivate qualified executive
personnel by recognizing and rewarding their accomplishments in support of Bull
Run and its subsidiaries businesses. The Compensation Committees approach to
structuring the total compensation package emphasizes base salary and annual
incentive opportunities, along with significant long-term incentive
opportunities that strongly link executive rewards to long-term stockholder
value creation. Bull Run does not provide any significant executive
perquisites as part of this total compensation package.

Competitive Market Reviews. Each year the Compensation Committee reviews
Bull Runs executive compensation philosophy and the effectiveness and
competitiveness of key executive compensation programs. The Compensation
Committee determines what changes, if any, are appropriate in the compensation
programs for the following year. In conducting this annual review, the
Compensation Committee may use salary surveys, reports and other data prepared
by independent compensation consultants, although it did not do so in fiscal
2002.

Components of the Executive Compensation Program. The Compensation
Committees policy for determining an executives base salary, annual incentive
award and long-term

65



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incentive compensation is based on the responsibility of
such executive, his impact on the operations and profitability of Bull Run or
of the business unit for which such executive has operating responsibility and
the knowledge and experience of such executive. The following describes the
various factors affecting the Compensation Committees decisions relating to
each component of Bull Runs executive compensation package:

Base Salary. Base salary is intended to provide compensation equal to the
average compensation levels at comparable companies for equivalent positions.
Although the Compensation Committee believes that its compensation structure is
similar to that of other comparable companies, it did not specifically compare
such structure with that of other companies in fiscal 2002.

Annual Incentive
Awards. Each executive officer is eligible to receive an
annual cash incentive award. The amount of the award, like the base salary
level, is set with reference to competitive conditions, as will as to the
individuals responsibility, knowledge, and experience, and his contribution to
Bull Run or to the business unit for which the individual is responsible.
Since these determinations are subjective in nature, the Compensation Committee
does not assign relative weights to the matters considered. In fiscal 2002,
the annual incentive award for Mr. Erickson (Vice President  Finance)
represented approximately 3% of his base salary. In fiscal 2002, Mr. Prather
did not receive an annual incentive award. The Compensation Committee accepted
managements recommendation to eliminate, or substantially reduce for fiscal
2002 certain discretionary cash compensation for management employees as Bull
Run responds to difficult economic circumstances having an impact on its
operating results.

Long-Term
Incentive Compensation. Bull Runs long-term incentive
compensation program is designed to provide equity awards, which are intended
to be directly related to the creation of value for Bull Runs stockholders.
Long-term incentive compensation consists principally of stock options that
generally vest over a period of three to five years. The principal purpose of
the long-term incentive compensation program is to reward Bull Runs executives
for enhancing the value of Bull Run and, hence, the price of Bull Run common
stock and, therefore, stockholders return. Additionally, this component of
the compensation program (through deferred vesting) is designed to create an
incentive for the individual to remain with Bull Run. During fiscal 2002, no
options were granted to the executive officers of Bull Run because Mr. Prather
and Mr. Erickson each received options during fiscal 2001. Options granted to
Messrs. Prather and Erickson in fiscal 2001 vest in annual installments through
2004.

Benefits. Bull Run offers basic benefits, such as medical, life and
disability insurance, which Bull Run believes are comparable to those provided
by other companies similar to Bull Run. Bull Run does not have an executive
retirement plan nor does it provide other benefits, such as country club
memberships, financial counseling or supplemental medical plans.

Chief Executive
Officer. Mr. Prathers base salary for fiscal 2002 was
less than his base salary for fiscal 2001 because, effective January 1, 2002,
Mr. Prather began receiving a base salary from Gray Television, Inc., a
12/9%-owned affiliate of Bull Run and a company of which Mr. Prather is an
Executive Vice President. Prior to January 1, 2002, Mr. Prather did not
receive any base salary from Gray. Mr. Prathers base salary was allocated
between Gray and Bull Run based on an assessment of the proportionate amount of
his time devoted to each respective company. The amount of Mr. Prathers
annual incentive award is generally based on the philosophy and programs
described above. The decision to forego an annual incentive award for fiscal
2002 was a result of managements recommendation to
the Compensation Committee to substantially reduce or eliminate such
discretionary compensation for fiscal 2002 due to the impact that difficult
economic circumstances have

66



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##### 



had on Bull Runs operating results for fiscal 2001
and 2002. In prior years, Mr. Prathers annual incentive award principally
reflected the level of achievement of Bull Runs business objectives and also
included the Compensation Committees subjective evaluation of Mr. Prathers
performance.

Submitted by the Management Compensation and Stock Option Committee of the
board of directors.



| | J. Mack Robinson, Chairman
Gerald N. Agranoff
James W. Busby
| | ------------------------------------------------------------

Item 12. Security Ownership
of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the ownership
of the Companys common stock as of September 30, 2002 by (I) any person who is
known to the Company to be beneficial owner of more than five percent of the
Companys common stock, (ii) all directors, (iii) all executive officers named
in the Summary Compensation Table herein and (iv) all directors and executive
officers as a group. Options to acquire the Companys common stock included in
the amounts listed below were exercisable on, or will be exercisable within 60
days after, September 30, 2002.

|                                                      |  |                      |           |            |  |  |      |  
|----------------------------------------------------- |  | -------------------- | --------- | ---------- |  |  | ---- | -
|                                                      |  | Amount and           |           |            |  | 
|                                                      |  | Nature of            |           | Percentage
|Name                                                  |  | Beneficial Ownership |           | of Class  
|                                                      |  |                      |           |           
|J. Mack Robinson                                      |  |                      | 9,894,638 | (1)(2)     |  |  | 26.0 | %
|Harriett J. Robinson                                  |  |                      | 9,894,638 | (1)(2)     |  |  | 26.0 | %
|Samuel R. Shapiro                                     |  |                      | 4,051,970 | (3)        |  |  | 10.7 | %
|Shapiro Capital Management Company, Inc.              |  |                      | 3,350,170 | (3)        |  |  | 8.8  | %
|Robert S. Prather, Jr.                                |  |                      | 3,293,738 | (1)(4)     |  |  | 8.6  | %
|Harriett J. Robinson, Trustee
Robin M. Robinson Trust |  |                      | 3,085,598 | (1)        |  |  | 8.1  | %
|Gulf Capital Services, Ltd.                           |  |                      | 2,673,098 | (1)        |  |  | 7.0  | %
|Robinson-Prather Partnership                          |  |                      | 2,660,598 | (1)        |  |  | 7.0  | %
|Hilton H. Howell, Jr.                                 |  |                      | 2,519,014 | (5)        |  |  | 6.6  | %
|James W. Busby                                        |  |                      | 2,145,206 | (6)        |  |  | 5.6  | %



---

|(1) |  | Includes 2,660,598 shares owned by Robinson-Prather Partnership.
Robinson-Prather Partnership is a Georgia general partnership, the general
partners of which are Robert S. Prather, Jr., President, Chief Executive Officer,
and a director of Bull Run; J. Mack Robinson, Chairman of the Board of Bull Run;
Harriett J. Robinson (the wife of Mr. Robinson); Harriett J. Robinson, as trustee
for Robin M. Robinson Trust; Harriett J. Robinson, as trustee for Jill E.
Robinson Trust and Gulf Capital Services, Ltd. The partnership agreement for
Robinson-Prather Partnership provides that Messrs. Prather and Robinson have the
exclusive control of the day-to-day operations of the partnership, including the
power to vote or dispose of the shares of common stock owned by Robinson-Prather
Partnership. Each general partner disclaims beneficial ownership of the shares
of common stock owned by Robinson-Prather Partnership, except to the extent of
his pecuniary interest in such shares of common stock, which is less than the
amount disclosed.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### 



|(2) |  | Includes as to each of J. Mack Robinson and his wife, Harriett J. Robinson:
116,500 shares issuable upon the exercise of options which were exercisable on,
or within 60 days after, September 30, 2002; 3,012,726 shares owned directly by
Mr. Robinson; 524,100 shares owned directly by Mrs. Robinson; an aggregate of
1,008,200 shares owned directly by the Robin M. Robinson Trust and the Jill E.
Robinson Trust, of each of which Mrs. Robinson is the trustee; an aggregate of
2,369,014 shares owned by Delta Fire & Casualty Insurance Co., Delta Life
Insurance Company, Bankers Fidelity Life Insurance Co. and Georgia Casualty &
Surety Co., Georgia corporations of each of which Mr. Robinson is Chairman of the
Board, President and/or principal stockholder (or the subsidiaries of the same);
12,500 shares owned by Gulf Capital Services, Ltd., of which Mr. Robinson is a
general partner; and 191,000 shares owned by the JMR Foundation, of which Mr.
Robinson is trustee. Each of Mr. and Mrs. Robinson disclaims beneficial
ownership of the shares owned by the Robin M. Robinson Trust, the Jill E.
Robinson Trust, Delta Fire & Casualty Insurance Co., Delta Life Insurance
Company, Bankers Fidelity Life Insurance Co., Georgia Casualty & Surety Co. and
each other.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Based on a Schedule 13G dated February 14, 2002, Mr. Shapiro is president, a
director and majority stockholder of Shapiro Capital Management, Inc., which
reported voting and dispositive power for 3,350,170 shares of Common Stock.
Additionally, the Schedule 13G reported sole voting and dispositive power for
581,000 shares owned by The Kaleidoscope Fund, L.P., a Georgia limited
partnership, and 120,800 shares owned by Mr. Shapiros wife. Shapiro Capital
Management, Inc. is an investment adviser under the Investment Advisers Act of
1940, having the authority to direct investments of its advisory clients. Mr.
Shapiro disclaims beneficial ownership of all securities reported herein by
Shapiro Capital Management, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) |  | Includes 380,740 shares issuable upon the exercise of options which were
exercisable on, or within 60 days after, September 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(5) |  | Includes 150,000 shares issuable upon the exercise of options which were
exercisable on, or within 60 days after, September 30, 2002; and an aggregate of
2,369,014 shares owned by Delta Fire & Casualty Insurance Co., Delta Life
Insurance Co., Bankers Fidelity Life Insurance Co. and Georgia Casualty & Surety
Co., Georgia corporations of each of which Mr. Howell is an executive officer.
Mr. Howell is married to Robin R. Howell, Mr. Robinsons daughter and a
beneficiary of the Robin M. Robinson Trust, which is a general partner of
Robinson-Prather Partnership. Mr. Howell disclaims beneficial ownership of the
shares of Common Stock owned by Delta Fire & Casualty Insurance Co., Delta Life
Insurance Company, Bankers Fidelity Life Insurance Co., Georgia Casualty & Surety
Co., Robinson-Prather Partnership and the Robin M. Robinson Trust.                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(6) |  | Includes 20,000 shares issuable upon the exercise of options which were
exercisable on, or within 60 days after, September 30, 2002; and an aggregate of
62,044 shares owned by Mr. Busbys two children.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

68



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##### 



Item 13. Certain
Relationships and Related Transactions

Bull Run leases office space from Delta Life Insurance Company, a company
of which J. Mack Robinson is Chairman of the board and principal stockholder.
Mr. Robinson is the Chairman of the board of the Company. The term of the
lease is for 10 years beginning January 1, 1993 and requires total basic annual
rent payments of $164,976 over the 10-year term, plus a pro rata share of
expenses.

Mr. Robinson personally guarantees substantially all of the Companys debt
to its bank lenders. During the fiscal year ended June 30, 2002, the Company
issued a total of 1,054,927 shares of the Companys common stock, then valued
at approximately $753,000, to Mr. Robinson to compensate him for his personal
guarantee. In fiscal years ended June 30, 2001 and 2000, the Company issued a
total of 873,655 shares of the Companys common stock, then valued at
approximately $1,449,000, and a total of 304,688 shares of the Companys common
stock, then valued at approximately $1,219,000, respectively. Mr. Robinsons
guarantee agreement in favor of the Companys bank lenders provides that if the
Company defaults on its bank loan, Mr. Robinson will repay the amount of such
loan to the bank up to the amount of his personal guarantee. If Mr. Robinson
is obligated to pay such amount, he would have the right to purchase the loans
from the lenders, thereby becoming a secured creditor of the Companys, with
liens against all of the Companys assets, including the Companys investments
in Gray common stock, the Companys warrants to purchase Gray common stock, and
the Companys investment in Rawlings common stock. Mr. Robinson will be
released from the guarantee agreement under certain conditions, which include
repayment of all or a specified portion of the debt.

The Company issued 3,000 shares of its series A preferred stock in June
2001, having a liquidation and redemption price of $1,000 per share, to
companies of which Mr. Robinson is an executive officer and/or principal
stockholder. The series A preferred stock included detachable warrants to
purchase 1,304,349 shares of the Companys common stock for $2.30 per share.
In November 2001, all outstanding shares of the Companys series A preferred
stock and the detachable warrants were exchanged for an equal number of shares
of the Companys series B redeemable preferred stock. Also in November 2001, a
company of which Mr. Robinson is an executive officer and principal shareholder
invested $2,400,000 in additional shares of the Companys series B redeemable
preferred stock. In July 2002, Mr. Robinson entered into two Subordinated Note
Agreements with the Company pursuant to which Mr. Robinson advanced an
aggregate of $4,000,000 to the Company for working capital. The loans were
refinanced, along with all accrued interest and fees, in August 2002 with the
issuance of shares of the Companys convertible preferred stock having a face
value of $4,091,000. In September 2002, the Company received an additional
aggregate $3,000 from Mr. Robinson and companies with which Mr. Robinson is an
executive officer and/or principal stockholder, for which the Company will
issue to Mr. Robinson and his affiliates shares of the Companys convertible
preferred stock having an aggregate face value of $3,000,000. Holders of the
series A and series B preferred stock are entitled to receive, as, when and if
declared by the Board of Directors, dividends at an annual rate of $90.00 per
share in cash, except that, until the second anniversary of the date of
issuance of the preferred stock, the Company may, at its option, pay such
dividends in cash or in additional shares of preferred stock.

Prior to December 17, 1999, the date on which Host was acquired by the
Company, Host loaned W. James Host, a director of the Company and Chief
Executive Officer of Host, $385,000 under an interest-bearing demand note.
Interest accrued through December 17, 1999 was $229,610. The note has been
non-interest bearing since December 17, 1999. In connection with the bank
commitment discussed above, Mr. Host executed an agreement in favor of the
bank, under which he pledged $3,000,000 in cash, 1,113,667 shares of the

69



---



##### 



Companys common stock and options to purchase 53,600 shares of the
Companys common stock. In connection with such pledge, the Company forgave
$86,370 of the principal and interest accrued and payable on Mr. Hosts note to
Host in the fiscal year ended June 30, 2002, and $162,500 in each of the fiscal
years ended June 30, 2001 and 2000.

On March 1, 1999, the Company executed an option agreement with Gray,
whereby Gray had the option to acquire the Companys investment in Tarzian from
the Company. Gray paid the Company a finders fee of $1,000,000 and, under the
terms of the option agreement, had the ability to extend the option period in
30-day increments at a fee of $66,700 per extension, ultimately extending the
option through December 31, 2001. In December 2001 Gray exercised the option
and acquired the Companys investment in Tarzian for the option price of
$10,000,000. In connection with the option agreement, the Company received
from Gray warrants to acquire 100,000 shares of Grays common stock at
$13.625 per share. The warrants became fully vested upon Grays exercise of
the option, and will expire in 2011.

In the fiscal year ended June 30, 2002, the Company sold shares of Gray
series A and series B preferred stock for approximately $6,803,000
(representing the redemption value of such shares), to companies of which
Messrs. Robinson and Howell are each affiliated as an executive officer and/or
principal shareholder.

In the fiscal year ended June 30, 2002, an insurance company of which
Messrs. Robinson and Howell are each affiliated as an executive officer issued
a $5,000,000 performance bond on behalf of Host in favor of the NCAA. The
Company ultimately compensated such insurance company by issuing to it 466,667
shares of common stock then valued at $350,000.

Mr. Host owns a 10% interest in the owner of two buildings leased to the
Company, for an aggregate rental of approximately $500,000 per year.

Mr. Host has an agreement with the Company under which he is entitled to
receive $200,000 annually, in monthly installments for a period of eight years
commencing with the termination of his employment with the Company.

In connection with the Host-USA Acquisition, the Company issued in favor
of each of Mr. Host, Robert S. Prather, Jr., Monte C. Johnson and certain other
stockholders of Host, as partial consideration for Messrs. Host, Prather
Johnson and such other stockholders securities of Host, an 8% promissory note
due in January 2003. The principal amount of Mr. Hosts promissory note is
$1,760,600, the principal amount of Mr. Prathers promissory note is $72,422
and the principal amount of Mr. Johnsons promissory note is $81,475. The
aggregate amount of all such promissory notes is $18,594,013. Mr. Host, Mr.
Prather and Mr. Johnson and other note holders amended the terms of their notes
in September 2002 to change the maturity date of such notes to January 2006.

Item 14. Controls and
Procedures
Not applicable.

70



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##### 



PART IV

Item 15. Exhibits,
Financial Statement Schedules and Reports on Form 8-K

(a)  List of documents filed as part of this report:



| |                                                                            
| | ---------------------------------------------------------------------------
| | (1)      Financial Statements and Related Independent Accountants
Reports:



| |  |  | The following consolidated financial statements of the Company and
Report of Independent Accountants are included in Item 8:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Reports of Independent Accountants                                                                                                               
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Consolidated Balance Sheets at June 30, 2002 and 2001                                                                                            
|
| |  |  | Consolidated Statements of Operations for each of the years in
the three-year period ended June 30, 2002                                         
|
| |  |  | Consolidated Statements of Redeemable Preferred Stock and
Stockholders Equity for each of the years in the
three-year period ended June 30, 2002
|
| |  |  | Consolidated Statements of Cash Flows for each of the years in
the three-year period ended June 30, 2002                                         
|
| |  |  | Notes to Consolidated Financial Statements                                                                                                       
|
| |  |  | Supplementary Data, Selected Quarterly Financial Data (Unaudited)                                                                                



| |  |  | The report of independent auditors on the consolidated financial
statements of Gray Communications Systems, Inc. dated January 29,
2001, filed on page F-1 of this Form 10-K Annual Report.               
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The report of independent public accountants on the consolidated
financial statements of Rawlings Sporting Goods Company, Inc. dated
November 15, 2000, filed on page F-2 of this Form 10-K Annual
Report.



| |                                                                    
| | -------------------------------------------------------------------
| | (2)      The following consolidated financial statement schedule of



| |  |  | Bull Run Corporation is included in Item 14(d):
| |  |  | -----------------------------------------------



| | 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.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)  Reports on Form 8-K



| |  |  | Current Report on Form 8-K dated April 8, 2002 concerning an
amendment to the Companys bank credit facility.
| |  |  | -------------------------------------------------------------------------------------------------------------

71



---



##### 



(c)  Exhibits

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Numbers |  | 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 (x)                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3.3)   |  | Certificate of Amendment to Articles of Incorporation, filed February 12, 2002 (x)                                                                                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3.4)   |  | 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)  |  | 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)                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.5)  |  | Second 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 Securities, Inc., as Sole
Lead Arranger and Book Manager and Wachovia Bank, National
Association, as Administrative Agent, dated October 11, 2002 (x)
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.6)  |  | Gray Communications Systems, Inc. Warrant dated September 24,
1996 (731,250 shares of Gray class A common stock) (c)                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.7)  |  | Gray Communications Systems, Inc. Warrant dated September 24,
1996 (375,000 shares of Gray class A common stock) (c)                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.8)  |  | Investment Purchase Agreement dated November 21, 1997 by and
between Rawlings Sporting Goods Company, Inc. and Bull Run
Corporation (d)                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.9)  |  | Standstill Agreement dated November 21, 1997 by and between
Rawlings Sporting Goods Company, Inc. and Bull Run Corporation
(d)                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.10) |  | Amendment Number One to Standstill Agreement dated April 23,
1999 by and between Rawlings Sporting Goods Company, Inc. and
Bull Run Corporation (f)                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.11) |  | Registration Rights Agreement dated November 21, 1997 by and
between Rawlings Sporting Goods Company, Inc. and Bull Run
Corporation (d)                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(10.12) |  | 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)                                                                                                                                                                                                                                                

72



---



##### 



|        |  |                                                                     
|------- |  | --------------------------------------------------------------------
|Exhibit |  |                                                                     
|Numbers |  | Description                                                         
|        |  |                                                                     
|(21)    |  | List of Subsidiaries of Registrant (x)                              
|        |  |                                                                     
|(23.1)  |  | Consent of PricewaterhouseCoopers LLP  Bull Run Corporation (x)    
|        |  |                                                                     
|(23.2)  |  | Consent of Ernst & Young LLP  Bull Run Corporation (x)             
|        |  |                                                                     
|(23.3)  |  | Consent of Ernst & Young LLP  Gray Communications Systems, Inc. (x)
|        |  |                                                                     
|(99.1)  |  | Certifications Pursuant to 18 U.S.C. Section 1350                   

|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
|(x) |  | Filed herewith                                                                                                                                        

(d)  Financial Statement Schedules

The response to this section is submitted as part of Item 14(a)(1) and
Item 14(a)(2).

73



---



##### 



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 October 14 ,
2002.

| |  |                      |  |                                      
| |  | -------------------- |  | -------------------------------------
| |  | BULL RUN CORPORATION
| |  |                      |  |                                      
| |  | by:                  |  | /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)       |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ GERALD N. AGRANOFF

Gerald N. Agranoff         |  | Director                                                                            |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ JAMES W. BUSBY

James W. Busby                 |  | Director                                                                            |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ FREDERICK J. ERICKSON

Frederick J. Erickson   |  | Vice President  Finance and Treasurer
(Principal Accounting and
Financial Officer) |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ W. JAMES HOST

W. James Host                   |  | Director                                                                            |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ HILTON H. HOWELL, JR.

Hilton H. Howell, Jr.   |  | Vice President, Secretary and Director                                              |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ MONTE C. JOHNSON

Monte C. Johnson             |  | Director                                                                            |  | October 14, 2002
|                                                   |  |                                                                                     |  |                 
|/s/ J. MACK ROBINSON

J. Mack Robinson             |  | Chairman of the Board                                                               |  | October 14, 2002

74



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##### 



CERTIFICATIONS

I, Robert S. Prather, Jr., certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Bull Run Corporation
(Registrant);                                                                                                                                                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual
report.                   

|        |  |                                       | 
|------- |  | ------------------------------------- | 
|Date:   |  | October 14, 2002                     
|        |  |                                      
|        |  |                                      
|Signed: |  | /s/ ROBERT S. PRATHER, JR.           
|        |  |                                      
|        |  | Robert S. Prather, Jr.               
|        |  | President and Chief Executive Officer

I, Frederick J. Erickson, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Bull Run Corporation
(Registrant);                                                                                                                                                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual
report.                   

|        |  |                                                      | 
|------- |  | ---------------------------------------------------- | 
|Date:   |  | October 14, 2002                                    
|        |  |                                                     
|        |  |                                                     
|Signed: |  | /s/ FREDERICK J. ERICKSON                           
|        |  |                                                     
|        |  | Frederick J. Erickson                               
|        |  | Vice President  Finance and Chief Financial Officer

75



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##### 



REPORT OF INDEPENDENT ACCOUNTANTS

We have audited the consolidated financial statements of Bull Run Corporation
as of June 30, 2002 and 2001 and for the years then ended, and have issued our
report thereon dated September 12, 2002, except as to Note 9, for which the
date is October 11, 2002, included elsewhere in this Form 10-K. Our audit also
included the financial statement schedule of Bull Run Corporation listed in
Item 14(a) as to information provided as of and for the years ended June 30,
2002 and 2001. This schedule is the responsibility of the Companys
management. Our responsibility is to express an opinion based on our audit.
We did not audit the financial statements of Gray Television, Inc. (a
corporation in which the Company has a 13% interest), as of December 31, 2000
and for the year then ended, and the financial statements of Rawlings Sporting
Goods Company, Inc. (a corporation in which the Company has a 10% interest), as
of August 31, 2000 and for the year then ended. Those statements were audited
by other auditors whose reports thereon have been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts for the periods
ended December 31, 2000 and August 31, 2000 included for Gray Television, Inc.
and Rawlings Sporting Goods Company, Inc., respectively, is based solely on
their reports.

In our opinion, based on our audits and the reports of other auditors, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.



| | PRICEWATERHOUSECOOPERS LLP
| | --------------------------

Atlanta, Georgia
September 12, 2002

76



---



##### 



REPORT OF INDEPENDENT AUDITORS

We have audited the consolidated financial statements of Bull Run Corporation
as of and for the year ended June 30, 2000, and have issued our report thereon
dated September 28, 2000 (except for Note 3 as to which the date is July 26,
2001), included
elsewhere in this Form 10-K. Our audit also included the financial statement
schedule of Bull Run Corporation listed in Item 14(a) as to information
provided as of and for the year ended June 30, 2000. This schedule is the
responsibility of the Companys management. Our responsibility is to express
an opinion based on our audit. The financial statements of Rawlings Sporting
Goods Company, Inc., (a corporation in which the Company has a 10% interest),
as of August 31, 1999 and for the year then ended, have been audited by other
auditors whose report has been furnished to us; insofar as our opinion relates
to data included for Rawlings Sporting Goods Company, Inc., it is based solely
on their report.

In our opinion, based on our audit and the report of other auditors, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.



| | ERNST & YOUNG LLP
| | -----------------

Charlotte, North Carolina
September 28, 2000

77



---



##### 



BULL RUN CORPORATION

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|------------------------------- |  | ---------- | --------- | ---------- |  | ----------- | ------- | ------------- |  | ------ | --------- | ---------- |  | - | --------- |  |  | - | --------- | 
|                                |  |            |           |            |  | Additions   |         |               |  |        |           |            |  |  
|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |  
|                                |  | Balance at |           | Charged to |  | Charged to  |         |               |  |        |           | Balance at
|                                |  | Beginning  |           | Costs and  |  | Other       |         |               |  |        |           | End of    
|Description                     |  | Of Period  |           | Expenses   |  | Accounts(1) |         | Deductions(2) |  | Period
|                                |  |            |           |            |  |             |         |               |  |       
|Year Ended June 30, 2002        |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|Allowance for
doubtful accounts |  | $          | 545,000   |            |  | $           | 630,000 |               |  | $      | 0         |            |  | $ | 731,000   |  |  | $ | 444,000   | 
|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|Year Ended June 30, 2001        |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|Allowance for
doubtful accounts |  | $          | 1,155,000 |            |  | $           | 576,000 |               |  | $      | 0         |            |  | $ | 1,186,000 |  |  | $ | 545,000   | 
|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|Year Ended June 30, 2000        |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|                                |  |            |           |            |  |             |         |               |  |        |           |            |  |   |           |  |  |   |           | 
|Allowance for
doubtful accounts |  | $          | 0         |            |  | $           | 267,000 |               |  | $      | 1,999,000 |            |  | $ | 1,111,000 |  |  | $ | 1,155,000 | 



|(1) |  | Represents amounts recorded in connection with the Host-USA Acquisition
during the year ended June 30, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Deductions represent write-offs of amounts not considered collectible.                                    

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